Changes afoot for retail leases- but do they go far enough?

Introduction

The Retail Leases Amendment Bill 2019 (Bill) is currently before parliament. If passed, it will result in changes to the Retail Leases Act (Act) in two significant ways.

Essential safety measures

Parties to retail leases will be free to contract as to which party will bear the obligation to meet the cost of essential safety measures. Should the parties avail themselves of this freedom, there will be certainty where to date, there has been uncertainty.

However, uncertainty as to which party is to bear the obligation to meet the cost of essential safety measures will prevail for tenancies other than retail tenancies, because those tenancies are not subject to the Bill. Similarly, uncertainty will continue if parties to retail leases do not agree on which party bears the obligation to meet the cost of essential safety measures.

Rent review

Tenants will be able to seek a rent review before exercising an option for a further term of a lease.

The current practice, typically, is that a tenant exercises an option for a new lease between 3 and 6 months prior to the expiration of the term of the existing lease, but before the rent is reviewed. Once the tenant exercises the option, it is committed to the further term, regardless of the rent that may be ultimately struck by a valuer, where the parties are unable to agree on the rent.

Other issues

The Bill does not address other issues of concern arising out of the application of the Act. For the Act to apply, the premises need to be wholly or predominantly used by the tenant under the terms of the lease for the sale or hire of goods by retail, or the retail provision of services. The interpretation of this provision by the court has resulted in the Act applying to leases against the expectations of landlords. More on this later.

Authors: Stephen Curtain, Partner, Nathan Koulouris, Trainee

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Disclaimer

This article is general commentary on a topical issue and does not constitute legal advice. If you are concerned about any topics covered in this article, we recommend that you seek legal advice.

The Author

Stephen Curtain

PARTNER, MELBOURNE