Retail Leases Amendment Act 2020 (Vic)
25 September 2020
2 mins reading time
While foreshadowed for some time, the amendments relating to retail leases were put on hold at the start of COVID-19 and have now been implemented. The Retail Leases Amendment Act 2020 (Vic) received royal assent on 22 September 2020, meaning that the Act has now come into effect.
Although the legislation has been somewhat controversial given the current climate, the following changes will take place:
| New Leases Essential Safety Measures (ESMs) | Parties to a lease can agree on which party will be responsible for the cost of installation, repairs and maintenance of ESMs. This means that by agreement the lease may require the tenant to pay for the cost of carrying out installation, repairs or maintenance work of an ESM going forward for new leases. |
| Current Leases ESMs charges | A VCAT advisory opinion issued in 2015 concluded that a landlord could not recover ESMs costs from a tenant under a lease, regardless of the lease terms. Any clause for the recovery of ESMs costs in an existing lease is now valid from the commencement date of this Act. This is a significant change to the previous position and will require a review of your specific lease terms as to whether it allows for recovery of ESMs costs. Any application of the 2015 guidance note to commercial leases hasn’t been fully resolved by this amendment. |
| Disclosure statements | Landlords will be required to provide tenants with a disclosure statement and a copy of the proposed lease at least 14 days before entering into the lease (the previous requirement was 7 days). Failure to provide the required documents within the specified timeframe will delay the commencement date of the lease to 14 days after the documents are received by the tenant. |
| Obligations on renewal | Landlords must provide a disclosure statement 3 months prior to the exercise date of any option. The statement must set out the last date by which an option term may be exercised, the rent payable in the first 12 months of the option term, the availability of an early rent review, the availability of a cooling-off period, and any other changes to the most recent disclosure statement provided to the tenant. |
| Early rent review | This change is designed to ensure that tenants are aware of the rent they will be paying prior to exercising an option to renew. Where the lease provides for a market rent review, the tenant may request an early rent review by giving the landlord notice within 28 days after the landlord gives the tenant notice. The tenant’s option period will then, if necessary, also be extended until 14 days after the date that the reviewed market rent is determined. |
| Cooling off period | A tenant who has exercised an option to renew a retail lease, but has not requested an early rent review, may in certain circumstances still have the benefit of a 14 day cooling-off period to change their mind once the rent review is finalised. |
| Security deposits | A landlord must return a tenant’s security deposit, including bonds and bank guarantees, to the tenant within 30 days of compliance with any relevant obligations under a retail lease. The previous requirement was ‘as soon as practicable’. |
If you would like further information or advice about how these amendments impact you, please contact our team.
The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.
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Retail Leases Amendment Act 2020 (Vic)
25 September 2020
While foreshadowed for some time, the amendments relating to retail leases were put on hold at the start of COVID-19 and have now been implemented. The Retail Leases Amendment Act 2020 (Vic) received royal assent on 22 September 2020, meaning that the Act has now come into effect.
Although the legislation has been somewhat controversial given the current climate, the following changes will take place:
| New Leases Essential Safety Measures (ESMs) | Parties to a lease can agree on which party will be responsible for the cost of installation, repairs and maintenance of ESMs. This means that by agreement the lease may require the tenant to pay for the cost of carrying out installation, repairs or maintenance work of an ESM going forward for new leases. |
| Current Leases ESMs charges | A VCAT advisory opinion issued in 2015 concluded that a landlord could not recover ESMs costs from a tenant under a lease, regardless of the lease terms. Any clause for the recovery of ESMs costs in an existing lease is now valid from the commencement date of this Act. This is a significant change to the previous position and will require a review of your specific lease terms as to whether it allows for recovery of ESMs costs. Any application of the 2015 guidance note to commercial leases hasn’t been fully resolved by this amendment. |
| Disclosure statements | Landlords will be required to provide tenants with a disclosure statement and a copy of the proposed lease at least 14 days before entering into the lease (the previous requirement was 7 days). Failure to provide the required documents within the specified timeframe will delay the commencement date of the lease to 14 days after the documents are received by the tenant. |
| Obligations on renewal | Landlords must provide a disclosure statement 3 months prior to the exercise date of any option. The statement must set out the last date by which an option term may be exercised, the rent payable in the first 12 months of the option term, the availability of an early rent review, the availability of a cooling-off period, and any other changes to the most recent disclosure statement provided to the tenant. |
| Early rent review | This change is designed to ensure that tenants are aware of the rent they will be paying prior to exercising an option to renew. Where the lease provides for a market rent review, the tenant may request an early rent review by giving the landlord notice within 28 days after the landlord gives the tenant notice. The tenant’s option period will then, if necessary, also be extended until 14 days after the date that the reviewed market rent is determined. |
| Cooling off period | A tenant who has exercised an option to renew a retail lease, but has not requested an early rent review, may in certain circumstances still have the benefit of a 14 day cooling-off period to change their mind once the rent review is finalised. |
| Security deposits | A landlord must return a tenant’s security deposit, including bonds and bank guarantees, to the tenant within 30 days of compliance with any relevant obligations under a retail lease. The previous requirement was ‘as soon as practicable’. |
If you would like further information or advice about how these amendments impact you, please contact our team.