Retail Leases Amendment Act 2020
Critical Amendments of which will impact both Landlords and Tenants
The retail real estate market remains in a state of flux with many property participants, be it landlords and/or tenants, directly affected by the ongoing lockdown restrictions imposed by the State Government of Victoria.
The Retail Lease Amendment Act 2020 is now in effect from 23 September 2020.
According to the Real Estate Institute of Victoria (REIV), the lack of ‘genuine consultation with the industry about the proposed changes’ was a real concern with many aspects of the proposed legislation being ‘unworkable’.
Under the existing process, a tenant of whom exercised their option within the prescribed time period had no insight whatsoever as to the commencement rental for the renewed lease term.
Upon the option being formally exercised, the landlord would only then advise the tenant of the proposed rent and then failing the rental sum being agreed upon by both parties, the ‘market rent review’ provisions of the lease would allow the matter to be referred, in most instances, to a Specialist Retail Valuer for Determination.
The following fundamental changes are now outlined under the Amendment Act;
- There is a requirement that the landlord provide certain information to the tenant three (3) months before the last date to exercise their option including the proposed rent for the next term, the availability of an early rent review and a cooling off period. If this requirement is not met, the tenant is granted a further three (3) months from the date of the landlord’s valid notice.
- I don’t propose to repeat the challenges faced in assessing a ‘market rental’ in the current real estate market and in this regard please refer to our recent blog titled “The Difficulty in Determining a Current Market Rental within the Covid-19 Environment with caution to be considered by all parties to the lease’.
- Establishes procedures for tenants to request early rent reviews by Specialist Retail Valuers where a market rent review is due and the tenant has exercised their option.
- A cooling off period of fourteen (14) days is now available to the tenant after it exercises its option to renew the lease, in the case where the tenant has exercised their option and not requested an early rent review.
- Landlords are permitted to pass on the costs associated with repair and maintenance of Essential Safety Measures where the current lease makes provisions for this and the costs have been advised to the tenant of which will apply to all leases and is retrospective.
- Disclosure Statements and a copy of the proposed lease are now to be provided to the tenant at least fourteen (14) days prior to the commencement date.
- Security Deposits are to be returned within thirty (30) days of expiry of lease term.
- Information contained within the Disclosure Statement on renewal of lease must be current and no more than three (3) months old with a requirement for the landlord to highlight any changes.
The actual mechanics of how the Amendment Act will affect the retail real estate market is expected to play out in the months ahead.
If any matter arises in relation to the assistance of rental submissions/lease negotiations and/or rental valuations for determination purposes, please directly message Mark Ruttner on 0411 419 674 or Jim Derzekos on 0412 361 367 or firstname.lastname@example.org
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