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Outgoings Disclosures and s 52 of the Retail Leases Act

Outgoings Disclosures and s 52 of the Retail Leases Act

Under s 39 of the Retail Leases Act 2003 (Vic) (“the Retail Leases Act”) a Landlord may recover building outgoings, such as council and water rates and building insurance and public liability insurance, so long as those costs as disclosed to the Tenant prior to entering into the Retail Lease.  The prescribed method of disclosure under the Retail Leases Act is a Lease Disclosure Statement.  Essentially, this document itemises the annual rent, length of the lease term, additional options, and importantly all of the building outgoings that the Tenant must contribute to or reimburse the Landlord for during the term of the Lease.

Under s 52 of the Retail Leases Act, the Landlord is responsible for repairs and maintenance of plant equipment (air conditioning or heating installed in the building) and fixtures relating to utility services (i.e. electrical cabling, plumbing, water pumps and the like).  However, section 52 of the Retail Leases Act also mentions that “Section 39 regulates the ability of the Landlord to recover outgoings (including the cost of repairs)”.[1]  In light of this wording, it was regularly assumed by Landlords and many legal practitioners that the maintenance costs of those fixtures, but not the improvement of those fixtures could be passed onto the Tenant; so long as they were disclosed to the Tenant in the prescribed Lease Disclosure Statement.

However, a Victorian Civil and Administrative Tribunal (“VCAT”) case in 2006, Chen v Panmure Hotel Pty Ltd[2] (“Chen’s case”) casts doubt on this assumption.  In that case, the Tenant disputed whether it should be obliged to pay towards the maintenance of smoke detectors, even though this outgoing was disclosed in the standard form lease disclosure statement.  It was VCAT’s view that s 52 of the Retail Leases Act should be interpreted in light of s 251 of the Building Act 1993 (Vic) (“the Building Act”).  Importantly, this section of the Building Act requires the owner to reimburse the Tenant for expenses relating to building work, which was performed by the Tenant (but deemed the responsibility of the owner under the Building Act).  Because, the maintenance of smoke detectors falls within the Building Act, VCAT held that the Tenant should be reimbursed by the Landlord, for the Tenant’s expense of maintaining the smoke detectors.  In effect, VCAT cancelled out a cost that the Landlord had tried to allocate to the Tenant under the Retail Lease.

It should be noted that this decision is not an anomaly.  In McIntyre & Anor v Kucminska Holdings Pty Ltd[3] (“McIntyre’s case”), the Tenant argued that it should not have to pay for the cost of fire safety equipment and maintenance under the Lease.  VCAT agreed and held that because fire safety equipment falls within the scope of s251 of the Building Act, the Tenant should not have to pay for the costs of the fire safety equipment and maintenance, and that the responsibility lies with the Landlord.

These cases raise the issue as to whether, other Landlord’s installations fall within the scope of s 251 of the Building Act.  For example, does the Landlord have to pay for maintenance of heating and air-conditioning, even when the Landlord passes on the cost to the Tenant under a Retail Lease?  In short, the answer is quite possibly.  The Law Institute of Victoria (“the LIV”), discussed this issue in light of the previously mentioned VCAT cases.[4]  The LIV were of the opinion that the Building Act Regulations makes reference to regular inspections and maintenance of property heating and cooling systems.[5]  As such, based on VCAT’s interpretation of the Retail Leases Act in conjunction with the Building Act, the LIV were of the opinion that a Landlord would not be able to pass on the costs maintaining and servicing heating and air-condition systems onto the Tenant[6].

It should be noted, there has been some legal opinion critical of VCAT’s Tenant friendly approach.  The barrister Robert Hay in his property blog, picked on the issue of s 52 and the cases of Chen’s Case and McIntyre’s Case.  Mr Hay was of the opinion that the expansive approach taken by VCAT may be counter to the intention of the Retail Leases Act.  In particular, he noted that

“In my view there is nothing in the Act that suggests that Parliament intended to interfere with the Landlord’s right and a Tenant’s right to bargain about the recovery of costs”.[7]

However, Landlords and Tenants need to be aware that the Victorian Small Business Commissioner, the government body which is in charge of monitoring the application of the Retail Leases Act, and resolving retail lease disputes between Landlords and Tenants; has adopted VCAT’s Tenant friendly view of s 52.[8]

So where does this leave Landlords and Tenants?  Unless s 52 is further amended by the Victorian Parliament, it appears that Chen’s Case and McIntyres’ Case represents the current understanding of the law.  In real terms, this means that Landlords are responsible and liable for the cost of maintaining air-conditioning and heating systems, essential safety systems (such as smoke alarms and fire extinguishers), and that these costs cannot be passed on to the Tenant; even when the Landlord attempts to disclose the outgoings as the Tenants responsibility in the standard Lease Disclosure Statement.

In light of these changes to the interpretation of s 52 of the Retail Leases Act, we advise all Landlords to Tenants to seek legal advice with respect to their Retail Lease, and in particular what outgoings can and cannot be passed onto the Tenant.

Should you have any questions about Retail Leasing, please feel free to contact our office to arrange an appointment to see our commercial & property lawyer, Mr Jamie McCallum.



[1] Retail Leases Act 2003 (Vic) s 52.

[2] Chen v Panmure Hotel Pty Ltd [2007] VCAT 2464.

[3] McIntyre & Anor v Kucminska Holdings Pty Ltd [2012] VCAT 1766.

[4] Law Institute of Victoria Journal, Tenants beware: Don’t get hit by safety maintenance costs (April 2012) Law Institute of Victoria <http://www.liv.asn.au/Mobile/Home/Law-Institute-Journal/Article?NodeID=237930&NodeParentID=237922>.

[5] Ibid, n 2.

[6] Ibid, n 2.

[8] Office of the Victorian Small Business Commissioner, Repairs and Maintenance <http://www.vsbc.vic.gov.au/retail-leasing-matters/repairs-and-maintenance>.

Part VIIIAB of the Family Law Act concerning De-Facto Couples

Part VIIIAB of the Family Law Act 1975 (Cth)

Did you know a new Part has been inserted into the Commonwealth Family Law Act 1975 (“the Act”) which provides unmarried couples with the right to have their financial and property matters settled in a Court exercising jurisdiction under the Act?

Part VIIIAB of the Act has created a simpler and more direct way for de-facto couples to settle their disputes. It provides for those couples who wish to access the Federal Family Law Courts (“the Court”) on property and maintenance matters. Although Part VIIIAB was enacted on 5 December 2008, any de-facto relationship which has broken down before that date may still have the option to take action under the relevant provisions of the Act.

A cause of action may be sought by a party to the de-facto relationship under sections 90SE, 90SM, or Part VIIIB of the Act. An application must be made within two years of the date of separation in order for it to be valid. Section 90SE allows the Court to make an order for maintenance of a party to the relationship in the event of a relationship breakdown. Section 90SM allows the Court to alter the respective parties’ interests in any property of the relationship, and Part VIIIB, which is not a new Part of the Act but has been extended to apply to both married and unmarried couples, gives rights and liabilities with respect to superannuation interests.

Part VIIIAB will only apply to unmarried couples who have been engaged in the relationship for at least two years, or alternatively, there is a child of the relationship. Furthermore, both parties will need to have resided within a ‘participating jurisdiction’ – which encompasses all Australian States with the exception of South Australia and Western Australia – for at least one third of the whole term of the relationship. If this is not the case, the applicant party will need to show either, they made ‘substantial contributions’ to the relationship, or that a failure to make an order will result in a ‘serious injustice’ to the applicant party.

A couple are engaged in a ‘de-facto relationship’ for purposes of this Act if they are not legally married to each other, they are not otherwise related by family, and with regard to all circumstances of the relationship, they are living together on a genuine domestic basis. A de-facto relationship may be between two persons of different or the same gender – there is no discrimination! The Court has discretion to determine whether there is or is not a de-facto relationship in existence before proceedings will commence. If one of the parties to the relationship dies after separation, proceedings may still be commenced or even finalized provided the deceased are legally represented.

De-facto couples may now also be parties to Financial Agreements, which may be drafted prior to, during, or after a relationship breakdown. These Agreements are the same as those which can be created for married couples under the Act. The Agreement will be binding at the point where all parties to the Agreement have signed it. A party to the relationship may not make an application under Division 2 of Part VIIIAB where there is already a Binding Financial Agreement in relation to that matter. Financial agreements may be terminated by the parties to the Agreement or set aside by the Court in certain circumstances.

In summary, unmarried couples now have the benefit of accessing the Family Court which is a specialist court with vast experience and expertise in the area of relationship breakdown. They will have access to procedures and dispute resolution mechanisms which are more suited to handling family litigation arising on relationship breakdown. Among other things, it will save de-facto couples a huge cost now that they can have both their financial and child related matters settled in the one court!

Intervention Orders

Intervention Orders

Are you a victim of domestic violence? Are you being stalked? Do you need protection from somebody who is threatening your right to feel safe?

Did you know that the Victorian Government has recently enacted two pieces of legislation that, when combined, provide a very broad protection for those who are victims of family violence, and/or stalking? This is given effect through the broadened definitions of those who are considered liable under the Acts, as well as the extensive powers given to police officers. The legislation seeks to provide protection for those in our society who feel their safety is at stake. More specifically, the Family Violence Protection Act 2008 (FVPA) provides protection for those who are victims of ‘family violence’, and the Stalking Intervention Orders Act 2008 (SIOA) provides protection for those who are ‘stalked’. Both pieces of legislation give the Court discretion to put in place an intervention order, notwithstanding any other criminal or civil court actions that may be appropriate.
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Mediation

Mediation

Mediation is a process by which the parties to a dispute can with the help of a third party called a mediator try to resolve that dispute by discussion.

A mediator is usually a person who has undergone special training in managing conflict resolution. It is not up to the mediator to decide the outcome. This is purely a matter for the parties.
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Power of Attorney

What is a Power of Attorney?

A Power of Attorney is a document by which one adult person (the donor) gives another adult person (attorney) the legal right to do on their behalf anything which can be legally be done by an attorney.

Common examples of authority given by a donor under a power of attorney include the power to sell a house owned by a donor or to enter into a legal contract. In those situations the attorney will execute the document with their own signature or seal which will then become legally binding on the donor.
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