Changes to Retail Leasing Law

On 15 September 2020, the Retail Leases Amendment Bill 2019 (Vic) (“Bill”) passed the Victorian Parliament which amended key provisions in the Retail Leases Act 2003 (Vic) and the Building Act 1993 (Vic). These amendments are separate to the recent legislative changes made in response to the COVID-19 pandemic.  The Retail Leases Amendment Act 2020 (Vic) (“Act”) came into force on 1 October 2020.

In summary, the Act introduced 6 main changes to the retail leasing framework:

1. Disclosure Statements for Options to Renew
   

   For leases that contain an option to renew for a further term, a landlord must now provide the tenant with a notice three months (previously six to 12 months) prior to the exercise date of any option. The notice must include:

   • the date by which an option to renew must be exercised;
   • the rent payable for the first 12 months of the renewed lease;
   • the availability of an early rent review under the Act;
   • the availability of a cooling off period under the Act; and
   • any changes to the most recent disclosure statement provided to the tenant (other than changes in relation to the rent).

2. Early Rent Reviews
   

   A tenant may request an early rent review by giving the landlord notice within 28 days after the landlord has provided a notice for an option to renew the lease. The last date for the tenant to exercise the option to renew will be extended to be 14 days after the market rent is determined.

3. Costs of Essential Repairs
   

   Prior to these amendments, a published VCAT determination suggested that landlords were solely responsible for bearing the costs of installation, repairs and maintenance for essential safety measures (ESMs). Now, landlords and tenants can negotiate leases to allow landlords to recover costs of ESMs through outgoings.

    

4. Disclosure Statements for New Leases
   

   Before entering into a retail premises lease, a landlord is now required to provide a tenant with a disclosure statement at least 14 days (previously 7 days) before entering into the lease. The Act introduces significant penalties for non-compliance with a landlord’s disclosure obligations (which currently equates to a fine of $41,305 for bodies corporate or $8,261.50 for individuals).

5. Security Deposits
   

   Landlords must now return security deposits, including bonds and guarantees, to the tenant within 30 days of the end of the lease (subject to the tenant complying with their obligations under the lease including any make good obligations).

    

6. Cooling Off Periods
   

   A tenant who has exercised an option to renew a lease will now have a 14 day cooling off period should they change their minds.

What does this mean for tenants?

Tenants should be aware of their new rights under cooling off periods, disclosure statements and right to return of security deposits pursuant to their obligations under their lease. Most importantly, tenants should ensure they make use of the rent review provisions before exercising an option under their lease.

What does this mean for landlords?

Landlords should review their existing lease to ensure that outgoings and ESMs are properly dealt with. Additionally, large penalties may apply if disclosure statements are in incorrect formats and exclude the required information for tenants.

Please contact your Morrows Advisor or Adam Neylon (03 9134 3543) of Morrows Legal to discuss your next steps.