The End of Ratchet Clauses – Amendments to the Retail Shop Leases Act

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Rent payable by a Lessee in a retail shop lease can now decrease at a market review. A clause in a lease which prevents the lease decreasing is commonly known as a Ratchet Clause.

The Retail Shop Leases Act has been amended by inserting a provision that makes a ratchet clause in a retail shop lease void.  A ratchet rent provision is defined as any provision of a retail shop lease that:

a) Prevents, or enables the lessor or another person to prevent, the rent decreasing under a rent review; or

b) Limits or specifies, or allows the limitation or specification of, the amount by which the rent may decrease under a rent review; or

c) Prevents, or allows the avoidance of, the rent review by the lessor or another person for a purpose mentioned in paragraph (a) or (b).

Any retail shop lease which contains such a provision is void where the lease is entered into on or after 4 April 2011.

The amendment has been passed to close a loophole created by the Court of Appeal which upheld the validity of a ratchet clause in a retail shop lease which prevented rent decreasing.

All Queensland landlords of retail shops will need to review their rent review clauses in leases entered into from 4 April 2011.

Please feel free to contact me if you have any questions.

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