(03) 9720 2922

Jansen Walsh & Grace

REMINDER: Retail lease rent reductions under the Act for your tenants end on Wednesday 28 April.  They will revert to normal on that day.

"Why do I need a written lease?"
The decision of the Tribunal in Deus Software Pty Ltd v Acumen Auditors Pty Ltd shows the difficulties if you, as the landlord, have no written lease.  In that case, an accountant offered to lease
the premises from the landlord.  There was an exchange of e-mails, but no formal written lease.  Consequently, no right of re-entry was reserved.  The accountant defaulted in the payment of rent and outgoings.  The landlord changed the locks.  The landlord refused to allow the accountant to collect his goods in premises after re-entry unless the arrears had been paid.  The Tribunal found that the landlord had no right to do so.

In addition, if your premises are "retail premises", section 16 of the Act makes it a criminal offence not to provide the tenant with a written lease.

"What is a 'retail lease'?"
The Retail Leases Act 2003 applies to any premises from which goods or services are supplied to the general public.  The Act requires that this be the sole or predominant use of the premises and provides that the Act does not apply to any part used for residential purposes.  The Court of Appeal’s decision in IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd has held that “the ultimate consumer test” is the test in determining whether premises are “retail premises” and therefore governed by the Retail Leases Act 2003.

"When does the rent reduction period end?"
The COVID-19 Commercial and Residential Tenancies Legislation Amendment (Extension) Bill 2020 modifies the law relating to retail leases and non-retail commercial leases and licences until 26 April 2021.

Fortunately for landlords, the Tribunal (VCAT) has interpreted this legislation fairly strictly, as it did on 24 December 2020 in PS Market Pty Ltd v Brijcam Nominees Pty Ltd and on 5 February 2021 in Filomeno Nominees Pty Ltd v Crown Group Pty Ltd.

What happens after 27 April 2021?”
The tenant must revert to paying the full amount of rent, including arrears of rent and the rent increase under the lease, as and from 27 April 2021.

Land tax relief for landlords
You are entitled to a 50% waiver of your 2020 land tax and deferral of the balance to 31 March 2021 if you provide eligible tenants with a 50% or more outright rent waiver for at least 3 months.

Cladding in your rental property  
The new Cladding Safety Victoria Act may assist you if you own buildings which contain cladding.  It enables to enable Cladding Safety Victoria to prioritise buildings for potential financial assistance for cladding rectification work and register owners and owners corporations of those buildings; to determine the amounts of financial assistance for cladding rectification work and make payment for those amounts under funding agreements; and allows Cladding Safety Victoria to provide guidance to owners and owners corporations of buildings and other persons and bodies in relation to cladding rectification work in order to mitigate risk.

Granting a new lease
If your premises are retail premises and you are intending to grant a retail lease, make sure that the documents comply with the changes to the changes which came into force on 1 October 2020.  They change what must be in the lease. 

"Why do I need to give a Disclosure Statement to my tenant?"
If your premises are "retail premises", you are obliged to give the tenant a Disclosure Statement and information brochure.  If these documents are not provided to a tenant at the time when you enter into negotiations for the lease and preparation of the lease documents, then the tenant can:

  • withdraw from the lease prior to entering into occupation of the premises; or
  • within 28 days of the commencement of the lease.

The tenant is also entitled to a refund of the rental and other monies paid from the time when the tenant requested the Disclosure Statement and when it is ultimately provided.

"Is GST payable on the rent?"
GST is payable in addition to the rent and you should give a tax invoice to the tenant.  It is not necessary for you to give tax invoices monthly as they can cover, for instance, a year of monthly payments.

"Who pays outgoings?"
The tenant pays the outgoings which are specified in the lease in addition to the rent, with one exception if it is a retail lease: land tax.

Security deposit or bank guarantee
The tenant must provide either a bank guarantee or a security deposit.  This must be invested on behalf of the tenant and kept separate.  We will usually do this for you free of charge.

"The tenant wants to put up signs"
All signage requires your consent.

The tenant has to take out insurance for $20 million to cover the risks.

Repairs and maintenance
Repairs and maintenance are the tenant's responsibility.  However, any work that may be required of a structural nature is your responsibility.  You have an obligation to maintain the property in the condition it was at the commencement of the term.

Car parking
Car parking is often an issue and should be dealt with before commencement of the lease.

Essential services
There is one win for landlords: the legislation overturns the rulings of the Tribunal in relation to the cost of essential services legislation. 

“Do I have to register the lease?”
Unlike other States, leases in Victoria for terms in excess of 3 years do not have to registered.  It is voluntary.  Leases for 3 years or less cannot be registered.

Renewal of lease
If you are intending to renew an existing retail lease, make sure that the documents comply with the changes to the changes which came into force on 1 October 2020.  They change what must be in the renewal of lease documentation. 

Tenant's use of the premises
Although it is the tenant's responsibility to ensure that its use complies with the municipal council’s requirements, you must keep an eye on this.  For example, we have encountered instances where the premises were used as an illegal brothel and the landlord was charged with a criminal offence.  So, you or your property manager must keep an eye on it.

Transfer of lease and subletting
The lease usually allows the tenant to transfer or sublet with your consent, which cannot be unreasonably withheld.  Provided that the new incoming tenant is clearly able to perform the lease and meet their obligations, you cannot refuse the assignment or subletting.

"What will it cost me?"
We usually provide transfers of retail leases free of charge to landlords.  Our charges are recovered from the tenant. Unfortunately, we cannot provide retail leases and renewals of retail leases free for landlords because of the very extensive extra documentation which we must prepare for landlords to give to tenants of retail premises.  As retail leases vary enormously, with the Act imposing different requirements on landlords of different types of retail leases, we will provide you with a written quote for your particular type of retail lease.