Western Australia Commercial Rent Increase Laws

Commercial rent increases in Western Australia are governed by the terms of the lease agreement, with additional protections for retail shop tenancies under the Commercial Tenancy (Retail Shops) Agreements Act 1985. Unlike residential tenancies, there is no statutory frequency cap for commercial rent reviews—the lease dictates when and how reviews occur.

Retail Shop Lease Rent Reviews

For leases covered by the Retail Shops Act, rent review mechanisms must be clearly stated in the lease and disclosed in the pre-lease disclosure statement.

Common Review Methods

Market Rent Reviews

Market rent reviews are the most significant—and most contentious—form of commercial rent adjustment. The process typically involves:

1. The landlord proposes a new rent based on a market valuation.
2. The tenant may accept or dispute the proposed figure.
3. If the parties cannot agree, either party can appoint an independent valuer.
4. If still unresolved, the matter can be referred to the State Administrative Tribunal (SAT) or determined by a specialist retail tenancy valuer.

Important: Market rent reviews can result in rent decreases as well as increases, depending on market conditions. The Act prohibits "ratchet clauses" that prevent the rent from falling below the current level.

Turnover Rent

Some retail leases include a turnover rent component, where the tenant pays a base rent plus a percentage of gross sales above a defined threshold. The lease must clearly define what constitutes "gross turnover" and how it is calculated.

Non-Retail Commercial Lease Rent Reviews

For commercial leases outside the Retail Shops Act, the rent review mechanism is entirely a matter of contract negotiation. Common approaches mirror those used in retail leases (fixed, CPI, or market reviews), but without the statutory protections.

Key considerations for non-retail leases:

• Ensure clarity: The lease must precisely define the review method, timing, and dispute resolution process.
• Ratchet clauses are permissible: Unlike retail leases, non-retail commercial leases can include clauses preventing rent from decreasing below the current level.
• No statutory right to dispute: Without the Act's protections, the tenant's only recourse is the standard court system.

Best Practices for WA Commercial Landlords

1. Disclose rent review mechanisms in the disclosure statement: For retail leases, this is mandatory. Failure to disclose accurately can give the tenant grounds to challenge the review.
2. Use qualified valuers: For market rent reviews, engage a licensed valuer experienced in the relevant property type and location.
3. Plan reviews well in advance: Start the review process early to avoid disputes delaying the rent adjustment.
4. Keep market evidence: Maintain a file of comparable lease evidence to support your proposed rent at review time.

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