How to ensure that terms implied by the Retail Leases Act 2003 (Vic) into a “retail premises lease” do not appear in a renewed lease which is not a “retail premises lease”

My last post considered Richmond Football Club Ltd v Verraty Pty Ltd  [2019] VSC 597 (Verraty) with particular reference to this question:

Do terms implied into a “retail premises lease” by the Retail Leases Act 2003 appear in a renewed lease following the exercise of an option where the renewed lease is not a “retail premises lease”?

In Verraty Justice Croft held that whether a lease was a “retail premises lease” under the Retail Leases Act 2003 was determined at the time the lease was entered into and, if the lease was a “retail premises lease” at that time, the lease remained a “retail premises lease” throughout its term.

The Act implies terms into a “retail premises lease”: see for example ss46 – 48 and 52-57. The Act also makes void certain lease provisions such as a provision which requires the tenant to pay land tax: see s.50.

Any lease term which is inconsistent with or contrary to a term implied by the Act is void to the extent that it is contrary to or inconsistent with the implied term: s.94(1).

In Verraty His Honour helpfully addressed the question of what terms implied into a “retail premises lease” by the Act are retained in a renewed lease which is not a “retail premises lease”. Croft J said at [75]:

The position with respect to the provisions of a renewed lease depend, in general terms, on the provisions for renewal, if any, contained in the lease which is being renewed.

In Verraty the lease provided that the renewed lease:

shall be subject to the same covenants, conditions, agreements, stipulations and providers contained in this Lease

Croft J held at [77] and [78] that were the lease to be renewed by the exercise of an option and the renewed lease was not a “retail premises lease”, the lease provisions implied into the lease by the Act remained in the renewed lease. Accordingly, the terms implied into the lease by provisions such as ss.46 – 48, 52- 57 of the Act would remain in the lease as renewed. Thus, the term implied by s.52(1) and 2(a) which require the landlord to maintain the structure of and fixtures in the “retail premises” in a condition consistent with the condition of the premises when the “retail premises lease” was entered into, would be retained in the renewed lease.

His Honour noted that this result could be avoided by including terms in the lease which – for example – provided that provisions implied into the “retail premises lease” by the Act ceased to have any effect when the Act ceased to apply.

His Honour’s comments about how to avoid the effect of the Act on a renewed lease have been considered by Senior Member Forde in Tib Kebab Pty Ltd v G8 Education Limited [2025] VCAT 999. In Tib a lease which had been a “retail premises lease” was renewed and there was a dispute about how the rent for the new term was to be determined. The lease provided that a party may initiate a review by stating the current market rent which it proposed for the first year of a renewed term. Because the lease provided for current market rent for the renewed term, s.37(1) of the Act implied the provisions contained in s.37(2) – (6) (which concern the conduct of current market rent reviews) into the lease. Section 37(3) provides that if the parties do not agree on the amount of the rent, it is is to be determined by a specialist retail valuer. However, clause 11.1.2 of the lease provided:

Unless the RLA applies, if the party receiving the notice does not object in writing to the proposed rent within 14 days, it becomes the rent for the first year of the renewed term.

The tenant had served a notice specifying the proposed rent for the first year of the renewed term and the landlord had not objected in writing to the proposed rent within 14 days.

The effect of the rent review clauses was that if the Act applied, unless the parties agreed on the market rent, the rent had to be determined by a valuer in accordance with s.37. But if the Act did not apply and the recipient of the notice did not object to the rent in writing within 14 days that party was bound by the proposed rent. The landlord did not agree with the proposed rent set out in the tenant’s notice.

The question arose whether clause 11.1.2 was effective in determining how the commencing rent was to be determined or did the rent have to be determined in accordance with s.37?

Senior Member Forde said at [39]:

The parties here have done what Croft J anticipated. They contemplated the possibility of the RLA not applying. Clause 11.2 of the Lease is consistent with s.37(3) of the RLA. It does not seek to avoid its provisions but rather contemplates the possibility of the RLA not applying. Clause 11 was not rendered void by s.94 of the RLA.

And at [41]:

Clause 11.1.2 makes plain that where the RLA does not apply the rent will be that proposed by a party to which the other party does not object in writing within 14 days. The parties have expressly agreed that the term implied by s.37(3) of the RLA will not operate in the event that the RLA does not apply.

The result was that the current market rent was that nominated by the tenant.

Tib does not yet appear on AustLII.

Thanks to Simone Farrugia of HWL Ebsworth for alerting me to Tib.

This post originally appeared on roberthaykc.blog