Victoria reports record number of retail leasing disputes in 2018/19

By Nick Hall | 18 Oct 2019 View comments

Retail leasing has once again emerged as the biggest issue facing small business, according to the latest results from the Victorian Small Business Commission’s (VSBC) Annual Report.

According to the commission, a record 2074 small businesses sought help in resolving their business disputes over the past year.

Retail leasing remained the primary concern, with 1040 dispute applications under the Retail Leases Act 2003 received by the VSBC, a rise of over 13 per cent on the previous year.

“In 2018–19 our team handled 9,572 phone enquiries. The majority of queries related to rights and obligations under retail leases, with a further significant proportion involving disputes that arose between businesses more generally,” the report states.

Nationwide retail leasing concerns

The results, while refined to the state of Victoria, mirror concerns raised across the board, with retail leasing earmarked a significant barrier to small business and franchisee profitability.

Tighter lending conditions in the wake of the Royal Commission into the banking sector, coupled with a rising rental market have also restricted growth for small business owners.

The issue has been brewing for some time, however, with the NSW government going so far as to introduce a voluntary shopping centre code earlier this year. Under the code, centres would provide a variety of benchmarking data to their tenants, such as moving annual totals, door counts and sales per square metre by category.

Irrespective, retail leasing wasn’t the only cause of dispute identified in the VSBC report.

Additional causes of dispute

Small businesses also revealed that a fundamental misunderstanding of their rights and responsibilities with regard to contracts had also proven a cause for concern. More than 16 per cent of the total applications for assistance received related to disputes over contractual rights and responsibilities.

While on the outside, the record number of assistance applications may seem like the problems are swelling, commissioner Judy O’Connell suggested it demonstrated that more small businesses are following the appropriate resolution process.

The commissioner revealed that more matters are being resolved early on with guidance and support, with 82 per cent of the matters that did go to mediation reaching agreement.

“It really does show the value of our stronger efforts to engage small businesses about their rights and responsibilities and to promote our quick, effective and low-cost dispute resolution service,” O’Connell said.

“We’ve also strengthened our work in advocacy by rolling out our Small Business Friendly Council initiative, where we’re working with councils to provide greater supports to local businesses.”

For franchisees, the report highlights the need to perform accurate due diligence. Many disputes, particularly around contractual rights and responsibilities can be alleviated through consultation with a franchise accountant and lawyer.