Retail and Commercial Leases (Designated Anchor Lease) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 17 June 2020.)

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General) (10:49): I rise to speak on the member for Florey's private member's bill, which was introduced to insert a new hardship provision into the Retail and Commercial Leases Act specifically for retail shop leases that are designated shopping centres, to include an anchor tenant, such as shopping centres, department stores or cinemas.

In the circumstances where a lease of an anchor tenant is to be terminated or not renewed, the proposition put forward in this bill is that the lessor must give at least three months' notice to all other lessees, who may request a rent review according to certain criteria. Until the rent review is determined by an independent valuer, the rent would be reduced by the greater of either 10 per cent or an amount prescribed in the regulations. I hope that I have sufficiently summarised the intent of the operation of the bill.

Members would be aware from shopping centres that are now a common feature certainly in metropolitan areas, and also in many regional towns, that they usually have an ownership, sometimes by multinational companies and that have an anchor tenant. If I were to try to summarise here the types of tenants we have as anchor tenants, sometimes they are a government agency, sometimes they are a supermarket, sometimes they are a very in-vogue fashion house.

One shopping centre, which is now in the state seat of Unley but which abuts my own electorate, is the Burnside shopping centre. It is owned by the Cohen family. It has been a very successful shopping centre in that it supplies and services multiple outlets to people in my electorate. If it were to be described as to what its anchor tenant would be under this bill, I think I would have to say it is the main Coles supermarket. Others might argue, though, that it is the Zara house, which is a Spanish-owned department store outlet for fashion and accessories, which might also be described as an anchor tenant.

It is usually on the basis that the anchor tenant is the retail outlet that is going to have a high volume of patronage and it is therefore going to provide an enormous opportunity for anyone else who co-locates to have multiple use of that traffic; that is, if you go and shop at the Coles supermarket you will be inspired to purchase other products at the other specialty stores around it, get your shoes repaired, buy some takeaway food or attend a chemist shop or whatever.

That is the way these things work. There is no question that often in these arrangements the rental for tenancies is quite high. I suppose the set-off for that is that you have an enormous volume of traffic of prospective purchasers. You pay higher rent, but you are sort of guaranteed a big population of potential purchasers and consumers and so it is a bit of a set-off.

I think the intent here, in the circumstances of COVID, etc., is that the mover of the bill wants to provide that greater protection to the smaller tenancies, and I think that is admirable. Obviously, we have announced a number of protections in relation to rent increase or review or eviction in relation to both residential and retail and commercial tenancies, but this is an area which, on the face of it, is attempting to proceed with a remedy but of which we do not have an ill.

In looking at this aspect, there are a number of people we have consulted with as quickly as possible because we welcome all ideas as a government that might be necessary to support people through this sort of situation. Has there been any evidence of a need for this in South Australia? On the information that we have assessed, the answer to that is no. My office has consulted with the Small Business Commissioner, who obviously has a fair handle in relation to people, whether they are a tradesperson having a professional qualification and the cost of that, across to licensing, to have some understanding of how that applies under Consumer and Business Services.

The Small Business Commissioner, however, has direct responsibility for some very targeted areas, and that includes the Retail and Commercial Leases Act. He advises us that, until such time as there can be some consultation with retailers and stakeholders, including the Shopping Centre Council, then he would not recommend to us that we action it.

In other words, there is not a demonstrated ill and we would need to do proper consultation on it before this type of approach could be brought forward. If the mover of the bill, however, has specific circumstances where there has been a cancellation, for whatever reason, of an anchor tenant, we would be happy to receive that data and we would be happy to have a look at it, but I can only indicate that on the information we have that would be opposed.

I just quickly indicate that we have also spoken to the Property Council. They represent members from the very little to the very big in the sense of tenancies and, of course, the landlords who are going to be pulled into this model or area of reform. They also claim that, from their assessment, the landlords have already negotiated some generous rent relief packages for their tenants impacted by COVID. As we know from other legislation, there is a process to add in protections for that.

Often, they claim that the terms of settlement on these have gone beyond the regulated code of conduct obligations and that this bill would open them up to further lease renegotiations at a time when they have just finished those arrangements. Obviously, they raised some concerns about it. Apart from those bigger picture issues, there are some concerns they have, and I will just place them on the record:

1. The bill does not say the rent cannot be reset generally and a tenant can use it as an opportunity to claw back an agreed rent which is already over market.

2. The bill applies even where the landlord is replacing the anchor tenant (e.g., with an even better one).

3. The bill applies even where there are numerous anchor tenants—that is, more than one. What happens if only one leaves and the others are still there?

4. The bill does not require that the tenant be anywhere near the anchor tenant or even be affected by the departure to be able to demonstrate the eligibility for the relief that is proposed in this bill.

These are just a few of the complications that they have highlighted need to be looked at. I thank the member for raising the issue. The bill is premature on the information we have received. It does not have evidence of there being people in an acute circumstance because of this and it would undermine the negotiated terms in the relief packages that have already been granted. For all those reasons, I indicate that the government and the Liberal Party will not be supporting the bill, but I thank the member for bringing the matter to the house.

Mr PEDERICK (Hammond) (10:58): I rise to speak to the Retail and Commercial Leases (Designated Anchor Lease) Amendment Bill, brought to this place by the member for Florey. What the member for Florey intends with the introduction of this bill is to insert new hardship provisions into the act for retail shop leases in specifically designated shopping centres that include an anchor tenant.

An anchor tenant can be a particular shop, department store or cinema. It could be a Woolworths, Coles, Big W or something along those lines. In circumstances where the lease of an anchor tenant is to be terminated or not renewed, the lessor must give at least three months' notice to all the other lessees, who may request a rent review according to certain criteria. Until the rent review is determined by an independent valuer, the rent would be reduced by the greater of either 10 per cent or an amount prescribed in the regulations, which does leave it a little loose.

Whilst we understand that the intent of this legislation may be to provide greater protection to smaller shops during challenging times for retail, there appears to be little evidence of the need here in South Australia for such provisions. I note that, as the Attorney has indicated, we have consulted the Small Business Commissioner, and he concurs with the above assessment. It needs more consultation with retailers and stakeholders, including the Shopping Centre Council. These concerns were not raised during the passage of other amendments to the act last year.

Even in a seat like Hammond, I have had various redistributions, as we all do, but in my main town of Murray Bridge shopping has changed dramatically over the time of my life. It has been the business centre for my family since they moved down to Coomandook in 1961, so that is a little while ago. My memories growing up are of a standalone Woolworths adjacent to Bridge Street in Murray Bridge. Then, years later, there was the Murray Bridge Green shopping area near Swanport Road and Adelaide Road in Murray Bridge, where Woolworths came to.

There was a series of other tenants in this shopping centre. There was a whole range of tenants. Target was one of the bigger ones that I can remember in there, and there have also been various chemist shops and a few cafes and eateries. So this was quite a step up at the time in my electorate, because it services not just Murray Bridge but quite a broad area, obviously with the regional community, the farming community. It was quite an update.

We have been quite spoilt for choice in Murray Bridge. Back around those times as well people may remember BI-LO. My electorate office is now on a corner of that site on Mannum Road in Murray Bridge. BI-LO had a concrete floor and was very basic shopping, but it was essentially the supermarket, and then over time a cluster of shops was built in adjacent buildings around it and there were more improvements.

This was about eight to 10 years ago, and I could be a little bit wrong with those dates, and it did take a while to build. We had the Murray Bridge Marketplace built, which was a massive production. I think it was budgeted at about $80 million, and in the end it cost about $90 million at the time to put that in place. The major tenants there—they may even be part of even the ownership—are Big W up one end and Woolworths up the other.

This was, I guess, Murray Bridge's chance to shine and really have a flash, bright shopping centre, and it is a great venue. I know I worked with the proponents of the build around access to electricity when they were going to build this shopping centre. If anyone knows how that works, it is a bit of a convoluted process in that, if you are the first one in, you essentially pay probably something like 200 per cent of the energy needs of what you will need and then you are rebated as other users of electricity come in, and that is put back to you.

It is an interesting way to do it, but it is the way it is done. If there is an upgrade, new transformers or new lines or both are put in to make it work. I certainly did my best to get some rebate on that, but at the end of the day I think it cost about $4 million just to get the appropriate amount of power because it is a very significant shopping area.

The BI-LO supermarket was bought by Coles over time, and then in the last few years Coles built a new supermarket opposite the main area of the Green supermarket area, and I helped open it. If you have ever seen four fairly sizeable blokes, including me, the earthmover and a couple of others, clutch one pair of scissors to cut a ribbon, that is a trick, I can tell you.

The Hon. D.C. van Holst Pellekaan: Lucky it wasn't an umbilical cord.

Mr PEDERICK: As the minister says, it was lucky it wasn't an umbilical cord. I think in the end, out of frustration, I just grabbed the scissors and cut the darn thing myself. Anyway, it was quite an amusing moment for us and the photographers.

We were really spoilt, and we are still spoilt, for choice in Murray Bridge, as we had two Coles supermarkets running, two Woolworths and two IGAs, apart from numerous other small shops. In more recent times, Coles have shut down the one on Mannum Road, where our office is located, and Woolworths have moved out of their old site. They kept their new site open in the Marketplace and Roger Drake and John-Paul Drake moved into the old Woolworths site adjacent to Swanport Road. I acknowledge that because they have made a very positive contribution to our area and are quite happy to operate in a deregulated environment.

I note John-Paul Drake's commentary during the COVID toilet paper crisis, which seems to have come back in some places. He basically gave a shopper, so to speak, a very stern message on what to do when he brought back 150 packets of toilet paper he had hoarded through a group scheme.

The Hon. D.G. Pisoni: I think it was 1,500 packets.

Mr PEDERICK: The minister is telling me it was 1,500 packets. It was a vast amount of toilet paper. Even though Kimberly-Clark cranked up to do a third shift down in the South-East and pumped out probably 50 B-doubles a day of toilet paper, we could not seem to get enough in Australia. I see that it is causing problems again in Victoria. I think that I would be buying pallets of spaghetti first; if you do not eat, you do not need the toilet paper, but that is another debate. Because I am running out of time, I cannot expand on that.

In closing, I will say that I have not been approached about this by anchor tenants in my electorate and, as I indicated earlier, we have not seen the need for this at this stage, so we will be opposing the bill when it gets to a vote.

The Hon. S.C. MULLIGHAN (Lee) (11:08): I rise to speak on the member for Florey's bill, the Retail and Commercial Leases (Designated Anchor Lease) Amendment Bill. It is not an unreasonable bill at all in the current environment. It is a fairly straightforward proposition that those tenants of a shopping centre, or the like, who are placed into a situation where the anchor tenant of that shopping centre—and we are almost exclusively talking about Coles and Woolworths, or perhaps more recently we might be talking about an Aldi or a large department store—will no longer be part of that shopping centre offering, should be made aware of that fact at least three months out. If that causes them some financial hardship once that anchor tenant leaves, then there should be some requirement for the shopping centre owner to negotiate a modest rental reduction to reflect what would understandably be the loss in business and custom for those other tenants.

This is important, of course, because we have only recently, with the consideration and passage of the government's COVID-19 legislation, been considering how retail leases should operate in this unfamiliar environment. The topic of some discussion in this place, as well as in the other place, was about what provisions the government would specify for those tenants who found themselves literally at a loss because of the constrained trading environment that the coronavirus restrictions were placing on the community.

There was a request of the government from the opposition and the crossbench, both here in the house and over in the other place, for the government to specify a level of rent relief that would be provided. There was even a request made about whether the state government would be adopting the national cabinet Mandatory Code of Conduct: SME Commercial Leasing Principles During COVID-19. We were told that the state government would not be adopting those principles. We were told the reason that the state government would not be adopting those federally mandated principles in that federal code of conduct was that no other state was adopting that code of conduct and the principles within it.

We were misled because, as the debate in the other place discovered, other states had adopted the code of conduct, other states had had regard to the principles contained in that code of conduct and had enshrined, if not in legislation then in regulation, some provisions dictating how relief should be provided in the context of retail leases.

It is not surprising that, after being misled by the government during the passage of that COVID-19 legislation, when it came to the moderation or arbitration of leasing disputes between commercial landlords and their tenants, when the member for Florey, as a private member, seeks some form of redress for her constituents to make sure that they are not left in the lurch in the circumstance when an anchor tenant leaves a shopping centre, that would find its way into a bill to be brought before this place, because without it there is nothing that would provide any guidance for relief for commercial tenants.

In her remarks, the Deputy Premier says, 'Well, you have a common conception that an anchor tenant is a large national or multinational outlet, like a Coles or a Woolworths, or that shopping centres are nationally or multinationally owned pieces of real estate, ostensibly organisations that can afford to provide relief, but we know in reality that is not always the case. It is usually the struggling, small landlord who owns a shopping centre, who struggles to hang on to someone like a Coles or a Woolies, and when they leave it is through no fault of their own. To impose on them mandatory rental reductions for the other tenants in that sort of circumstance is unreasonable.'

That is not the circumstance for the vast majority of shopping centres we are familiar with today. That is just not the case. It is certainly not the case in my electorate. It is certainly not the case for the Westfield West Lakes Shopping Centre, which has anchor tenancies from both Coles and Woolworths. The other tenancies at Westfield West Lakes by and large are small businesses owned and operated by constituents of mine, small business people working as hard as they can to make a living, not only making a living for themselves but usually providing the first employment opportunity for young South Australians living in the electorate of Lee.

I am thinking about young retail workers who might get their first job or even young workers of fast-food outlets that are also attached to that sort of shopping centre. If Scentre Group, for example, which owns the Westfield West Lakes Shopping Centre, is unable to come to an arrangement with Coles or Woolworths or another anchor tenant, why should they not be required to advise the other tenants?

When the drop-off in trade inevitably occurs through losing such attractive anchor tenants, when all those people who used to go to a shopping centre to do their weekly grocery shop, for example—or if you have young children, more often than a weekly grocery shop—no longer need to go into that shopping centre as often, are not making the decision to stop off at the local butcher, are not making the decision to stop off at the local baker, are not making the decision to go to the chemist or the newsagent or even some of the small clothing retailers, that is going to impact those businesses quite significantly.

I do not think it is unreasonable that we support this move by the member for Florey and, in particular, that we support it in the absence of any other legislative guidance that is provided in the current circumstances of the coronavirus, because this was something that was sought in the previous discussions around the coronavirus emergency response legislation, and we were assured by the government that it was not required. Well, it patently is required. It is clear that it is required.

I cannot imagine why we would be asked to rely on the assurances of the Deputy Premier that it is not required when we relied on the assurances of the government during the course of the discussion over the COVID-19 emergency response legislation, and we were given an assurance that no other state was adopting the federal code of conduct and the principles within it, and when it turned out that, despite having been told that in this place repeatedly by the Deputy Premier and also in the other place by the Treasurer, other jurisdictions had in fact adopted that code of conduct.

We were misled in the advice that was provided to us, and other states had, in fact, adopted those guidelines. We do not have those guidelines, we have not adopted those guidelines and we do not have a way of determining specifically how these disputes should be resolved. We have this bill from the member for Florey, and it is understandable in the absence of what other states are doing that we should have some guidance in this area.

The last point I want to touch on is one made by the Deputy Premier that the Property Council in South Australia does not see the need for this. Well, spare me! When did the Property Council of South Australia become the arbiter of good public policy? We already saw during the course of the land tax debate how they cut loose small landlords, they cut loose small property owners and they did a grubby deal on the seventh iteration of the land tax legislation to provide massive land tax cuts for people who own literally millions of dollars worth of taxable land.

They are focused on the interests of the top end of town. They are focused on the interests of the Scentre Groups, of the Coles and the Woolworths and not the locally owned small businesses, which the member for Florey and I and the opposition are more concerned about.

The Hon. D.G. PISONI (Unley—Minister for Innovation and Skills) (11:18): Previous speakers from the government have indicated that the government is not supporting this bill. I would like to speak from a local Unley perspective because there are many more retailers in Unley on the streets of Unley Road, Goodwood Road, King William Road, Fullarton Road, Glen Osmond Road, who have much more responsibility for the vibrancy and who are also at risk of things that happen in shopping centres, but there is nothing in here for them.

If Unley Shopping Centre, for example, closed down or the anchor tenants moved out and people moved elsewhere, that would have an impact right across the strip shopping not just on Unley Road but on other roads as well. I do understand the motivation of the member for Florey in bringing this forward. She sees it as being a way of supporting small traders, but there are many more small traders that are affected by all different sorts of changes in shopping.

For example, when Franklins moved out of Rossiters Food Hall back in the early 2000s, that had an impact on the strip shopping nearby because there was less of a draw into that area. There was less reason to park your car because you could not do your supermarket shopping while you were popping into the map shop, or popping into a cafe, or popping into an antique print store or, heaven forbid, a store on Unley Road that made extraordinary handmade furniture.

We know that anchor tenants are crucial for smaller tenants of shopping centres, but they are also crucial for shopping districts, and this bill does nothing for those broader tenants of shopping districts when an anchor tenant moves out. We certainly do not agree that there is a lack of notification of anchor tenants closing stores. As far as I understand, anchor tenants generally are publicly listed companies. Publicly listed companies must make public significant changes that may affect their shareholders.

These changes are made well in advance. I have never seen them not be covered in the media, not just in the business pages but right throughout the media. When Harris Scarfe announced in their receivership process that they were going to close their Rundle Mall store, first of all, I do not think it was a surprise; they were in administration. Secondly, there was certainly plenty of notice for other tenants.

I am not actually seeing major or anchor tenants moving out of shopping centres in my electorate, but I am seeing small businesses in shopping centres moving out. At the Unley Shopping Centre, the fruit and veg store that has been there for as long as I have been living and working in Unley—and that is quite some time now—has been closed all year, and the only option for those in that shopping centre now is to go to Woolworths or Coles for their fruit and veg. I certainly much prefer to use the small retailer for such products. I go to the local butcher and either the Central Market or the local fruit and veg shop on Goodwood Road (or previously in the Unley Shopping Centre).

Another thing that is important to understand about strip shopping is that it works when it is a destination, when there is a reason to go there because there are a lot of things to do and there is an experience. Although there was quite a bit of controversy over the redevelopment of King William Road just recently, it has delivered a terrific experience for those who use that road. Obviously, locals walk there, and people use their cars to go to King William Road to experience what is on offer.

I congratulate the Unley council on the work they have done there. They have recognised that they are competing with shopping centres and competing with people buying things online. If you just want to buy a product, you do that online, but if you want to actually have an experience, you might decide to make that purchase in a strip shopping part of Unley, for example, in a department store or in Rundle Mall because you are after more than just a product: you actually want a shopping experience. You are using the experience of that as part of your leisure.

When we were trading on Unley Road, the Unley council took a small delegation of traders, who paid their own way, to see what had happened on Oxford Street in Paddington. There we saw an uncoordinated go-for-all of landlords letting their buildings to the person prepared to pay the most rent. Over time, yes, there were lots of expensive frock shops, but there was no experience for those who wanted to spend the day on Oxford Street shopping. So the trading group got together and said, 'Look, we're going to have to try to bring the cafes back because the rents are too expensive for the cafes and we can't expect one or two landlords to lower their rent so that there is a broader benefit for the district.'

The landlords fixed the problem by setting up a fund. Those who had the higher rent-paying tenants contributed to a fund that would subsidise the cafes that they wanted back in the area. Anyone who has been to Sydney in recent years knows that it is a very nice experience to shop along strip shopping in Paddington and Oxford Street in particular. It is a destination. People travel from all over Australia and the world to experience it. They make a day of it. They are able to shop at various shops, purchase different products, and also have lunch, perhaps a glass of wine or a cup of coffee, with their friends. They can meet up with people and then go shopping together. They took on the convenience of shopping centres like Chatswood and Marion here and they brought it to a strip shopping area to make it an experience.

That is the challenge for strip shopping in South Australia. The member for Morphett has a lot of strip shopping in his electorate. The Premier has a lot of strip shopping in his electorate. We do not have as much strip shopping in South Australia or in Adelaide as they do in other states and cities, but it is an important part of living, particularly in the in the suburbs. We value our strip shopping.

That is why I was very pleased, when I raised my concerns about the extension of clearway times on Unley Road with the transport minister, that he asked his department to do some more work on the impact of extending those clearway times. He was pleased to advise me that the very little impact extending the clearways would have on through traffic was not worth the disruption to the strip shopping, so we still have the historical clearways on Unley Road as opposed to the extended hours proposed by the department before I intervened.

Debate adjourned on motion of Dr Harvey.