Online retailers – Retail Shop Lease?

A number of retailers have moved away from traditional shops to online retailing.  This move has accelerated due to COVID-19 issues, however it has been a trend for a number of years and shows no sign of reversing.

We have recently come across this situation where an online retailer intended to take premises in a commercial/industrial centre from which to operate their business.  The entirety of the business would be operated from that premises, but it was not intended for customers to visit those premises as all transacting is done online. 

It became necessary to determine whether the premises were a “retail shop”.  Quite apart from anything else, if the lease is for a “retail shop” as defined by the Retail Shop Leases Act (Queensland), then there are a number of safeguards for the tenant including prohibitions upon the recovery of certain costs and outgoings, including land tax.

The Retail Shop Leases Act merely provides that a lease is a retail shop lease if it is a lease of a retail shop (section 5A).  The section goes on to identify certain circumstances in which case what would otherwise be a lease of a retail shop is not defined as such.

Section 5B of the Act defines a retail shop as premises that are either situated in a retail shopping centre, or used wholly or predominantly for the carrying on of a retail shop business.  In other words, subject to certain exclusions, all premises in a retail shopping centre (which has its own definition) are retail shop leases, but individual premises are also retail shops if there are wholly or predominantly used for carrying on a retail business. 

Section 5C of the Act goes on to identify that a retail business is a business prescribed by regulation as a retail business.  The Retail Shop Lease Regulation identifies at section 8 that a business is a retail business if it is a business mentioned in the schedule, or its whole or predominant activity is the sale, hirer or supply of goods or services mentioned in the schedule.  It clarifies that the wholesale sale of goods is not a retail business. 

The schedule to the Retail Shop Lease Regulation then identifies a number of activities individually said to be retail businesses.  There are around 200 individual activities identified under general categories of:

  • antique and use goods retailing;
  • bread and cake retailing;
  • clothing retailing;
  • dine in retailing;
  • domestic appliance retailing;
  • domestic hardware and household goods retailing;
  • fabric and other soft goods retailing;
  • floor covering retailing;
  • flower retailing;
  • footwear and footwear repair retailing;
  • fresh meat, fish and poultry retailing;
  • fruit and vegetable retailing;
  • furniture retailing;
  • household appliance installation and repair services – electrical;
  • liquor retailing, for off-premises construction;
  • miscellaneous retailing;
  • music and video hire and retailing (obviously done prior to streaming);
  • newspaper, book, stationary, arts and crafts retailing;
  • pharmaceutical, cosmetic and toiletry retailing;
  • photographic equipment retailing;
  • specialised food retailing;
  • sport and camping equipment retailing;
  • supermarket and grocery stores retailing;
  • takeaway food (ready for immediate consumption) retailing;
  • toy and game retailing;
  • watch and jewellery retailing.

There is no requirement in either the Act or the Regulations for the business to be involved in the operation of a “shop” as such – ie there is no requirement that the premises are used for direct contact between the customer and the business at which money is exchhanged for goods or services.  This is different to the definition  in some other states which would suggest that transactions with customers are an element.

As a consequence, it is at least arguable that in Queensland, a premises from which a wholly online retail business is operated is a retail shop lease and entitled to the protections and disclosures under the Retail Shop Leases Act.

For enquiries relating leasing, including Retail Shop Leases, please contact Kayla Davison at kaylad@qbmlaw.com.au or Peter Muller at peterm@qbmlaw.com.au