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Leasing to Tobacco Businesses: Risks, Legal Obligations and Termination Rights
Queensland landlords need to be aware that their obligations have recently changed, with the Queensland Parliament granting assent to the Tobacco and Other Smoking Products (Dismantling Illegal Trade) and Other Legislation Amendment Bill 2025, which amended the Tobacco and Other Smoking Products Act 1998 (the Act), in order to address growing concerns surrounding the rise in illicit tobacco sales.
Under the Act, tenants involved in the sale of illicit tobacco products can be issued a closure order by the State Government, and subsequently have their lease terminated by their landlord. However, the Act also subjects landlords to penalties in circumstances where sales of illicit tobacco have been made from premises that they own.
It is essential that landlords understand their legal obligations and the circumstances in which they may terminate a lease with an illicit tobacco business.
Closure Orders
Queensland Health may issue a closure order in respect of any premises believed to be used for the sale of illicit tobacco products. A closure order prevents operations from occurring within that premises. Queensland Health will then notify the landlord of the closure order, and provide the landlord with information about the landlord's rights and obligations – which may include termination of the lease. Closure orders remain in place until the lease ends and Queensland Health is notified by the landlord.
After the giving of a closure order, the landlord may terminate the lease on 14 days written notice – this right to terminate exists outside the terms of the lease, so the landlord may terminate even if the lease does not provide for it. The Act specifically protects landlords from any claim for damages or compensation from the tenant.
Despite this, there is still some "haze" regarding this issue – termination is not technically mandatory. The Act does not remove a landlord's autonomy when it comes to whether or not they should terminate the lease. Instead, it prompts consideration on whether continuing the lease may expose them to penalties.
Penalties for Landlords
Under the Act, knowingly permitting the sale of illicit tobacco products is now an offence for landlords. Non-compliant landlords may be subject to a maximum penalty of $166,900, 1 year's imprisonment, or both.
'Knowledge' can be established without a closure order being issued, meaning that a landlord may be held liable if it is found that they were recklessly indifferent to the supply or possession of illegal substances on their premises – actual knowledge is not required.
Landlords who have been informed of a closure order, are aware that the tenant is engaging in illicit tobacco sales, yet continue to permit this activity, will likely satisfy actual knowledge and be subjected to regulatory penalties. Penalties may include $166,900 for individuals and $834,500 for corporations.
What Should You Do?
With these substantial changes in obligations and penalties in mind, landlords should consider taking proactive steps to ensure they remain informed about how their premises are being used.
For existing leases, it may be prudent to consider any complaints made, monitor the trading activity and executing any lawful inspection rights if suspicions arise. Landlords should seek legal advice promptly if there are warning signs of illegal tobacco business, as the risks for ignoring and overlooking are now too great. It is important to seek legal advice before taking steps to terminate a lease, as unlawfully terminating a lease could expose the landlord to a claim for damages from the tenant.
For new leases, landlords should verify the nature of business that tenants are involved in and undertake and appropriate legal checks before a lease is entered into.
Most importantly, for landlords who have been issued a closure notice, time is of the essence. It is crucial that legal advice is sought to resolve the issue without incurring any penalties.
How We Can Help
If you are a landlord facing challenges with an existing tenant or require guidance on leasing to a tobacco business, we are here to help. Please feel free to reach out to one of our Property + Business Transactions Team for specific advice and assistance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
