Harmonised National Lease Legislation Reform

Four Pillars of National Retail Lease Reform

Predictably the gloves are off…Round One!

Where are the NRA and the QRSTA…?

As we said last week the reaction from the market was predictable; reminds us of 1992-1995 the last time Retail Tenancy Legislation was really challenged.

The gloves are off with the ARA (The Australian Retailers Association) in the red corner and the SCCA (The Shopping Centre Council of Australia) in the blue corner.

We are moving towards the bell in Round One however the retailer support team of the NRA and QRSTA have not yet arrived in the retailers’ corner, only the ARA is present.

Despite this hopefully The RETAiL Alert Group can be allowed to act as one of the referees?

As indicated we expect entrenched positions to be taken in the first round; but with is a twelve round contest which will wear down both combatants forcing a points’ compromise draw by round twelve.

The Marquis of Queensbury Four Pillars of Harmonised Retail Tenancy Reforms will be the rules.

There is no doubt that Australian retailers and the Australian Shopping Centre Industry can benefit by adopting change; the current market imbalance between the major retailers vs. Australia’s specialty chains, medium and SME retailers has to be resolved via the Productivity Commission promoted States Tenancy Review Group.

By round three we expect both sides to allow the States Tenancy Review Group to be the Harmonising body.

By round six Gross Leases with no limit on lease terms should be agreed to.

By round nine an agreement should be reached on Sales Declaration at Category by Sales per Meter by Shopping Centre to a third party; our preference the ABS.

Rounds ten to twelve will be the main slug; annual reviews based on sales per meter by category by centre.

It is hoped that the ‘Creeping Acquisition’ plus ‘Obligation to Divest’ powers will be part of the ACCC’s TPA powers by round twelve; that should level out the stoush.

Further to the ARA proposal for a Rudd government Retail Tenancy Roundtable we want to congratulate the ARA for taking a retail sector association leadership position on Harmonised National Retail Lease Legislation Reform.

Long overdue and welcome.

We think a meeting of retailers would be beneficial before any proposed round table with government and the shopping centre industry.

Expect to see the Shopping Centre Industry carry the normal banner ' leave things as they are, it is working' and try to disparage the ARA's initiatives.

For us it is shades of the Retail 'Black Hand' society 1992-1994 all over again.

Compromises which benefited the Retailers and the Shopping Centre Industry happened then and will happen now.

Maybe this is the cause that will bring the ARA, NRA and the QRTSA together into that one Federated Retail Sector Association we have been asking for?

Although covering most of the RETAiL Alert Group’s Four Pillars of Harmonised Retail Lease Legislation Reform there are some gaps we want to speak to.

Our recommendations are for a set of simplified ‘rules’ based on four principles.

1. Lease Harmonisation Legislation; general agreement; a basis for discussion.
2. Gross Leases; a basis for further discussion.
3. Sales to be given to an independent Third Party reported at Category Level only; a basis for further discussion.
4. Annual Rents Increased / Decreased based on Sales per Meter by Category by Centre; some questions for readers to consider.

All ready for COAG (Council of Australian Governments) National Tenancy Group consideration (Stage 1 Concept Discussion Form) for the Australian Retail Sector Harmonised Lease Legislation Reform.

Although in firm agreement with the thrust of the ARA’s recommendations there are comments;

• We believe that there should be one gross lease structure for shopping centres and the high street; administration and legal costs slashed for Shopping Centres, Retailers and State Governments.

• To have two sets of lease structures will defeat the exercise of having a reduction in red tape and State government legislation costs; two formats will create confusion and create unnecessary costs for all parties.

• The proposed code of conduct for Shopping Centre Landlords regulated by the ACCC will not work

• Codes of conduct have failed in the past and the ACCC does not have our proposed ‘Obligation to Divest’ anti-trust powers to force divestment of uncompetitive lease terms and conditions disadvantaging the chains, medium size and SME retailers vs. major retailers.

• Lease length and terms and conditions to be similar in competitive market nature between major retailers and Australian Specialty Chains, medium size and SME retailers.  
  
   
• We are in total agreement with the Disclosure of Sales Figures being reported to an independent third party reported at category level but we want to add also sales per meter by category.

• Our recommendation is for the ABS to be the independent sales hold party with an open ‘pay by view’ structure to;

1                    Allow landlords to assess retail category weaknesses by centre for marketing support.

2                    Allow retailers to assess the sales potential of a Shopping Centre.

3                    To provide Federal, State and Local governments access to performance of the retail sector by category by State / Local Government Area.

4                    Allow the ACCC to have qualified data on which to assess retail sector competitiveness.

5                    The ability to use the sales per meter by category by centre to calculate annual retailer category rent increases or decreases.

• The initial software patterned on the Westfield best practice Monthly reports.

• Non complying retailers subject to two auto-email warnings then penalties applied as per non BAS disclosure.

• Our view, annual rental reviews performance based by sales per meter by category by Shopping Centre will progressively rebalance the gulf in competitive occupancy costs, major retailers vs. the Australian chains, medium and SME Retail Sector.

• As with declaration of sales to a third party we are total agreement in the establishment of an open National Retail Lease Register where all occupancy costs and inducements are registered.

• Again costs of the National Retail Lease Register funded by an open ‘pay by view’ mechanism.

The key purpose of our Harmonised Four Pillar Retail Tenancy Reforms is to provide certainty to Australian Retailers on the risks and opportunities of entering into an exciting but risky retail business venture.

Having solid Harmonised Four Pillars of Retail Tenancy Legislation Reforms will also streamline the plethora of confusing and costly State retail lease legislation and ACCC dispute matters currently in play.

The RETAiL Alert Group wants to congratulate the ARA on having the courage to present the Harmonised Retail Lease Legislation Reforms to market.

As indicated we welcome the ARA taking the retail industry association market leadership position.

The RETAiL Alert Group’s comments should not be seen as a criticism of the ARA’s initiative but seen as complimenting and enhancing the Australian Retailers Associations proposals.

We believe that our modifications based around the RETAiL Alert Group’s Four Pillars of Retail Legislation Harmonisation to the ARA’s position delivers a fair and balanced set of a Harmonised ‘retail leasing platform’ and should be the basis of any ARA Tenancy Committee proposals to the Rudd government and the Australian Shopping Centre Industry.

To comment on Harmonised Retail Lease Legislation Reform; email Harmonised Retail Lease Legislation Reform.

Tony Standley

Principal
The RETAiL Alert Group (Australia)

Mobile +61 (0)41 924 0497
e-mail info@adsass.com.au
Fax +61 (0)2 9987 0633
Website http://www.retailalert.com.au