Around five years ago in Queensland, leasing a retail strip shop to a tobacconist was considered a stable, low-maintenance tenancy. Many commercial landlords saw tobacconist operators exercise their options, renew agreements, or sign long-term five-year leases. Recently, consecutive enforcement raids by authorities targeting illicit trade have forced property owners to reconsider this tenant profile entirely.

With organised crime infiltrating suburban shopfronts, commercial property managers are navigating complex operational hazards rather than standard retail tenancies. Property owners face severe collateral damage, including late-night arson attacks, police closure orders, and uninsurable risks. Accepting a tobacconist tenant is no longer just a calculation of rental yield; landlords must evaluate whether their physical asset and public liability policies can withstand the fallout, and whether building insurers will honour claims following a catastrophic incident.

1) Cause-and-Effect Chain

In 2010, the Commonwealth Government introduced a 25 per cent excise jump, followed by a series of 12.5 per cent annual compounding increases from 2013 to 2020, and subsequent annual increases through to 2025 (Australian Government Treasury, 2019). This tax policy was paired with mandatory plain packaging and flavour bans.

When compounding excise lifts retail costs to between $45 and $60 per legal packet, economic principles dictate that raising tax rates past an optimal threshold contracts total revenue rather than expanding it. Nicotine demand did not disappear; instead, consumer purchasing shifted directly into untaxed black-market alternatives.

As a result, Commonwealth tobacco excise collections plummeted from $16.27 billion AUD in 2019-20 down to $7.77 billion in 2024-25, with Treasury estimates forecasting just $4.13 billion AUD for 2025-26.

Organised crime syndicates capitalised on these margins and moved directly into suburban retail strips across Australia, triggering over 250 firebombings and multiple homicides linked to violent extortion rackets.

Queensland: Under state legislation, commercial landlords face severe penalties if they fail to act against tenants selling illicit tobacco or vapes. Individual property owners risk fines exceeding $160,000, up to one year of imprisonment, or both, while corporate entities face penalties exceeding $800,000. The framework also extends temporary closure orders up to three months on the spot and up to twelve months through the courts.

Action Plan for Landlords with Tobacconist Tenants

Because these issues were not standard leasing considerations five years ago, commercial property owners must implement a rigorous risk framework.

If you have an existing tobacconist, you should consider the below

Action 1: Immediate Insurance Disclosure and Audit

• Written Insurer Notification: Formally notify the building underwriter that a tenant retails tobacco, vaping, or related items. Failing to disclose material retail risk can void an entire property policy following an arson event.
• Policy Exclusion Verification: Review building policies specifically for illegal enterprise exclusions, deliberate fire exclusions, or conditions refusing indemnity if unapproved contraband was stored on the premises.
• Cross-Tenancy Liability: Confirm that public liability limits adequately cover catastrophic structural damage
• Ask for Tenant Insurance: Ensure adjoining retail tenants carry up-to-date, comprehensive business insurance, public liability and plate glass insurance.

Action 2: Permitted Use and Regulatory Compliance Verification

• Strict Permitted Use: Restrict permitted use covenants strictly to the "lawful retail sale of licensed tobacco products", explicitly prohibiting unapproved goods, non-compliant packaging, or illicit stock.
• Request of Documentary Proof: Obligate the tenant to submit current retail tobacco licences, local government health permits, and business registration certificates on an annual basis.
• Routine Physical Inspections: Exercise contractual inspection rights to verify the shop floor has not installed concealed secondary storage rooms, unapproved structural partitions, or covered display cabinets.

Action 3: Lease Default Triggers and Termination Rights

• Immediate Default upon Closure Orders: Draft lease covenants ensuring any interim or formal closure order issued by health authorities or the police triggers an immediate, incurable breach of lease.
• Increased Security Guarantees: Require substantial bank guarantees (at least six months gross rent) to cover make-good requirements, and rental shortfalls during legal investigations.

Action 4: Physical Fire Separation and Site Security

• Fire Boundary Separation: Inspect and certify the fire-resistance level of party walls, ceiling cavities, and common service ducting between the tobacconist and neighboring tenancies.
• Landlord-Controlled CCTV: Maintain landlord-managed external surveillance covering shopfront display windows, rear service doors, and delivery docks.
• Surrounding Tenant Communication: Maintain an active reporting channel with adjoining retailers to identify suspicious out-of-hours deliveries, threats, or property tampering promptly.

If you own retail property in Queensland and want to ensure your lease agreements, insurance disclosures, and risk management procedures protect your asset against non-compliant tenancies, speak with our team.

Contact McGees Property Brisbane today for tailored leasing advice, risk audits, and professional commercial asset management to safeguard your investments.

For a complete list of weekly commercial transactions in Queensland, visit McGees Wrap Up | McGees Property Brisbane

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