Section 54 of the Retail Leases Act – When Does it Apply?
There are two types of commercial leases in Victoria, retail leases and non-retail leases. This distinction can have significant implications for both a landlord and a tenant.
Namely, if the lease is held to be a retail lease, it will be governed by the provisions of the Retail Leases Act 2003 (Vic) (RLA).
The RLA contains a number of protections and obligations for both landlords and tenants. For more information on whether your lease is a retail lease as defined by the RLA, click here.
Below we have outlined three key sections of the RLA that tenants and landlords should all be aware of, relating to one of the most commonly disputed sections of the RLA, section 54.
Premises to be Used Wholly or Predominately for Retail Purposes
Section 4 of the RLA requires that for premises to satisfy the definition of retail premises, they must be used, wholly or predominantly, for the sale or hire of goods by retail or the retail provision of services
This means that the Court will apply the ‘ultimate consumer’ test in determining whether the premises are retail premises.
What is the Ultimate Consumer Test?
According to the ultimate consumer test, the premises will constitute a retail premises if:
- the goods/services purchased from the premises were used by the tenant’s customers;
- the tenant’s customers paid a fee for the purchase of the goods/services;
- any person from the public could purchase the goods/services if the fee was paid;
- the tenant’s business was open during normal business hours; and
- the tenant’s customers did not pass on the goods/services to anyone else – they were the ultimate consumer of the tenant’s goods/services.
To fall within the scope of the RLA, the use of the premises must be predominantly (i.e. for than 50%) for the sale or hire of goods or services.
Tenant Required to be Compensated for Interference
Section 54(2) of the RLA states that a landlord must pay to a tenant reasonable compensation for loss or damage suffered by the tenant because the landlord has interfered with the tenant’s use and enjoyment of the premises.
This could include a landlord substantially reducing a tenant’s access to the premises, altering the flow of customers to a business, unreasonably disrupting a tenant’s trading or failing to fix a breakdown in equipment or installations at the premises that a landlord is responsible for
Section 54 is a crucial and commonly disputed, as many property disputes regarding retail leases involve a tenant’s claim that they have been prevented from quiet enjoyment of the premises throughout the term of their lease.
For this reason, many retail leases seek to exclude the operation of section 54 from the lease.
Can a Lease Exclude the Application of the Act?
Section 94 of the RLA provides that a provision of a retail premises lease is void to the extent that it is contrary or inconsistent with anything in the RLA.
The question of whether a tenant and landlord can ‘contract out’ of the provisions of the RLA was considered by the Supreme Court of Victoria in Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2015] VSC 515.
In that case, the Court held sections of the RLA such as sections 52 and 54 automatically form part of any lease covered by the RLA, and that section 94 of the RLA means that these sections cannot be modified or contracted out of by agreement between a tenant and landlord.
Accordingly, section 54 of the RLA, which requires the landlord to compensate the tenant for interference throughout the period of the tenancy (as outlined above), cannot be contracted out of.
Our property lawyers here at Rosendorff are knowledgeable and experienced in this subject matter and all property law related issues. Will be more than happy to assist you in determining whether the protections afforded by section 54 of the RLA apply to your lease.
