Page 3241 - Week 11 - Wednesday, 21 September 1994
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The tenancy mix in a shopping centre may need to be changed for a number of reasons, including responding to changes in shoppers' preferences. Owners argue that automatic renewals would take away the right of the owner to control their investment and would mean that a tenant would effectively get freehold title without the need to pay a purchase premium. Tenants would have the option of leaving at the end of any lease period, but owners would not have a similar right to choose whether to continue dealing with a particular tenant.
The Government has sought to find a middle ground on the question of renewals. Accordingly, the proposed code provides for all leases to be for a minimum period of five years, inclusive of options. In addition, a tenant will have a right to request an owner, within 12 months before the tenancy is set to expire, to indicate whether the owner intends to renew the lease. The owner will then have one month in which to respond as to whether the lease will be renewed. If the lease is to be renewed, the Government is keen to ensure that the parties themselves are given maximum opportunity to strike their own bargain as to the amount of initial rent to be offered on renewal. If the parties cannot agree by themselves, there will be mediation to try to effect an agreement. If, ultimately, the parties cannot agree, the rent to be offered will be determined by a valuer having regard to the reasonable amount of rent those premises would be likely to fetch if they were offered for renting for the use to which they could be put in accordance with the lease. If at any time an owner withdraws from the negotiation process, the tenant retains the original period of notice he or she requested.
These provisions have been designed to balance the concerns of tenants and owners in relation to the important issue of tenure. It leaves the power to renew a lease to an owner; but it gives the tenant a guaranteed and reasonable period of time in which to recoup costs, plan ahead for the benefit of the business and be assured that there is a maximum ceiling on rent if the lease is renewed. The Government trusts that all parties will accept these provisions in the spirit in which they are intended.
Amendments have been made to provisions of the draft code released for public comment in relation to outgoings. The provisions have been simplified, and unnecessary duplication has been removed. An important change to the definition of outgoings which has been made in response to tenant concerns is that outgoings may be recovered only if they represent the reasonable expenses of the owner for repairs, maintenance and direct operating costs of the premises. This will allow a tenant to question, for instance, excessive management fees for which the tenant may see little benefit. The owner may also recover government rates, taxes, levies and other statutory charges relating to the building. The other change that has been made in relation to outgoings is that expenses and charges other than advertising or promotion costs must relate to expenditure incurred during the term of the lease, and the nature of the outgoings must have been disclosed in the disclosure statement provided to the tenant prior to entering the lease.
Owners have expressed concerns about a tenant's right to a sublease or mortgage. I am advised that the requirement that an owner may not unreasonably withhold consent to a sublease is stipulated in Victoria and South Australia and there is a limited right to a mortgage in Queensland. I can see no reason why these rights should not be available to tenants in the ACT. Accordingly, the proposed code will allow for an owner
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