While most landlords and tenants of retail premises in Victoria are aware of the need to provide notice in regards to a forthcoming renewal of a lease for a further term, legislative changes in recent years to the Retail Leases Act 2003 (Vic) impose a stricter burden on landlords, and set out more comprehensive statutory rights to tenants, in such circumstances.
What information must a landlord provide to a tenant prior to the renewal of a lease?
Section 28 of the Retail Leases Act 2003 (Vic) (the Act) applies if a retail premises lease contains an option exercisable by the tenant to renew the lease for a further term. Sub-section 28(1A) of the Act mandates that a landlord must, at least 3 months before the last date that an option to renew the lease may be exercised, give the tenant written notice setting out all of the following information:
- the date by which the option to renew the lease may be exercised by the tenant;
- the rent payable for the first 12 months under any renewed term of the lease;
- the availability of an early rent review under section 28A of the Act;
- the availability of a cooling off period under section 28B;
- any changes to the most recent disclosure statement provided to the tenant, other than any changes in relation to rent.
Sub-section 28(1A) of the Act applies to new leases, as well as all retail leases on foot as of September 2020 where the last date to exercise the option falls on or after 1 January 2021.
What happens if the landlord doesn’t meet its obligations under section 28(1A) RLA?
What happens if the landlord does not provide all (as opposed to just some, or even none) of the information to the tenant as required under section 28(1A)?
The answer is set out in sub-section 28(2)(a). This provision provides that, in the event that the landlord fails to give the tenant all of the information required by sub-section 28(1A), or to give written notice within the time specified by that subsection, the lease is automatically taken to provide that the date after which the option is no longer exercisable is instead 3 months after the date that the landlord in fact provides to the tenant the notice required under subsection 28(1A).
Sub-section 28(2)(b) provides that if the date referred to in sub-section 28(2)(a) falls on a date after the term of the lease ends, the lease will automatically continue until that date on the same terms and conditions as applied immediately before the lease term ends, unless the landlord and tenant otherwise agree.
What if the tenant decides they don’t wish to continue with the lease after all?
Sub-section 28(2)(c) provides that the tenant, whether or not the landlord has by that time notified the tenant as required under sub-section 28(1A), may give written notice to the landlord terminating the lease from a specified day that is—
- on or after the date on which the term of the lease ends; and
- before the date until which the lease would otherwise have continued because of sub-section 28(2)(b).
How can a tenant exercise its right to a rent review?
Section 28A of the Act in turn states that if a retail premises lease provides for a rent review to be made on the basis of the current market rent of the premises, the tenant may request an early rent review from the landlord. Sub-section 28A(2) of the Act provides that the tenant may request an early rent review by giving the landlord written notice of the request within 28 days after the landlord gives notice under sub-section 28(1A). The landlord must agree to such a request if made by the tenant.
What happens if the landlord and tenant cannot agree on the rate of market rent under a rent review?
Sub-section 37(3) of the Act provides that, in the event that a landlord and tenant do not agree on what the amount of that market rent is to be, it is to be determined by a valuation carried out by a specialist retail valuer appointed by—
(a) agreement between the landlord and tenant; or
(b) if there is no agreement, the Small Business Commission—
and the landlord and tenant are each to pay the costs of the valuation in equal shares.
If you have any questions or queries about the above matters, or the renewal of retail or commercial leases more generally, please do not hesitate to contact our property lawyers at Rosendorff Lawyers and we will be delighted to assist you.
