Anne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | Hansard source

I present the government's response to the report of the Economics References Committee on its inquiry into the need for a national approach to retail leasing arrangements. I seek leave to have the documents incorporated into Hansard.

Leave granted.

The document read as follows—

Australian Government response to the Senate Economics Committee report:

Need for a National Approach to Retail Leasing Arrangements

February 2016

Introduction

The Australian Government welcomes the Economics References Committee (the Committee) Report into the Need for a National Approach to Retail Leasing Arrangements.

This report complements previous reviews by the Productivity Commission on retail tenancy in 2008, 2011 and 2014. The Productivity Commission made recommendations consistent with this report in areas related to improving transparency, disclosure, dispute resolution and greater national consistency.

The Competition Policy Review, led by Professor Ian Harper, examined competition laws and barriers to competition stemming from planning and zoning regulation. The final report was provided to Government in March 2015. On 24 November 2015, the Government released its response to the Competition Policy Review.

This response outlines the Government's views on each of the Committee's recommendations and the recommendations put forward in the dissenting report from Senator Xenophon.

Response to the Committee ' s Recommendations

Recommendation 1

The Committee recommends that the Australian Government give due recognition to, and wherever possible support, the work of the small business commissioners with the aim of strengthening their role and encouraging the establishment of small business commissioners in all states and territories.

Response to Recommendation 1

The Australian Government supports the recommendation.

The Government agrees that the establishment of small business commissioners or similar arrangements provides an affordable, less onerous and less time consuming dispute resolution mechanism. The Government is creating an effective Australian Small Business and Family Enterprise Ombudsman with the independence of a statutory appointment. The Ombudsman will be a Commonwealth-wide advocate for small business and family enterprises and will also be a concierge for dispute resolution, referring matters to appropriate agencies that can more conveniently or effectively deal with them.

Recommendation 2

The Committee recommends that National Retail Tenancy Working Group (NRTWG) be re-established to develop a national disclosure statement, taking note of the lessons learnt from its previous attempts, and ensuring vital stakeholders are actively involved in any consultation processes.

Response to Recommendation 2

The Australian Government notes the recommendation.

The Australian Government encourages all states and territories to move towards mechanisms that improve the transparency of retail lease information noting that transparency is a key element of a functioning and effective market. Lease registers are one mechanism to help improve transparency, but are currently only employed in New South Wales, Queensland, the Northern Territory and the Australian Capital Territory, and is a voluntary industry-led measure in Victoria.

The Government notes that previous attempts to develop a national disclosure statement through the NRTWG resulted in only limited take up of disclosure statements in jurisdictions. The Government would consider re-establishing the NRTWG to develop a national disclosure statement if there were strong support from all jurisdictions. Mechanisms that may guard against tenancies being obliged to open/operate when it may be uneconomical to do so may also be canvassed if there is strong support to do so by all jurisdictions.

Recommendation 3

The Committee recommends that the Commonwealth take on a greater leadership role in encouraging the States and Territories to move towards a harmonised approach through the COAG process.

Response to Recommendation 3

The Australian Government notes the recommendation.

The Productivity Commission identified that improvement in state regulations, notably 'removing those key restrictions in retail tenancy legislation that provide no improvement in operational efficiency, compared with the broader market for commercial tenancies', should precede the move towards a nationally consistent commercial leasing framework.

In addition, the Productivity Commission has previously highlighted the importance of reform to planning and zoning regulation, and noted that imbalances of bargaining power between landlords and tenants may be lower in some cases where a more liberal approach is taken by states and territories to planning and zoning regulation.

The Competition Policy Review also saw planning and zoning regulation as a priority area for review and noted that planning and zoning requirements can restrict competition by creating unnecessary barriers to entry. The Review recommended state and territory governments should subject restrictions on competition in planning and zoning rules to a public interest test, such that the rules should not restrict competition unless it can be demonstrated that the benefits of the restriction to the community as a whole outweigh the costs, and the objectives of the rules can only be achieved by restricting competition. The Government's response to the Competition Policy Review supports this recommendation, noting this is an area of state responsibility. The Government encourages the states and territories to review planning and zoning regulations and include competition principles in the objectives of planning and zoning rules so that they are given due weight in decision making. The Government will continue discussions with states and territories on ways to promote these reforms.

Response to Senator Xenophon ' s Dissenting Report

Recommendation 1

That rights of renewal be enshrined on a national basis, using the Tasmanian Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 as a template.

Response to Recommendation 1

The Australian Government notes this recommendation, and will raise it with jurisdictions should there be strong support for the reestablishment of the NRTWG.

Retail tenancy legislation is administered by the states and territories and as such, enshrining of the first rights of renewal is a matter for each jurisdiction to consider.

Recommendation 2

An industry code of conduct in respect of fair, effective, and cost efficient dispute resolution be implemented, to be managed by the ACCC.

Response to Recommendation 2

The Australian Government does not support this recommendation.

The industry codes framework under the Competition and Consumer Act 2010 is reliant on the Corporations power and would therefore not provide sufficient coverage for the majority of small businesses. In addition, the Australian Government notes the availability of cost efficient dispute resolution services offered in every state and territory. The Australian Government also notes the existence of Small Business Commissioners who provide mediation and dispute resolution services to small businesses on a range of issues, including retail tenancy. As such, whilst the Australian Government supports the provision of cost efficient dispute resolution services, it views that the services are already in place.

Recommendation 3

Ratchet clauses be excluded from retail leases, unless expressly agreed to by the tenant.

Response to Recommendation 3

The Australian Government notes this recommendation, and will raise it with jurisdictions should there be strong support for the establishment of the NRTWG.

Retail tenancy legislation is administered by the states and territories and as such, excluding ratchet clauses from retail tenancy legislation is a matter for each jurisdiction.

Recommendation 4

Whatever the terms of the lease are at the time it is entered into ought to continue for the full term of the lease, unless explicitly agreed to otherwise.

Response to Recommendation 4

The Australian Government notes this recommendation, and will raise it with jurisdictions should there be strong support for the establishment of the NRTWG.

The Australian Government views lease terms are a private matter between businesses to negotiate, governed by retail tenancy law administered by the responsible state and territory jurisdictions. To ensure both parties have sufficient information to negotiate the best outcome, state and territories can encourage further transparency in the retail tenancy market.

Recommendation 5

Bank guarantees on tenants be limited to 28 days.

Response to Recommendation 5

The Australian Government notes this recommendation, and will raise it with jurisdictions should there be strong support for the establishment of the NRTWG.

The Australian Government understands the constraints bank guarantees can have on cash flow particularly in the early stages of a business. However, the Australian Government views bank guarantees as a private matter between businesses to negotiate, governed by retail tenancy law administered by the responsible state and territory jurisdictions.

Recommendation 6

An organisation such as the Australian Property Institute (Valuation Division), in consultation with tenant and landlord stakeholders, should develop a standard form to be completed by landlords when entering into a lease. This form should require the disclosure of the commercial terms of the contract, including all incentives offered to the tenant.

Response to Recommendation 6

The Australian Government supports this recommendation in-principle.

The Australian Government notes that disclosure statements and standard forms are useful tools for presenting information about key lease terms and conditions and that the harmonisation of disclosure statements could provide efficiencies for businesses, including those operating across borders.

The Government notes that previous attempts to develop a national disclosure statement have resulted in only limited take up in jurisdictions. Implementation progress and considerations will be raised with jurisdictions should there be strong support for the establishment of the NRTWG.

The Australian Government views incentives as a private matter between businesses. If incentives were to be made public, the Australian Government views it should be done in a way to protect business confidentiality.

Recommendation 7

A code of practice that incorporates the broad reporting of sales and occupancy costs in Australian shopping centres be finalised and implemented as soon as practicable. Such a code should prohibit specific commercial-in-confidence sales and occupancy data being provided to landlords.

Response to Recommendation 7

The Australian Government partially supports this recommendation.

The Australian Government views that any Code of Conduct should be led by industry. The Australian Government notes the work of the Shopping Centre Council of Australia, National Retail Association, Australian Retailers Association and the Pharmacy Guild in designing a code of practice governing the provision of sales information by retailers. The Australian Government views the finalisation of the code of practice will relieve the associated tensions between shopping centre landlord and tenants.

The Australian Government does not support the notion that a code of conduct should prohibit specific commercial-in-confidence sales and occupancy data being provided to landlords. The Australian Government understands the need for shopping centre landlords to have the right tenancy mix and sales and occupancy data is required to ensure viability of the shopping centre.

The Australian Government notes that the provision of data by retailers should be complemented by improved transparency of leasing information by landlords, and will raise it with jurisdictions should there be strong support for the establishment of the NRTWG.

Recommendation 8

The cost of fit-outs ought to be a factor in determining the length of the lease.

Response to Recommendation 8

The Australian Government notes this recommendation, and will raise it with jurisdictions should there be strong support for the establishment of the NRTWG.

The Australian Government understands the terms of a lease may not provide sufficient time to write-off the cost of a shop fit out. However, the Australian Government views businesses are in the best position to negotiate the terms and conditions required for their business, including the length of the lease.