Landlords likely to consider gross leases

Today I commented on an advisory opinion given by the President of VCAT, Justice Garde, in which His Honour decided that:

(a)    a landlord could not recover from a tenant the costs of complying with essential safety measure requirements imposed on the landlord under the Building Act 1993 and its regulations;

(b)  a landlord could not recover from a tenant as outgoings the costs that the landlord incurs in complying with s.52 of the Retail Leases Act 2003.

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 effect of the decision is that landlords are likely to require tenants to enter into ‘gross leases’. Landlords are also likely to ask tenants to apply for a certificate from the Small Business Commissioner under s.21(5) of the RLA; the giving of a certificate enables a retail premises lease to have a term of less than five years.

That part of the opinion concerning the recovery of the cost of complying with essential safety measures will prevent a landlord under both a retail premises lease and a commercial lease from recovering the costs incurred in complying with the essential safety measure requirements.

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  1. #1 by Peter Lowenstern on May 1, 2015 - 5:09 pm

    I agree … in fact the issue about ESM costs recovery becomes a mere side-show to the implications of the opinion, so far as section 52(2) expenses recoveries goes.

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