Landlord’s consideration of proposed assignment must be “reasonable”

  • Author : Robert Hay QC - 02-06-2014

Section 60 of the Retail Leases Act 2003 prescribes when a landlord can withhold consent to a proposed assignment of a retail premises lease.

The most significant provision is sub-section 60(1)(b) which provides that:

“(1)           A landlord is only entitled to withhold consent to the assignment of a retail premises lease if one or more of the following applies –

….

(b)             the landlord considers that the proposed assignee does not have sufficient financial resources or business experience to meet the obligations under the lease;”



 
On its face s.60(1)(b) appears to give the landlord unfettered power to withhold consent – that is the landlord’s subjective view is all that matters. Despite the wording of the section VCAT has implied a requirement that the landlord must act “reasonably” in undertaking its consideration. In AAMR Hospitality Group Pty Ltd v Goodpar Pty Ltd [2009] VCAT 2782 Deputy President Macnamara held at [45] that:

“With the utmost hesitation however I consider that the words ‘reasonably’ or ‘acting reasonably' should be read into section 60(1)(b)……. The overriding policy evident in the Retail Leases Act is to provide special protection to a limited class of commercial tenants, namely those who are tenants of small retail tenancies and do not have the clout that say a listed corporation would have. The provisions of the statute are aimed at providing protection to this class of tenant and constraining and restricting a largely unrestricted power which landlords of these premises at common law and before the enactment of special retail tenancies legislation had available. To construe a provision such as section 60(1)(b) such that one of the protected class of tenants was to be at the mercy of the purely subjective determination of a lessor would not be conducive to the statute’s overall policy, per contra it would tend to subvert the wider policy of the statute, …”

In a recent decision Member Farrelly said  that he agreed with Deputy President Macnamara’s reasoning and construed s.60(1)(b) as if it the word “reasonably” appeared before “considers”. See: Villa v Emaan Pty Ltd [2014] VCAT 274 at [47]- [48].

About the Author

Robert Hay QC

Recent Posts

The Mortgagee’s Power of Sale

Robert Hay QC Date: 18-10-2019

“Retail premises leases” cannot jump out of the Retail Leases Act 2003

Robert Hay QC Date: 04-10-2019

Retail premises leases can “jump out” of the Retail Leases Act

Robert Hay QC Date: 01-08-2019

High Court affirms traditional test for enforcing oral contracts based on acts of part performance

Robert Hay QC Date: 20-11-2018

Estate agents’ commission fiasco to be fixed

Robert Hay QC Date: 26-06-2018

VCAT loses jurisdiction to hear a dispute where a party is not resident in Victoria

Robert Hay QC Date: 24-04-2018