Relevant to all property owners: but clubs and pubs especially need to be wary of catering agreements
A decision handed down on 22 February 2012 shows that anyone controlling premises can trigger retail leasing liabilities by entering into an arrangement for someone to work in their premises.
This has general relevance, by no means just restricted to registered clubs or to arrangements like catering agreements.
One year catering agreement triggers five year lease
A registered club thought it had committed to a one year catering agreement, but has found itself stuck with a minimum five year lease because of the retail leasing legislation.
On top of that, the club has to return in excess of $9,000 that the caterer paid as a contribution to the costs of some associated capital works. Owners are not allowed to claim capital contributions from certain "retail" tenants.
Another consequence not expected by the club is that the caterer also now has other protections that the retail leasing legislation gives to a regulated retail tenant, which places several additional restrictions on the club.
All that came about in a situation which is not unusual, although the club was not helped by its own formal Licence Agreement document.
Club grants caterer rights to use kitchen and servery
North Bondi RSL gave the caterer a one year catering agreement that said he had exclusive use of parts of a kitchen and servery for the purpose of providing a restaurant service. Patrons were entitled to consume the food in most other parts of the club premises.
It was the "exclusive use" that triggered the retail leasing legislation.
The club unsuccessfully tried to flip the argument and claim that if there was a "lease", then it extended to the rest of the club premises where food was consumed. The club argued that it was therefore entitled to the exemption that applies where a lease is for an area greater than 1,000 square metres.
However, the club lost that argument as well.
Take care if you allow someone to work at your premises
What this means for you if you own or lease premises is that you must take particular care before allowing someone to work at or from your premises. No matter what you call the deal or the document, it might create a retail lease. If so, that will have a number of consequences you probably don't expect and don't want.
However, the lessons of the North Bondi RSL case also give property owners and their lawyers the opportunity to avoid that outcome in some similar circumstances.
It was confirmed that the law requires all of the tests to be applied, by looking only at the terms of the actual agreement.
Make sure your arrangement is properly documented
So if an arrangement is truly and properly documented, the legislation will not apply if the document reflects a transaction that is not regulated.
In other words, there isn't much scope to look at how the agreement is actually implemented. It's the original deal that counts.
Also, the decision confirms that where there truly is a sharing of space, then that of itself is not a form of occupation that triggers the legislation.
Equally important, the decision also confirms that the legislation isn't triggered for a space that has multiple uses, unless the predominant use is one of those prescribed as relevant under the legislation.
So, although an "eating place" is a prescribed business, the broader areas of the club were held to have multiple uses and their use as an "eating place" was not even the predominant use.
Lytton v North Bondi RSL Club
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