Commercial Tenancy (Retail Shops) Agreements Amendment Bill 2011, Gardiner
Author: Philip Gardiner
Published on: 28-June-2011
I rise to address some of the issues in the Commercial Tenancy (Retail Shops) Agreements Amendment Bill 2011. These issues have been pretty well canvassed by Hon Max Trenorden, Hon Ljiljanna Ravlich and Hon Lynn MacLaren. However, I want to put my perspective because I became attached to the relevance and significance of this bill when I learnt that, as a tenant, if I happened to divulge information to someone else about what I had learnt about rentals from the landlord—for example, my rental might have been lower than my colleague’s, who was also a tenant—and my colleague went to negotiate with my landlord to lower his rental, and that cost the landlord, I would have to pay the landlord damages for the costs that he was incurring as a result of lowering my colleague’s rental. That means that if a tenant talks about his rental to someone else and that results in any cost to the landlord, the tenant has to pay the
landlord the difference. I found that to be a gross inequity. It led me to see that this bill contains the two basic principles of free competition and competitive trade; they are attached to it, but not embedded in it. The first one is transparency. I am a great believer in transparency. If a person is trying to hide something, they are doing it for a particular reason. There are a whole lot of things in this bill that support the hiding of information about rentals in shopping centres. If a person is hiding things like that, there must be a reason. It is like tax: when we are dealing with tax, we have to assume that the taxman will come to our door to look at our books. If those books do not pass that transparency test, they are not being done right, or they are being done illegally or for some other benefit that they should not be done for. Transparency is thefirst principle, which is important when analysing what is contained in this bill.
The second principle I find in the bill is that of countervailing power. I believe that too often small business is at a huge disadvantage compared with big business. Small business has to develop its own structures to deal in that commercial world to find a balance of power; otherwise, it will always be the case that small business will not get up and grow in the way that small businesses should have the capacity to grow. Innovation is one of those things that allows small businesses to grow. As one of my National colleagues, Senator Barnaby Joyce, has said—not that I agree with him on everything—every big business grew from a small business. That is exactly right. We need to give every small business a commercial environment that allows them to grow. However, when we have such divergency of size in businesses, the difficulty that the minister or anyone in government has is to get consensus or agreement. The reason it is impossible to do so is that the vested interests are so deeply embedded that they will never agree. Basically, they have too much to lose. We have an opportunity to embrace the good parts of this bill, of which there are a number, but we can also address those parts that cut across what I believe are those key principles of transparency and countervailing power. Without those, we are cutting across our philosophy of what constitutes free and fair commercial behaviour. The two issues that are related to fairness of competition are, first, fairness between retailers. In shopping centres we have the very big fellows, the anchor tenants, and then we have the small businesses. The second issue is the countervailing power of landlord to retailer. What I feel has to be changed in this bill, through the amendments that Hon Max Trenorden and Hon Ljiljanna Ravlich will introduce in due course, is that the retailer does not have that power over the small retailer in such a way that it is only the small retailer who must not divulge information.
As I was saying before the dinner break, the second aspect of unfairness is the issue
of countervailing power of landlords and retailers already embedded in the act, and, in my view, this amendment bill will similarly embed that imbalance of countervailing power. We have to balance this bill for the sake of small business. Often there is a lack of understanding about what small business entails. Small business is essential to our economy and we know what proportion of our economy small business makes up. For those operating a small business, the work is arduous, the hours long, the stress continuous, and it often involves the whole family. Small business has different dynamics to that of big business, which can afford someone to administer the overheads, someone to manage the accounts, who is different from the person managing the operations, and, of course, big business has managers and operators, whereas the small business owner is, just about, the lot. And then there is the owner’s wife, and thank goodness, because she is often the strength behind a small business,
As a result of the current act, a small number of large businesses are subsidised by a large number of small businesses. How are they subsidised? When the anchor tenant negotiates a deal with the landlord, the anchor tenant’s outgoings are often paid by the rest of the small commercial retail tenancies. That is a subsidy. And as Hon Max Trenorden said, it is protection at its worst when a landlord buys land for the sole purpose of a shopping centre and embeds an anchor tenant whose outgoings are subsidised by the anchor tenant’s fellow retailers, who are nearly all small business owners. In my view, that needs to be remedied by this bill.
When we get down to it, the issue of competitiveness is the pressure between retailers. We want, as best we can, to have a free, open and transparent market, but the confidentiality provisions and definitions contained in this bill determine what information can be shared, and they exclude non-proprietary companies. What is a proprietary company? It has fewer than 50 shareholders; it does not need to have auditors; and it does not need to seek capital by way of a prospectus. It is, by definition, a small company. Such companies are differentiated in the Commercial Tenancy (Retail Shops) Agreements Amendment Bill 2011 in a way that affects them adversely. On the other hand, the bill also contains some good equity conditions. The legal costs of landlords can no longer be put back onto tenants for payment when they are negotiating a lease agreement. Of course, most of these lease agreements are pretty standard agreements, and if they are not standard, small details can be changed through a one-page schedule; yet it costs something like $1 500 or $2 000 in legal fees for a lease agreement that can be printed out at the press of a computer key. Under this legislation, the landlord’s legal costs are no longer payable by the tenant.
Clause 13 of the bill makes provision for renewal notification, which is a good measure. Retail tenants can often forget that they have to renew their lease, and run over the renewal date. Under this provision, landlords have an obligation to remind and advise their tenants that their tenancies are up for renewal. The unfairness of some market reviews, where tenants’ assets are included in the value of the lease, is covered by clause 8. Under this legislation, if a landlord wants a tenant to relocate and there is a dispute, it is specified that the State Administrative Tribunal will assist and arbitrate if necessary. As Hon Max Trenorden said, we can arbitrate all we like and even have conciliation, but unless both parties want it, it can still end up in court and go back to the very beginning. There is a similar provision to involve the State Administrative Tribunal in dealing with misleading and deceptive lease provisions. As we know, in this state the State Administrative Tribunal becomes involved in matters only when it is specified in legislation. That is why that clause is so important in this particular bill.
Currently, a landlord can give information to some tenants but not others. One of the things that the amendments will do is make that a general case, so that all tenants are treated the same. The confidentiality and damages provisions will also be changed so that all parties in a shopping centre will be treated the same and will have access to the same information.
I am very much in favour of retaining the useful aspects of this bill, because they will apply fair competition to an area that currently does not enjoy fair competition. They are essential amendments, but we want to build transparency and fairness into the bill, to bring about healthy competition and healthy knowledge, and to bring about an outcome that opens it up so that we can have a value system in our commerce of which we can be justifiably proud because it is fair and reasonable to all parties.
