At Ensure Legal, we know that navigating retail lease costs can be confusing, especially for tenants who may be unaware of what they should and should not be paying. In Queensland, the Retail Shop Leases Act 1994 (RSL Act) protects tenants by restricting certain charges that landlords can impose.
If you are leasing a retail shop, understanding these restrictions can save you from paying unnecessary fees and help you manage your business expenses more effectively. Below, we break down the key restricted charges, permitted costs, and what to do if a dispute arises.
What Charges Are Not Allowed in a Retail Lease
Lease preparation costs
Landlords cannot pass on the cost of preparing the lease to the tenant. This includes legal fees and other administrative costs. However, if a tenant requests a lease to be prepared and then withdraws before signing, they may be responsible for the preparation costs. (Section 48)
Key money – what it is and why it’s banned
Key money is an extra payment a landlord asks for when granting, renewing, or extending a lease. It is not a security deposit or bond but rather an additional upfront payment.
The RSL Act strictly prohibits landlords from demanding key money, whether it’s called a non-refundable deposit or any other name. If a tenant has paid key money, they have the right to recover it, and the landlord may face penalties. (Section 39)
Costs for granting a lease renewal option
If a tenant exercises their option to renew the lease, the landlord cannot charge them for legal or administrative costs related to granting the renewal. (Section 48)
Mortgagee consent fees
If a landlord needs to obtain mortgagee consent to enter into a lease, they cannot pass those legal or other costs on to the tenant. (Section 48)
Charging for services that are not provided
A tenant cannot be charged for services that are not available or that have not actually been provided. This ensures landlords do not charge for services they do not deliver. (Sections 7 & 38)
Contributions to a sinking fund
If tenants are required to contribute to a sinking fund for maintenance:
- total contributions from all tenants cannot exceed 5 percent of the landlord’s estimated outgoings for the year
- the landlord cannot request contributions if the sinking fund balance would exceed $100,000 after payment (Section 40)
Repairs and maintenance disputes
Disagreements over repair and maintenance costs are common in retail leases, particularly when deciding whether a cost is a capital cost or a maintenance cost. Reviewing the lease and seeking legal advice can help clarify these responsibilities.
What Charges Are Allowed in a Retail Lease
A retail lease may include clauses requiring the tenant to pay for:
- up to one month’s rent in advance
- a repayable bond (there is no maximum amount)
- shop fit-out costs paid by the landlord
- survey and registration fees associated with registering the lease
- interest on overdue rent or outgoings
- damages for breaching a lease term
- reasonable costs incurred by the landlord when consenting to an assignment of the lease
- legal costs for consenting to a sublease or lease variation requested by the tenant
These charges must be clearly stated in the lease. (Sections 24, 39 & 48)
Outgoings – what tenants are responsible for
A tenant is not required to pay outgoings unless the lease specifies:
- the specific outgoings payable by the tenant
- how outgoings will be calculated and apportioned
- how the landlord will recover outgoings from the tenant
If the lease does not contain these details, the tenant is not legally required to pay outgoings. (Section 37)
Outgoings that cannot be charged to tenants
The RSL Act prohibits landlords from passing on the following costs to tenants:
- land tax
- costs of a capital nature, such as structural improvements
- insurance premiums for loss of profits
- excess payments on insurance claims for the building
- landlord contributions to merchants’ associations or shopping centre promotion funds
- interest or charges on amounts borrowed by the landlord
- contributions to a depreciation or additional sinking fund (except as permitted under Section 40)
A landlord cannot profit from outgoings and can only recover costs they have actually incurred. (Sections 7 & 24)
GST obligations under a retail lease
The RSL Act does not prevent landlords from requiring tenants to pay GST under the lease. If a landlord is registered for GST, the tenant may be required to pay GST on rent and outgoings. However, GST cannot be added on top of an amount that already includes GST. (Section 24A)
What to do if there is a dispute
If a tenant believes they have been charged an unlawful fee, they should:
- review the lease terms to confirm whether the charge is allowed
- seek legal advice from a lawyer experienced in commercial leases
- communicate concerns in writing, clearly stating the restricted charge
- assess the financial impact of legal proceedings
- attempt to negotiate a resolution
- apply for mediation with the Queensland Small Business Commissioner (QSBC), which can mediate disputes up to $750,000 in value
If mediation is unsuccessful, disputes may be referred to the Queensland Civil and Administrative Tribunal (QCAT).
Recovering key money or other unlawful charges
If a landlord has unlawfully charged key money or other restricted fees, tenants may be able to recover the amount as a debt. The jurisdiction for recovering such debts depends on the amount:
- up to $25,000 – QCAT
- up to $150,000 – Magistrates Court
For larger amounts, disputes may be escalated to higher courts.
Our advice
Retail tenants in Queensland have strong legal protections against excessive charges, but disputes still arise. Understanding your lease terms and legal rights is the best way to avoid unexpected costs.
If you have concerns about charges in your retail lease, need help disputing an unlawful fee, or want assistance negotiating fair lease terms, our team at Ensure Legal is here to help. Contact us today for expert legal advice on retail leases.
