To the real estate industry: read this now

If you're yet to digest the recent Federal Court decision in ACCC v JJ Richards & Sons, you need to get across it.

That's because JJ Richards has serious implications for the enforceability of standard form commercial leases, commercial offers to lease, contracts of sale, building contracts, and property, facilities and strata management agreements.

The Federal Court's decision represents the first test of the B2B unfair contract terms regime, which came into effect on 12 November 2016. Under that regime, any unfair contract term in a standard form "small business contract" is void.

Importantly, in JJ Richards, the Federal Court decided that, among other clauses, each of the following constituted unfair contract terms.

• A clause that had the effect of automatically renewing a contract unless it was cancelled by the customer within 30 days before the end of the term.
• A clause that had the effect of allowing JJ Richards to unilaterally increase its prices.
• A clause that had the effect of removing any liability for JJ Richards, where its performance was prevented or hindered “in any way”.
• A clause that had the effect of allowing JJ Richards to charge for services not rendered.
• A clause that had the effect of giving JJ Richards exclusive rights to remove waste from the customer’s premises.
• A clause that had the effect of allowing JJ Richards to suspend its services, while continuing to charge the customer, if the customer failed to make a payment within seven days.
• A clause giving JJ Richards the benefit of an unlimited indemnity.
• A clause that had the effect of preventing a customer from terminating its contract if it had outstanding payments, and entitling JJ Richards to continue charging the customer equipment rental after termination of the contract.

If any of this sounds concerning to you, it's probably because analogues of many of these clauses commonly appear in the standard form contracts that you and your clients use every day.

I've just been looking at clauses 2 and 8.1 of REIWA's "Exclusive Authority to Act as Managing Agent for Commercial/Industrial Property", which provide that the agreement automatically renews unless the client gives 28 days' notice to the agent. Scroll down a little bit further and, lo and behold, you'll find an unlimited indemnity in clause 9.1.

Danger Will Robinson.

And don't think for a moment that this is only a REIWA issue: the unfair contract terms regime applies to all sorts of standard form contracts. Do you own, lease out or manage a multi-tenanted commercial property? Chances are, you're using a standard form commercial lease. Are you involved in off-the-plan residential sales, using a non-REIWA contract? That's likely to be a standard form contract of sale.

Litigation isn't my thing personally, but I can guarantee you that there are lawyers out there just waiting to apply the Federal Court's decision as leverage in a dispute.

You need to get your standard form contracts reviewed now for an opinion on whether any clauses run the risk of constituting unfair contract terms, and what can be done to minimise that risk.

(I am, of course, happy to help.)

Disclaimer: This post has been prepared as a general summary only. It is not, and is not intended to be, legal advice with respect to any particular matter. This post should not be relied on with respect to any particular matter without taking legal advice. The author disclaims liability to any person who relies on this post.