Retail Leasing- The Renewal of Leases
If you are a Retail Lease Landlord or Tenant then the last 12 months have certainly been challenging with the practical implications of the pandemic, and the complex Regulations passed by the Victorian Government to address dealings between Landlords and Tenants in relation to rent waivers and deferments for complying Leases during the period from April 2020 through to March 2021.
During this period and quite separate to the Covid Regulations, the Retails Leases Amendment Act 2020 was passed into law effective from 22 September 2020. This amending legislation has made a number of changes to the Retail Leases Act 2003 and other associated legislation. The balance of changes brought in the legislation took effect from 1 October 2020.
A brief summary of the key changes from this legislation are as follows:-
- Disclosure Obligations – Landlords are now required to provide a Disclosure Statement and draft Lease 14 days prior to the commencement of a Lease in place of the previous 7-day period. It appears that the 14-day period commences from the date the final draft of the proposed Lease is given to the Tenant. This needs to be carefully considered regarding commencement dates.
- Essential Safety Measures – The amending legislation changed the definition of outgoings to be paid by a Tenant to include the cost of part of the cost of repairs or maintenance work in respect of an essential safety measure.
- The new Act also amends the Retail Leases Act to make the essential safety measure amendments retrospective and applicable to existing Retail Leases where that Lease has provisions allowing for essential safety measures cost to be passed on to Tenants. In reality the majority of these impacts will be relevant effective from 23 September 2020 for essential safety measures.
- Renewal of Leases – The Retail Leases Act previously required Landlords to notify Tenants of their last date to exercise an option no less than 6 months and no more than 12 months before the last date the option could be exercised. That has been amended now to be not less than 3 months prior to the last date to exercise.
- Section 28 of the Retail Leases Act has been amended to require the Notice from the Landlord to also set out a proposed rent for the first 12 months of the renewed term and details of an early rent review process and cooling off option now available to Tenants together with an updated Disclosure Statement. This is far more complex than previous requirements. If a Tenant does not receive a complying Notice from the Landlord, they retain rights to call for an early rent review and potentially still cool off from the Lease if they are not satisfied with the result of the rent review.
In summary, these are significant changes and Lease documents needs to be reviewed carefully and considered by both Landlords and Tenants well prior to the end of existing terms of occupation.
If you have any queries or questions regarding Retail Leasing issues and your rights as either a Landlord or Tenant, please do not hesitate to contact Deborah McCloskey in the RNG Lawyers Property Team for further information.