Victoria’s small business commissioner has issued a warning to retail landlords and estate agents shirking their disclosure obligations, signalling a crackdown amid an increase in complaints.
Last year more than half of the 1,708 disputes brought before the Victorian Small Business Commission (VSBC) were related to retail leases.
Small business commissioner Judy O’Connell says she is concerned many small businesses were signing the dotted line without adequate information.
“A lot of small businesses go into it unprepared,” O’Connell tells SmartCompany.
“We have found that a high number of retail businesses do not understand their rights and responsibilities before signing the lease and then they end up at the VSBC in a dispute.”
Rental stress and related disputes have been a reoccurring pain point for businesses, earlier this year a high profile court case between a small business and their landlord expanded the scope of the Retail Leasing Act.
Disputes arising from disclosure problems and those related to landlords chasing money from tenants increased in 2017-18, O’Connell says.
More than a quarter (27%) of retail lease disputes arose from tenants who hadn’t paid their bills, a 7% increase on the previous year.
Many retailers, in Victoria and across the country, have complained rising rents are an increasingly unsustainable impost on their business operations.
A slew of retailers large and small have collapsed in recent years, with rental costs alongside broader industry disruption emerging as common factors.
Earlier this year Sydney-based retailer Oz Resort was forced to relocate its business after being shafted by high rents.
“There’s nobody [in retail] doing the sort of money to sustain [rent] now,” managing director Jacqueline Major told SmartCompany in February.
“We will be penalising”
Following a Victorian state government review, VSBC has released a fact sheet landlords will be required to provide to prospective tenants alongside a copy of a proposed lease as soon as negotiations begin.
Landlords that don’t comply could be on the hook for fines of up to $8,000, and O’Connell says she’ll be watching.
“We will be penalising where we find that there are people who continuously don’t provide disclosure,” she says.
“We are now putting landlords and agents on notice that we will be monitoring compliance with this obligation.”
The fact sheet includes a checklist for business owners to help ensure they’re not taken advantage of during negotiations.
It provides information about disclosure statements, which landlords must provide at least seven days before the agreement is signed, and additional information on landlord obligations to tenants.
There is also information provided on the fact sheet informing business owners the VSBC will resolve any possible disputes which arise.
O’Connell says it’s about ensuring negotiations get off on the right foot from the start, for both businesses and landlords.
“There are smaller landlords who probably don’t understand their rights and obligations as well,” she says.
“In a business relationship if you work well with someone, whether its a landlord or tenant it always works much better if you’re upfront honest.”