Can my landlord force me to trade?

NATIONAL

The majority of MGA’s members operate as tenants under a lease of premises, rather than owning the physical premises of their store(s) in their own name, or a company name.

For such businesses, this means that there can be a number of restrictions on how they conduct their operations, which are usually found both in lease regulations and in their lease documentation, which in most instances is a retail lease, rather than a residential or commercial lease.

Generally speaking, business owners who operate as tenants under a retail lease are free to operate their business autonomously and without significant interference by their landlord. However, one area which may impact day to day operations is trading hours (separate to any government regulation on trading hours).

Many leases, particularly in shopping centres or shopping strips, will place an obligation on retailers to trade either on certain days of the week or at certain times of the day. Furthermore, provisions obligating tenants to trade on public holidays (where not prohibited by law) are not uncommon. Failure by tenants to abide by these provisions will often result in the landlord claiming costs from tenants, including damages and legal costs.

These types of provisions can often seem to be quite unreasonable, considering that tenants continue to pay rent even on days when they are not trading. Therefore, penalising a tenant by imposing additional costs when they do not trade can seem particularly onerous.

Generally speaking, the reason landlords often include such clauses in retail leases is related to the fact that if all retailers within a particular shopping precinct are seen to be open during specified centre hours, then it can encourage customers to visit the precinct as a whole, and in turn be attractive to other potential tenants, which can increase the value of the premises. However, such clauses in retail leases will generally not be enforceable if they place an unreasonable obligation on tenants to trade on certain days. Most obvious is the situation where a trading obligation is placed contrary to government trading hour restrictions – in fact, where this is the case, such clauses forcing traders to remain open will be declared void. Other circumstances where a ‘forced trade’ provision may not be enforceable may include where the business is running at a loss and negotiating with the landlord on the terms of the lease going forward.

If business owners foresee that they will not be able to trade for any reason, on a day that they usually would have, or on a public holiday (where trading is not restricted), it may be in their best interest to approach their landlord prior to discuss their options before closing their doors.

Members are urged to check their current lease provisions for clauses obligating them to trade. If you have any queries at all regarding such clauses in your lease, or about your lease generally, please contact MGA’s Legal and HR team for further advice.

GENERALLY SPEAKING, BUSINESS OWNERS WHO OPERATE AS TENANTS UNDER A RETAIL LEASE ARE FREE TO OPERATE THEIR BUSINESS AUTONOMOUSLY AND WITHOUT SIGNIFICANT INTERFERENCE BY THEIR LANDLORD.

LEGAL & HR ADVICE TAILORED TO YOUR BUSINESS NEEDS

As part of your membership, MGA’s Legal and HR team are here to help you and your business with advice that is personalised to your situation. 1800 888 479 (option 1) or (03) 9824 4111.