Recap – what is the mandatory notification regime?

Australia is moving from a voluntary merger clearance regime to a mandatory regime (Mandatory Notification Regime) under the Competition and Consumer Act 2010 (CCA). We’ve described key features of this regime in earlier publications, which you can see here.

Key points include the following:

• Any acquisition, including interests in land, which will be ‘put into effect’ after 1 January 2026 must be notified to the ACCC if it meets certain notification thresholds.
• A notifiable acquisition must not be ‘put into effect’ until ACCC clearance is obtained.
• If ACCC clearance is not obtained for a notifiable acquisition, the acquisition is void. Penalties of up to $50 million or 30% of the acquirer’s Australian group turnover also apply.
• An ACCC clearance goes ‘stale’ after 12 months. If a notified acquisition has not been put into effect within this time, a new notification and clearance will be required.
• Substantial filing fees apply for notifications.

When are leases notifiable?

A wide range of property transactions, including freehold purchases, leases and agreements for lease (AFLs), can be caught by the Mandatory Notification Regime. Both of the first two notifications under the new regime have been lease transactions.¹

The Government announced on 15 October that it intends to ‘simplify the approach to monetary thresholds for asset acquisitions‘. It is not clear what this means or how extensive any proposed changes will be. However, the notification thresholds as currently set out in the Competition and Consumer (Notification of Acquisitions) Determination 2025 (Determination) as they apply to property acquisitions are summarised below:

Exemptions apply for the following types of property transactions.

• Acquisitions of:
  • interests in land, where the purpose is to develop residential premises;
  • interests in land by a business primarily engaged in buying, selling, leasing or developing land;
  • acquisitions of a ‘land entity’, where the entity’s only non-cash asset is a legal or equitable interest in land and the holding of that land is for one of the purposes set out above;
  • sale and leaseback arrangements;
  • extensions and renewals of existing leases; and
  • acquisitions of a legal interest or further equitable interest in land if the acquisition of an equitable interest in that land has already been notified (provided the land and ownership interests are the same) (Subsequent Interest Exception).²

How do the notification thresholds apply to leasehold acquisitions?

For many leases and AFLs, it is currently difficult to determine whether notification under the new regime is required or not.

Under the Determination, the ‘revenue attributable’ to a leased property is the revenue attributable to the property in the accounts of the lessor for the lessor’s most recently completed financial year prior to the date of the acquisition contract.³ This would suggest that:

• if a lease or AFL relates to existing premises that were previously leased to another party, the revenue relevant for applying the notification thresholds would be the rent the lessor received under the lease of those premises in the prior financial year (even though that rent will probably be different to the rent payable under the lease to be notified); and
• if the lease or AFL relates to premises that are yet to be constructed, the revenue attributable to the asset in the lessor’s previous year accounts will presumably be ‘zero’. On that approach, a lease or AFL in respect of new premises would not satisfy the tests for notification and arguably should therefore not be notifiable.

However, it may not be this simple. The Determination provides an alternative means of calculating revenue as follows: ‘to the extent that it is not reasonably practicable to attribute the Australian revenue of a [lessor] to an acquisition of an asset, the amount to be included…. is instead 20% of the market value of the asset‘.⁴ The Explanatory Statement to the Determination (Explanatory Statement) then provides that ‘where the acquisition is of a lease … and the principal party would carry on business in the leased premises, it is likely that the alternative means of calculating revenue would apply‘.⁵

To use the approach directed by the Explanatory Statement, one must therefore calculate the market value of the lease. Under a lease, the asset being acquired is a right to occupy premises, subject to the obligation to pay rent. If rent is set at an appropriate level, the liability to pay rent should largely offset the value of the right to occupy. In most cases, this logic will result in a valuation for a lease at a level that will be unlikely to result in the notification thresholds under the Mandatory Notification Regime being met.

However, the Explanatory Statement to goes on to say that the market value of a lease is to be calculated as ’20 per cent of the entire lease arrangement – in other words, 20 per cent of the total rent payable under the entire term of the lease, not an individual year of the lease‘.⁶ In practice, this valuation methodology is difficult to apply:

• Does the ‘entire term’ of the lease mean you include rent payable under option periods, or is it just rent payable during the initial term?
• If option periods are included, how does one account for rent reviews? How does one know what the market rent is going to be in 10 years’ time or 20 years’ time?
• Many leases are indexed to CPI. How does one know what CPI will be in future years?
• Rent under retail leases is commonly based on turnover of the lessee. How does one know the turnover of a specific retail store in the future?
• How should incentives such as landlord contributions towards fit out costs be treated?
• Leases commonly require the lessee to pay outlays. Should payments of outlays be included as part of the payments payable under the lease, or should they be deducted because an obligation to pay outlays make the lease less valuable?

These questions could all make the difference as to whether a lease must be notified or not. This is important because, if a lease is not notified when it is in fact notifiable, the lease is void.⁷

Agreement for lease (AFLs)

Where parties enter into an AFL, the lessee acquires an equitable interest in the property to be leased. If the notification thresholds are met, the acquisition of that equitable interest will be notifiable and the Mandatory Notification Regime will prohibit putting the acquisition into effect until ACCC clearance has been obtained.

The Mandatory Notification Regime also provides that, once the ACCC clears an acquisition, the notification to which that clearance relates will become ‘stale’ after 12 months.⁸ Once a notification becomes stale, the acquisition to which the notification relates will be ‘stayed’.⁹ If any person continues to take steps that constitute ‘putting the acquisition into effect’ after the acquisition has been stayed, this will contravene the CCA¹⁰ and render the acquisition void.¹¹ This creates a problem for AFLs if they will take more than 12 months to ‘put into effect’.¹²

In its latest Mandatory Notification Regime FAQs, the ACCC states:¹³

Agreements for lease may have conditions precedent to the agreement for lease itself coming into effect, for example obtaining certain regulatory approvals, such as ACCC or FIRB approval.

Agreements for lease will usually also specify other requirements or conditions that must be met before the lease will ultimately be entered into. These are not conditions precedent to the agreement for lease itself coming into effect; they are steps to be taken before a lease will be entered into in the future. Legal advisers may wish to consider ensuring that this distinction is made clear in the agreements for leases they prepare.

The ACCC’s view is that there is an acquisition of an equitable interest in land when an agreement for lease is executed and any conditions precedent to it coming into effect are satisfied. At this time, the acquisition of an equitable interest which results from entering into the agreement for lease is ‘put into effect’ for the purposes of the merger law. This needs to occur within 12 months of a determination of the ACCC or Tribunal that the acquisition may be put into effect.

The logical extension of the ACCC’s reasoning would appear to be that, if the acquisition of an equitable interest is fully put into effect once conditions precedent are satisfied, the process of satisfying those conditions precedent must constitute a relevant process of ‘putting into effect’ of the acquisition, which must occur within 12 months of obtaining ACCC clearance.¹⁴ The ACCC, however, distinguishes between conditions precedent to an AFL coming into effect (which must be satisfied within 12 months or the acquisition will be stayed) and conditions that must be met before the formal lease is entered into (which, in the ACCC’s view, can take more than 12 months without causing the acquisition to be stayed or requiring a new ACCC notification).

The ACCC acknowledges that conditions such local government approvals and registration of a strata plan or a plan of subdivision may take over 12 months to satisfy. However, it goes on to say that:

The ACCC understands that local government approvals and registration of a strata plan would usually be requirements or conditions to be met before the formal lease is entered into, rather than conditions precedent for the agreement for lease to come into effect (see above question and response). However, this will depend on the drafting of a particular agreement for lease.

Therefore, on the ACCC’s explanation of the law:

• If an AFL is notifiable, the lessee will need to notify the acquisition to the ACCC and obtain clearance before steps can be taken to satisfy conditions precedent to an AFL coming into effect, such as FIRB approval. If those conditions have not been satisfied (eg FIRB approval has not been obtained) within 12 months, no further steps can be taken until a new notification is made, fresh filing fees are paid, and the ACCC makes a fresh clearance determination. Hopefully the new clearance determination will be the same as the first.
• The question of whether other requirements that take more than 12 months to satisfy may require renotification or render the AFL void may depend on whether the advisers drafting the AFL were aware of the need to draft the relevant requirements as conditions to be met before the formal lease is entered into but not as conditions precedent to the AFL coming into effect.

There is also the added uncertainty in that there is no guarantee that a court’s interpretation of these new laws will be the same as the ACCC’s.

What steps are being taken to resolve these issues?

On 15 October 2025, the Commonwealth issued a press release announcing an intention to amend the Mandatory Notification Regime to provide an exemption from the requirement for ACCC clearance and notification where leases entered into in the ‘ordinary course of business’.¹⁵

The CCA has for many years provided an exemption from merger laws for acquisitions made in the ordinary course of business.¹⁶ The legislation implementing the Mandatory Notification Regime reversed this exemption in respect of acquisitions of interests in property. Presumably the Government intends to put the exemption back to its previous form. However, the ordinary course of business exemption has never had much significance in merger law because acquisitions that are significant enough to be capable of substantially lessening competition in a market are rarely ordinary enough to be regarded as being in the ordinary course of business. Similarly, in practice, a large lease transaction will rarely benefit from the ‘ordinary course of business’ exemption. The case law on ‘ordinary course of business’ suggests that most leases that are of a size that would be notifiable under the Mandatory Notification Regime are also unlikely to be ‘ordinary’ enough to fall within an ‘ordinary course of business’ exemption. Reinstating the ordinary course of business exemption for property transactions is therefore unlikely to fix any of the current challenges.

A case often cited as a leading definition of the ‘ordinary course of business’ is Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd¹⁷ in which the Court said:

It means that the transaction must fall into place as part of the undistinguished common flow of business done, that it should form part of the ordinary course of business as carried on, calling for no remark and arising out of no special or particular situation.

Similarly, in Re Bradford Roofing Industries Pty Ltd¹⁸, the Court held:

The transaction must be one of the ordinary day-to-day business activities, having no unusual special features, and being such as a manager of a business might reasonably be expected to be permitted to carry out on his own initiative without making prior reference back or subsequent report to his superior authorities such as, for example, to his board of directors.

A lease of sufficient size to trigger the notification thresholds seems unlikely to satisfy these tests. Such a lease might be for, say, a new headquarters for an organisation, or an investment in facilities like a new factory or new warehouse or new distribution facility. Rarely could such an acquisition be safely described as ‘calling for no remark‘ or ‘such as a manager of a business might reasonably be expected to be permitted to carry out on his [or her] own initiative’. For such leases, it is therefore hard to imagine circumstances where an ‘ordinary course of business’ exemption could be relied upon with confidence.

The ACCC has also indicated in its FAQs that ‘Treasury is considering potential amendments to exempt acquisitions of interests in land if a previously acquisition of an equitable interest in the same land by the same acquirer occurred prior to 1 January 2026‘ (Grandfathering Exception).¹⁹ If passed, the effect will be to exempt any property acquisition from the Mandatory Notification Regime if the relevant acquisition agreement is executed before 1 January 2026.

This would effectively kick the problems with property transactions down the road to next year. However, the only publicly available information about the Grandfathering Exception is the quote extracted from the ACCC’s FAQs above. Interestingly, the Government’s press release on 15 October 2025, which set out the Government’s proposed ‘refinements’ to the regime, said nothing about the Grandfathering Exception. We therefore don’t know what form the Grandfathering Exception may take or, importantly, whether there may be any carve outs from the exception or even whether it will ultimately be introduced at all.

How can we help?

HWLE’s property team has been working closely with our specialist competition and consumer law team to understand the impact of the Merger Notification Regime on property transactions and stay at the leading edge of developments. If you would like more information about the services we provide, please contact us.

This article was written by Richard Westmoreland, Partner, and Alexander Shepherd, Senior Associate. 

¹ See Kongsberg Defence’s notification relating to a site within Newcastle Airport Precinct, NSW and Asahi’s notification relating to a warehouse site in Deer Park, Vic on the ACCC’s Acquisitions Register: Link here.
² Determination, s 2-20(4).
³ Determination, s 1-8 read together with ss 2-1, 2-2 and 2-3.
⁴ Determination, ss 1-9(3), 1-10(3) and 1-14(3).
⁵ Explanatory Statement to the Determination, p. 9.
⁶ Explanatory Statement to the Determination, p. 9.
⁷ It is unclear how this provision in the new merger regime can be reconciled with state property laws that provide for the indefeasibility of leases once registered.
⁸ Section 51ABG.
⁹ Section 51ABE(5). This will occur whether the acquisition was required to be notified in the first place, or not. Thus, if a lessee decides to notify an acquisition under an AFL ‘out of an abundance of caution’, the acquisition becomes a ‘notified acquisition’ and will be stayed after 12 months, even if there was no strict need to notify in the first place.
¹⁰ Section 45AY.
¹¹ Section s45AZA.
¹² It has been suggested by some that the Subsequent Interest Exception set out in section 2-20(4) of the Determination resolves this issue by providing that, if a party acquires an equitable interest in land and that acquisition is notified to and cleared by the ACCC, it is not necessary to notify the acquisition by that party of a subsequent equitable or legal interest in the same land. This means that if a lessee obtains ACCC clearance under the Mandatory Notification Regime in respect of an AFL, it will not necessary for the lessee to notify and obtain a separate ACCC clearance when it obtains a legal interest in the land through the execution and registration of the final lease. This does not, however, resolve the problem of what happens if the original notification in respect of an AFL goes stale and the acquisition is stayed before the final lease is issued.
¹³ ACCC, Merger Reform: Frequently Asked Questions: Merger reform frequently asked questions – updated 17 October 2025, p 3.
¹⁴ The ACCC’s logic would appear to create the paradox that the process of obtaining an ACCC approval would constitute a step of putting the acquisition of under the AFL into effect, which must not occur until an ACCC approval has been obtained. It is not clear how one is to obtain an ACCC clearance if obtaining that clearance is prohibited until you have ACCC clearance.
¹⁵ See: Refinements to exemptions proposed for new merger regime | Treasury Ministers.
¹⁶ s4(4)(b) of the CCA.
¹⁷ (1948) 76 CLR 463 at [470].
¹⁸ [1966] 1 NSWR 674 at [681].
¹⁹ ACCC, Merger Reform: Frequently Asked Questions updated 22 September 2025: https://www.accc.gov.au/frequently-asked-questions-about-merger-reform, p. 5.