Leasing - Local Government Property Seminar - 21 October 2014
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Leasing Emma Dunlevie, Senior Associate Kate Bartlett, Lawyer 21 October 2014 KXB 3812350v1
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This presentation covers: - Repair and maintenance obligations, including essential safety measures - Overview of the application of the Retail Leases Act to council premises (which will cover ministerial determinations – existing and proposed) Originally presented at Russell Kennedy's Local Government Property seminar on 21 October 2014
Transcript of Leasing - Local Government Property Seminar - 21 October 2014
Leasing
Emma Dunlevie, Senior Associate
Kate Bartlett, Lawyer
21 October 2014
KXB 3812350v1
> A landlord is not required to put or keep premises in repair
> Repair obligations only arise where lease terms or legislation impose obligations
> Written leases usually impose repair obligations on the tenant
Maintenance and Repair Obligations
General Law
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> Scope of tenant’s repair obligations depends on the terms of the lease:
> “to keep the premises in good and tenantable condition”
> “to keep the premises in good repair having regard to their condition at the commencement date”
> Define “Premises” carefully
> Usual remedy = damages
General Law cont.
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> Fair wear and tear
> Structural repairs (except where required because of tenant’s misuse or if tenant can remove relevant item)
> Capital repairs
> Damage caused by fire, storm or other insurable risks
Exceptions
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> Section 52 – Landlord responsible for maintaining in a condition consistent with condition when lease entered into:
> Structure of and fixtures in premises
> Plant and equipment
> Appliances, fittings and fixtures provided with the premises relating to gas, electricity, water drainage or other services
Retail Leases Act 2003 (Vic)
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> S 52(3) – Landlord not responsible if:
> Need for repair arises from misuse by tenant
> Tenant is entitled or required to remove the item at the end of the lease
> S 52(4) – Tenant can arrange for urgent repairs and recover costs from landlord
Retail Leases Act cont.
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> Can a landlord recover the costs of complying with s 52?
> No – according to VCAT decisions Café Dansk Pty Ltd v Shiel [2009] VCAT 2009
> VCAT advisory opinion due soon
> Parties are free to agree that landlord must do more than is provided for under s 52
Retail Leases Act cont.
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> Building Act 1993 and Building Regulations 2006
> require owner to repair and maintain Essential Safety Measures
> prepare and display annual ESM report
> bind councils - but no prosecution for breach
> Must repair to the required standard - even if repairs are tenant’s responsibility under lease, and even if repairs go beyond scope of s 52 of Retail Leases Act
> Can the landlord pass on the costs of complying with the Building Act and Building Regulations to the tenant? Controversy!
Building Act 1993
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> S 251 Building Act 1993:
(1) If the owner of land is required under this Act or the regulations to carry out work or do any thing and they do not carry out the work or do the thing, the occupier may carry out the work or do the thing.
(2) An occupier may recover any expenses incurred under ss (1) from the owner as a debt due or deduct the expenses from the rent.
(6) This section applies despite any covenant or agreement to the contrary
Building Act cont.
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> Because of lack of certainty & public interest, the Vic. Small Business Commissioner has sought an advisory opinion from VCAT on:
> Whether a landlord can require a tenant to meet the landlord’s obligations under the Building Act and Regulations in respect of ESM requirements
> Whether a landlord can recover (as outgoings) the costs of ESM compliance under the Building Act
> Whether costs of complying with s 52 of Retail Leases Act can be passed on as an outgoing
> VCAT matter number R115/2014
> See also: www.vsbc.vic.gov.au
Building Act cont.
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Essential Safety Measures> Air conditioning systems
> Fire-protective coverings
> Balustrades and hand rails associated with exits
> Fire-rated materials applied to building element
> Carpark Mechanical ventilation systems
> Fire-resisting shafts
> Emergency lifts
> Fire-resisting structures
> Emergency lighting
> Fire shutters
> Emergency warning and intercommunication systems
> Fire windows
> Exit doors
> Paths of travel to exits
> Smoke doors and their closing and latching mechanisms
> Fire detectors and alarm systems
> Fire doors and their closing and latching mechanisms
> Solid core doors and their closing/latching mechanisms
> Fire extinguishers (portable)
> Sprinkler systems
> Fire hose reel systems
> Stairwell air pressurisation systems
> Fire hydrant systems
> Standby power supply systems
> Fire indices for materials
> Stretcher facilities in lifts
> Fire order notices
> Vehicular access around large isolated buildings
> Fire protective construction joints and spaces11
> Exit signs (including direction signs)
> Passenger lift fire service controls
> Fire and non-fire isolated ramps
> Penetrations in fire-rated structures
> Fire and non-fire isolated ramps
> Smoke and heat alarm systems
> Fire and non-fire isolated stairways
> Smoke and heat detection systems
> Fire control centres (or rooms)
> Smoke control measures
> Fire curtains
> Smoke and heat vents
Retail Premises: premises that, under the terms of the lease, are used wholly or predominantly for the sale or hire of goods by retail or the retail provision of services
Key exceptions:
> Occupancy costs > $1 million
> Listed public companies or subsidiaries
> Term > 15 years (excluding options) and substantial works required by tenant
> Premises above 3rd storey of building
> Term < 12 months (unless possession > 12 months)
> Ministerial Determinations
Application of Retail Leases Act 2003
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> Current MD (2008 MD) operates to exclude from the operation of the Act leases granted by councils:
1. for certain public purposes; or
2. to certain NFP entities.
Ministerial Determination (“MD”) under Retail Leases Act 2003
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> Gazetted 13 October 2014. Comes into effect on 1 January 2015
> Revokes existing 2008 MD, but 2008 MD will continue to exclude from the Act leases entered into between 1 August 2008 and 30 December 2014
> Fewer council leases will be excluded from the operation of the Act due to new $10,000 per annum rent ceiling
> No longer able to obtain a certificate from the SBC as evidence that a lease is exempted from the Act
> Applies to leases by municipal councils and leases by any other type of entity
New Ministerial Determination
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> New MD will exclude the following leases from the operation of the Act:
> A lease of premises used wholly or predominantly for public, municipal or charitable purposes (etc.), OR
> A lease of a premises used wholly or predominantly by a NFP entity that exists for the purposes of providing or promoting community, cultural, sporting, recreational or similar facilities or activities or objectives
> AND the rent (including any GST) is no more than $10,000 per annum
New Ministerial Determination cont.
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> Effect on Existing Leases:
> Leases in force immediately before 31 December 2014, which are excluded from the Act due to the 2008 MD, will continue to be excluded from the Act until:
> the lease expires or is terminated “under the Act”, or
> it is no longer possible, under the terms of the lease, for the tenant to exercise an option to renew the lease.
New Ministerial Determination cont.
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> If tenant does not exercise option to renew strictly in accordance with the lease (eg, not within time or by the manner required by the lease), then under the terms of the lease it is no longer possible for the tenant to exercise an option to renew the lease
> If a lease (which is excluded from the Act due to 2008 MD) is renewed in these circumstances, the renewed lease will not be excluded from the Act unless it is excluded under the new MD (i.e. the rent does not exceed $10,000 p.a. inc. GST)
New Ministerial Determination cont.
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> Holding over:
> If a fixed term lease expires, and a tenant over-holds under over-holding provisions in the lease, the legal effect (depending on the lease terms) is either that:
> the lease will continue until it is ended by service of the requisite notice by either party; or
> the lease has ended.
> If the lease continues, the lease will continue to be excluded from the Act.
> If the lease ends, and the rent exceeds $10,000 (inc. GST) per annum, the new MD will not exclude the lease from the operation of the Act.
New Ministerial Determination cont.
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> Consequences to note if Act applies:
> A tenant under a retail lease is entitled to a minimum 5 year term (unless they obtain a waiver certificate from the Small Business Commissioner under section 21 of the Act)
> Landlord’s disclosure requirements
> Positive maintenance and repair obligations
> Restrictions on cost-recovery
> Increase in administrative burden (eg. outgoings statements)
> No ability to prohibit the tenant from assigning the lease (but can prohibit a sublease)
New Ministerial Determination cont.
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If you are unsure whether the Retail Leases Act will apply to a new lease, or to an existing lease that has expired
or is proposed to be renewed, seek advice.
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QUESTIONS
The information contained in this presentation is intended as general commentary and should not be regarded as legal advice. Should you require specific advice on the topics or areas discussed please contact the presenter directly.
Disclaimer
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Emma DunlevieSenior Associate
Telephone: 9609 1637Email: [email protected]
Kate BartlettLawyer
Telephone: 8640 2367Email: [email protected]
