The 2020 changes to the Retail Leases Act will improve protections for retail tenants, while increasing landlord obligations
The amendments to Victorian retail leasing laws are controversial because they put even more pressure on retail landlords, many of whom are already struggling the current economic climate. It is clear that the changes are consistent with the consumer-friendly nature of the Retail Leases Act.
What are the key amendments to the Retail Leases Act?
The Amendment Act passed both houses of Parliament with no significant changes. It received Royal Assent on 22 September 2020.
The key amendments are:
Essential Safety Measures
Parties to a lease are now able to agree whether a landlord or tenant will bear the cost of installation, repairs and maintenance of essential safety measures (as defined under the Building Act). Where agreed, landlords can recover the cost of essential safety measure repairs and maintenance from the tenant, in the form of outgoings.
The Amendment Act contains a transitional provision which provides that any clauses for the recovery of essential safety measure costs in existing leases are not void. This will, to an extent, override the which concluded that a landlord could not recover essential safety measure costs from a tenant, regardless of the lease terms.
A landlord must provide a disclosure statement to a tenant at least 14 days (instead of 7 days) prior to entering into a retail lease. If a landlord fails to comply, penalties will apply for non-compliance and the term of the lease will be taken to commence 14 days after the disclosure statement and copy of the proposed lease are given.
Obligations on renewal
Landlords must provide a disclosure statement three months before the exercise date of any option.
The statement must now specify:
- the date which the option to renew may be exercised by the tenant;
- the rent payable during the first year of the option term;
- the availability of an early rent review under the RLA;
- the availability of a cooling off period under the RLA; and
- any changes to the most recent disclosure statement provided to the tenant (other than in relation to rent).
If a landlord fails to comply within the required timeframe, the last date a tenant may exercise their option can be extended for three months after the notice is eventually provided. The lease will continue on the same terms and conditions for that period of time.
Cooling off period
A tenant who has exercised their option to renew their lease, but has not requested an early rent review, can now give the landlord a written notice in the cooling-off period (14 days after the option is exercised) that they no longer wish to renew the lease.
In this scenario:
- 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
Early market rent review
If a retail lease provides for a market rent review, tenants may request the landlord conduct an early market rent review by giving the landlord notice within 28 days after the landlord gives the tenant the notice outlined in the paragraph above.
Changes in proposed lease
The landlord must notify the tenant of any amendments to a proposed lease. Failure to comply with this obligation results in penalties (250 penalty units for a body corporate). To ensure compliance, landlords should always give tenants a compare or marked-up copy of the lease outlining any changes to the previous copy of the lease.
Return of security deposits
The RLA previously required the landlord to return a tenant’s security deposit ‘as soon as practicable’ after a tenant complied with any relevant obligation under a retail lease. The Act now requires the landlord to return the security deposit (including bonds and bank guarantees) within 30 days of compliance.
Considerations for retail landlords and tenants
Landlords should take immediate steps to update their standard leases to incorporate how emergency safety measure costs are treated, as well as outgoings. Landlords should also review their processes and procedures for providing tenants with details of changes in disclosures and leases, and ensure that all deadlines for submitting required documents are clearly diarised.
Tenants should consider and understand their rights to request an early rent review and their cooling off rights if they choose not to use the early rent review provisions.
Disclaimer: The information in this publication is not tailored to the circumstances of a particular individual or entity and is a general summary only of the relevant law in question. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future.