Proposed Changes to the Retail Leases Act 2003

By | 19/11/2019

Proposed Changes to the Retail Leases Act 2003

The Retail Leases Amendment Bill 2019 is before the Victorian Parliament and should be passed in the coming months, with effect expected from October 1st 2020. It contains a number of amendments to the current legislation which you should be aware of including:

  1. Essential Safety Measures.

The bill proposes to provide clarity with respect to the recovery of essential services maintenance.

Proposed Changes to the Retail Leases Act 2003The landlord will remain responsible for the overall compliance with building regulations, even though these charges are recoverable or payable by a tenant.

Whilst most leases contain provisions for tenants to be responsible for the cost of compliance, disclosure statements need to be appropriately worded to estimate these charges.

  1. Provision of Landlords Disclosure Statement and Proposed Lease.

The bill proposes to extend the time frame for supplying a proposed lease and disclosure statement to a new tenant to 14 days prior to lease commencement, presently the requirement is 7 days. Penalties also apply if the final lease submitted has changes that have not been communicated to the tenant. If the disclosure statement and the lease are not given to the tenant within 14 days prior to the commencement date, then the commencement date will be delayed until a clear 14 days has passed.

  1. Security Deposits.

The bill proposes a change from “as soon as practicable” to “within 30 days” for the return of a tenant’s bond following the end of the tenancy, assuming that the tenant has complied with the obligations of the lease.

  1. Landlords Disclosure on Renewal of Lease.

Any changes to the original disclosure statement will be recorded and must be current within 3 months before the statement is given. This will include amended outgoings (if different to the original disclosure or annual outgoings statement provided under section 47 of the Act) or variations to the tenancy.

  1. Landlord to give tenant certain information before option to renew lease expires.

Presently where a lease contains an option, the landlord is required to give the tenant 6 – 12 months notice prior to the last date that the tenant can take up the option. The bill will reduce the notice period to 3 – 12 months prior to the last date to take up the option.

The landlord will also have to include the following in their option notice to the tenant:

  • Last date to exercise the option (as is required at present).
  • The rent payable for the first 12 months of the lease.
  • The availability of an early market rent review (valuation).
  • The availability of a 14 day cooling off period.
  • Any change to the previous disclosure statement.
  1. Early Rent Review.

Following receipt of the landlord’s notice concerning the option, the bill proposes that the tenant may, within 28 days of receipt, request a rental determination by a valuer. This, however, will not preclude the parties from privately negotiating a suitable rent. Following receipt of the determination, the tenant will have 14 days in which to decide whether they will take up the option or not.

  1. Exercise of Option Cooling Off Period.

The bill proposes that if the tenant has exercised an option and has not requested an early rent review, the tenant may, within 14 days after formally exercising the option, give the landlord a further written notice advising that it no longer wishes to exercise the option.

Retail Lease ActHow will these changes affect you?

  • The proposed changes will provide clarity surrounding the liability of tenants to pay essential services costs.
  • The requirement to provide the final lease and disclosure statement at least 14 days prior to lease commencement will see prudent landlords having documentation during the leasing process “ready to go” for prospective tenants.
  • The stated time frame for the return of security deposits should generally not be an issue.
  • The Disclosure Statement for a renewal of lease will need to be compared closely to the initial one issued and updated if needed.
  • The landlords notice of option will require an assessment of the market rent well ahead of what is presently conducted.
  • The early rent review may create uncertainty and needless expense where the tenant has the opportunity to terminate the lease following the valuer’s decision. A determination may take months to complete and may have passed the last date to exercise the option.
  • Landlords cannot be certain that their tenant is renewing until the cooling off period has passed.
  • The complexity of options may see many landlords opting for single term leases when the legislation takes effect.

Once the bill receives royal assent, we will update our clients accordingly. Stay tuned for further news.

A copy of the bill can be seen here.

Bill DiDonna

Written by Bill DiDonna 

Bill has more than 35 years of property management experience across Melbourne’s suburban commercial property market. He is a licenced estate agent, has an Associate Diploma in Real Estate Valuations (RMIT),is currently a committee member on the Commercial and Industrial chapter of the REIV and takes a keen interest in legal issues, trends and insights affecting property.

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