Landlord cannot recover essential safety measure costs or the costs of complying with s.52 of Retail Leases Act 2003 (Vic)

In a decision that will upset landlords and delight tenants the President of VCAT, Justice Garde, resolved long standing controversies in deciding that:

(a) a requirement in a retail premises lease that a tenant perform ESM requirements that the landlord must perform under the BA or its regulations is void;

(b) a requirement in a retail premises lease that a tenant pay for ESM requirements that the landlord must perform under the BA or its regulations is void;

(c) if the obligation relating to the ESM is that the landlord must ensure that a result is achieved or a standard met the landlord may agree with the tenant to achieve that result, or meet the standard, and the tenant will be obliged to perform the lease at the landlord’s expense;

(d) in the circumstances referred to in (c), the tenant can deduct the costs incurred in the performance of the term from the rent or recover the costs of from the landlord;

(e) a landlord cannot recover as outgoings the cost incurred by the landlord in complying with s.52 of the RLA.

See: In the matter of the referral of matters to VCAT for an advisory opinion pursuant to s.125 of the VCAT Act 1998 [2015] VCAT 478.

The decision will have major consequences for tenants and landlords. In particular, tenants are likely to seek to recover from landlords any EMS costs that have been paid by the tenant together with costs that the landlord has incurred under s.52 and required the tenant to pay as outgoings.

I will be writing more about this decision.