Ratchet Clauses & Leases: Queensland

Joe Kafrouni

15 Sep 2011

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min read

A ratchet clause stops rent going down on a rent review. In a Queensland retail shop lease, it is generally void.

Section 36A of the Retail Shop Leases Act 1994 (Qld) applies where a retail shop lease provides for a rent review under which the rent could fall. Any ratchet rent provision in that lease is void. A ratchet rent provision is any provision of a retail shop lease to the extent that it:

prevents, or enables the lessor or another person to prevent, the rent decreasing under a rent review;
limits or specifies, or allows the limitation or specification of, the amount by which the rent may decrease under a rent review; or
prevents, or allows the avoidance of, the rent review by the lessor or another person for either of those purposes.

The rule commenced on 4 April 2011 and applies to retail shop leases entered into after it commenced (section 134). It does not apply where a major lessee has given the notice the Act allows under section 27(8).

In practice, this matters most on a market review. If market rent has fallen, a tenant under a retail shop lease is entitled to the lower rent, whatever the lease says about the rent never decreasing. If you are buying a business with a retail shop lease, or negotiating one, check the rent review clause with this in mind.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Law

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The information provided by Kafrouni Law is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Law makes no warranties or representations regarding the information and excludes any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Law.

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