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Is your leased property ‘retail premises’?

Property & Development
Cold storage warehouse
In July 2017, the Victorian Court of Appeal confirmed that a cold storage warehouse and transport facility was ‘retail premises’ for the purposes of the Retail Leases Act 2003 (“the Act”) in CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017] VSCA 178 (“Cold Storage”). The landlord’s application for special leave to appeal was dismissed by the High Court in December 2017.

It has now been 18 months since Cold Storage was decided (and as a result of this and more recent cases relying on the position in Cold Storage), a greater number of leased premises previously thought to be excluded from the Act may now be subject to the ‘tenant friendly’ provisions of the Act. These provisions impose a different set of obligations on both landlords and tenants. 

Below are some points for landlords, agents and leasing managers to keep in mind when negotiating, reviewing or renewing a lease: 

  • The actual use of the premises will be the main consideration when determining whether or not a lease falls under the Act and the absence of a specific reference to ‘retail’ (or any express denial of it) may not be sufficient to exclude it.
  • The traditional understanding of the distinction between ‘retail’ and ‘wholesale’ no longer applies.
  • The ‘retail provision of services’ (one of the defining criteria under the Act) includes any situation where a tenant is providing services to a customer who is the ‘ultimate consumer’ of those services.  This newly clarified interpretation may now change previously held views on what uses were historically considered not to be of a ‘retail’ nature.  In particular, consider circumstances where electronic or online sales are taking place within a premises.  If the e-commerce business is the predominant service provided from the premises, it may be a retail lease.
  • The Act will apply to the lease if the use of the premises satisfies the ‘retail’ criteria at the time the lease is entered into or renewed.
  • A landlord cannot contract out of the Act by including exclusionary wording in a lease.
  • Leases of some retail premises are excluded from the coverage of the Act, including leases where:
    • occupancy costs exceed $1 million per annum; and
    • the tenant is a listed corporation, whether local or foreign, or a subsidiary of one.​
  • Under a retail premises lease, the landlord will be responsible for land tax payments, capital costs, and a number of other expenses customarily recovered as outgoings under leases which are not regulated by the Act. Other changes imposed by the Act on a landlord affect matters such as:
    • rent/adjustment review provisions;
    • notice to the tenant of options for renewal; and
    • potential extension of the term (if for example the initial term of the lease is for less than 5 years).
  • If a lease is found to be a ‘retail lease’, a tenant may be able to recover any land tax payments made by the tenant to the landlord on the basis that the parties considered the lease to be a commercial premises lease.

Arnold Bloch Leibler’s Property & Development team have extensive experience in the negotiation, preparation and enforcement of all types of commercial, industrial and retail tenancies. We are recognised as a market leader in lease innovation.

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