March 3, 2014

The New Age of Pop-Up Retail Shops – What does this mean for retail leasing?

The phrases ‘pop-up shop’ or ‘pop-up retail’ generally refer to a short term, temporary retail space. These types of shops occupy a space for as little as one day, up to several months, and often simply appear in a vacant shopfront (and then disappear just as quickly).

Pop-up shops have become a common fixture in the Australian retail space, presenting a quick and cost-effective way for retailers and designers alike to offload last season’s stock at lower prices (often too good to resist!).

Landlords are attracted to the idea of a pop-up shop as a way to let a vacant space temporarily while seeking a permanent tenant – however these types of leasing arrangements have the potential to create issues.

Despite the increasing popularity of pop-up shops, the words ‘pop-up shop’ do not appear in our Retail Shop Leases Act 1994 (Qld) (the Act), and this has left retailers and landlords without guidance as to what their legal obligations actually are.

Where to start

Though pop-up stores are not specifically mentioned in the Act, the Retail Shop Leases Regulation 2006 (Qld) (the Regulations) lists the types of businesses that are considered to be retail shops governed by the Act.

If the tenant’s business is listed in the Regulations, though a pop-up store only contemplates a short term lease, the provisions of the Act will still apply.

Some important considerations include:

  • Warranties and indemnities
  • Public liability and other insurances
  • How to end the term
  • Guarantees
  • Default and termination
  • Security bond

Make good clauses are also of particular significance as they set out the tenant’s obligations in relation to the condition of the premises upon the expiry of the lease.

These matters should not be overlooked simply because a space will be occupied for a very short time.

The future for pop-up shops

The NSW Government is in the process of reviewing the operation of its equivalent Retail Leases Act, and a discussion paper on this Act, including the concept of pop-up retail, was issued last year.

We are yet to see the Queensland Government follow suit, however change in this area seems inevitable and should provide clarity for both retailers and landlords.