Changes to Victorian Retail Leasing

by | Nov 24, 2020 | Corporate & Business

Retail leasing is quite strictly regulated with statutory procedures, which are mostly for the tenant’s protection.  New legislation is now in place which makes a number of key changes to the retail leasing framework in Victoria.  Unsurprisingly, most of these changes result in the imposition of additional obligations on landlords.  If you are a landlord or tenant to a retail lease, you need to be made aware of the following takeaways of the recent changes under the Retail Leases Amendment Act 2020 (Vic)(Amendment Act):

Essential Safety Measures (ESM’s)

This one is for the landlord – provided it is expressly agreed, a landlord can recover the cost of ESM installation, maintenance or repairs as part of the outgoings recoverable from a tenant.

Disclosure Statements

Landlords will be required to provide a tenant with a Disclosure Statement and a copy of the proposed Lease at least 14 days prior to entering into a retail lease (this was previously 7).  Failure to do so, will result in the commencement date of the lease being delayed until the 14 day time period has passed.  This seems an inordinately long time.

Changes in Proposed Lease

If a landlord provides a tenant with a proposed lease that contains changes compared to previous versions provided during a negotiation, should the landlord not advise the tenant of these changes, there can be significant penalties to the landlord.

Renewals or Exercises of Option

Landlords must provide a tenant with a disclosure statement 3 months prior to the exercise of any option under the lease.  This is in addition to the landlord’s existing obligation to notify the tenant of the date by which they must exercise their option if they wish to take it up.

Security Deposits

A landlord is required to return a security deposit to a tenant within 30 days of the end of the lease provided the tenant has complied with its obligations under the lease.

Rent Review

Where a lease provides for rent review on commencement of a further term, a tenant can request an early rent review after receiving a Renewal Notice.  The tenant needs to request the early rent review within 28 days of receiving the Renewal Notice.  This assists businesses to plan, by ensuring the tenant knows what the rent will be rather than rolling the dice on exercising the option before it knows what the rent will be.  This is in line with some other states.

Cooling off Period

In some situations, where a tenant has exercised an option to renew the lease, they will receive a 14 days cooling off period.

What Should I Do? 

The amendments regarding ESM’s came into effect on 23 September 2020 with the balance taking effect on 1 October 2020 and applies to new leases as well as current leases.  Therefore, if you are a landlord to a retail lease, we would suggest you contact Nevett Ford Lawyers who will be able to assist you to:

  • Review any current lease as to outgoings and how ESM’s can be dealt with; and
  • Attend to all requirements for renewals and exercise of options and rent reviews.

Nevett Ford Lawyers can also assist tenants by:

  • Reviewing your lease so that we can advise you of how you can benefit from an early rent review;
  • Advising on your rights to a cooling off period; and
  • Reviewing and advising on any proposed lease or disclosure statement.