Jansen Walsh and Grace

"Why do I need a written lease?"
The decision of the Tribunal in Deus Software Pty Ltd v Acumen Auditors Pty Ltd (Building and Property) [2015] VCAT 1667 shows the difficulties if you, as the landlord, have no written lease.  In that case, an accountant offered to lease the premises from the landlord.  There was an exchange of e-mails, but no formal written lease.  Consequently, no right of re-entry was reserved.  The accountant defaulted in the payment of rent and outgoings.  The landlord changed the locks.  The landlord refused to allow the accountant to collect his goods in premises after re-entry unless the arrears had been paid.  The Tribunal found that the landlord had no right to do so.

In addition, if your premises are "retail premises", section 16 of the Act makes it a criminal offence not to provide the tenant with a written lease.

"What will it cost me?"
We usually provide commercial leases, renewals of commercial leases and transfers of commercial leases free of charge to landlords.  We also deal with transfers of retail leases free of charge to landlords.  Our charges are recovered from the tenant.  Unfortunately, we cannot provide retail leases and renewals of retail leases free for landlords because of the very extensive extra documentation which we must prepare for landlords to give to tenants of retail premises.  As retail leases vary enormously, with the Act imposing different requirements on landlords of different types of retail leases, we will provide you with a written quote for your particular type of retail lease.

Disclosure Statement
If your premises are "retail premises", you are obliged to give the tenant a Disclosure Statement and information brochure.  If these documents are not provided to a tenant at the time when you enter into negotiations for the lease and preparation of the lease documents, then the tenant can:

1.  withdraw from the lease prior to entering into occupation of the premises; or
2.  within 28 days of the commencement of the lease.

The tenant is also entitled to a refund of the rental and other monies paid from the time when the tenant requested the Disclosure Statement and when it is ultimately provided.

What is a "retail lease"?
The Retail Leases Act 2003 applies to any premises from which goods or services are supplied to the general public.  The Act requires that this be the sole or predominant use of the premises and provides that the Act does not apply to any part used for residential purposes.  The Court of Appeal’s decision in IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178 has held that “the ultimate consumer test” is the test in determining whether premises are “retail premises” and therefore governed by the Retail Leases Act 2003.

GST is payable in addition to the rent and you should give a tax invoice to the tenant.  It is not necessary for you to give tax invoices monthly as they can cover, for instance, a year of monthly payments.

Outgoings
The tenant pays the outgoings which are specified in the lease in addition to the rent, with one exception if it is a retail lease: land tax.

Security deposit or bank guarantee
The tenant must provide either a bank guarantee or a security deposit.  This must be invested on behalf of the tenant and kept separate.  We will usually do this for you free of charge.

Transfer of lease and subletting
The lease allows the tenant to transfer or sublet with your consent, which cannot be unreasonably withheld.  Provided that the new incoming tenant is clearly able to perform the lease and meet their obligations, you cannot refuse the assignment or subletting.

Signage
All signage requires your consent.

Insurance
The tenant has to take out insurance for $20 million to cover the risks.

Repairs and maintenance
Repairs and maintenance are the tenant's responsibility.  However, any work that may be required of a structural nature is your responsibility.  You have an obligation to maintain the property in the condition it was at the commencement of the term.

Fire levy and other essential services
Some retail leases require that the tenant to pay for the fire levy.  These leases are inconsistent with the Advisory Opinion of The Honourable Justice Garde dated 1 May 2015 and the decisions of Deputy President McNamara (as his Honour then was) in Chen v Panmure Hotel Pty Ltd [2007] VCAT 2464 and by Senior Member Senior Member Riegler in McIntyre v Kucminska Holdings Pty Ltd [2012] VCAT 1766.  This restriction does not apply to commercial properties which are not retail premises.

Car parking
Car parking is often an issue and should be dealt with before commencement of the lease.

Tenant's use of the premises
Although it is the tenant's responsibility to ensure that its use complies with the municipal council’s requirements, ypu must keep an eye on this.  For example, we have encountered instances where the premises were used as an illegal brothel and the landlord was charged with a criminal offence.  So, you or your agent must keep an eye on it.

Possession
It is the usual practice not to give possession to the tenant until after all documentation is signed and exchanged and the initial rent bond and costs paid.

Registration
Unlike other States, leases for terms in excess of 3 years do not have to registered.  It is voluntary.  Leases for 3 years or less cannot be registered.