On 15 September 2020, the Victorian Parliament passed the Retail Leases Amendment Bill 2019 (Bill), which amends the Retail Leases Act 2003 (RLA) and the Building Act 1993 (Building Act).
The main purposes of the Bill are to:
- amend the Building Act and the RLA to clarify the obligations of landlords and tenants of retail leases in respect of essential safety measures. However, amendments required for landlords and tenants under commercial leases are still being considered
- require landlords to give information to tenants within certain timeframes
- clarify the time within which landlords must return security deposits to tenants
- create a new early rent review process for tenants
- establish a cooling-off period for the renewal of leases in certain circumstances.
We note that the Bill has not yet been given Royal Assent. We will publish a further update once it has been assented to and the amendments have been introduced.
The key amendments to the RLA are set out below.
Essential safety measures
The amendments regarding essential safety measures (ESM) make it clear that under the RLA, landlords can recover the cost of ESM repairs or maintenance, or an installation relating to the fit out of premises which a tenant has agreed to pay for, from tenants in the form of outgoings (new sections 41(2), 122).
Section 17(1) will be amended to require a landlord to give a tenant a disclosure statement and a copy of the proposed lease at least 14 days (previously seven days) before entering into the lease. Failure to provide the documents more than 14 days before entering into the lease will see the commencement date delayed until 14 days have passed (new section 17(1C)).
If the proposed lease contains changes compared to the previous version given to the tenant and the landlord fails to notify the tenant of the changes, the landlord may be subject to a fine of $41,305 (if it is a corporation) or $8,261 (if it is an individual) (new section 17(1B)).
Section 24(1) will be amended to require a landlord to return a tenant's security deposit within 30 days of the lease ending, provided the tenant has performed all of their obligations under the lease. Previously, landlords were required to return security deposits "as soon as practicable".
This amendment will apply to all retail premises leases entered into and in operation immediately before a day to be proclaimed, or otherwise 1 October 2020.
Obligations on renewal
Disclosure statements issued on renewal must set out any changes to the previous disclosure statement given to the tenant and include information that is current up to three months before the issue of the statement (section 26(2)). This amendment will apply to retail premises leases entered into and in operation immediately before a day to be proclaimed, or otherwise 1 October 2020 (unless there are less than 21 days before the end of the current term of the lease).
If a lease contains an option to renew, then at least three months before the last day for the tenant to exercise that option, a landlord must give the tenant a notice which sets out:
- the date by which the option to renew may be exercised
- the rent which will be payable for the first 12 months of any renewed term
- the availability of an early rent review (new section 28A)
- the availability of a cooling-off period (new section 28B)
- any changes to the most recent disclosure statement provided to the tenant, other than any changes in relation to the rent.
Section 28 will be amended such that a landlord's failure to give the tenant a notice within the required timeframe will result in the date after which the option is no longer exercisable being three months after receipt of the notice (previously six months). The lease will continue on the same terms and conditions for that period of time.
These amendments will apply to retail premises leases entered into and in operation immediately before a day to be proclaimed, or otherwise 1 October 2020 (unless there are less than three months before the last date that the option to renew the lease may be exercised).
Early rent review
New section 28A enables a tenant to request an early rent review if the tenant has an option to renew its lease.
In order to trigger the review, the tenant must give the landlord a notice within 28 days of receiving the landlord's renewal notice (section 28A(2)).
The tenant must notify the landlord in writing as to whether it exercises its option to renew on or before the last date to do so (section 28A(3)), but the date will be extended for 14 days after the date on which the tenant is notified of the rent determination if that has not occurred at least 14 days before the last date to exercise the option (section 28(4)). In that event, the lease will continue on the same terms and conditions (section 28(5)).
If the tenant does not exercise its option to renew the lease following the rent determination, and the date that is three months after the last date that the option may be exercised is after the lease term ends, the lease will continue on the same terms and conditions to that date, unless otherwise agreed (section 28(6)).
New section 28B enables a tenant who has exercised its option to renew its lease, but has not requested an early rent review, to give the landlord a written notice in the cooling-off period (14 days after the option is exercised) that the tenant no longer wishes to renew the lease.
In the event of a cooling-off notice being given to the landlord:
- the term of the lease will be extended by 14 days
- the lease is not, and is taken not to have been, renewed
- the tenant is not able to exercise an option to renew the lease.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.