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

 

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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].

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

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The fog is beginning to clear

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Section 52 of the Retail Leases Act 2003 implies into a lease a term that the “landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into:

“(a)      the structure of, and fixtures in, the retail premises; and

(b)      plant and equipment at the retail premises; and

(c)      the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

The section was considered in  Computers & Parts Land Pty Ltd [2010] VCAT 2054 where it was held that a landlord was not required to maintain premises in “state of disrepair” that was “identical” to the state of disrepair when the lease was entered into; the state of repair “need not be any better than at the commencement of the lease” but had to be “the same benefit to the lessee as was agreed to be provided by the demise” (para [75]).  Section 52 was a “keep in repair” obligation as opposed to a “put in and keep in repair” obligation (paras [84] and [85]). The expression “keep in repair”:

“…could mean, in extreme circumstances, that the only course open to a landlord is to replace some aspect of rented premises, but only to the degree that it is necessary to give the tenant the same conditions as at the commencement of the tenancy.”

If parts failed they had to be replaced with replacement parts that  “in the absence of adequate second hand parts, might need to be new” (para [85]). While s 52 did not mandate compliance with any legislative standard, a landlord could not contravene “a building or related law or regulation” and if there were an “aspect of the building that was legal at the date of its construction but is no longer legal, repair of that aspect of the building would not be a betterment for the Tenant.”(para [88]).

The Tribunal rejected contentions that a landlord had to re-design an air conditioning system to remove design flaws or anomalies (para [90]) and replace the  system with one that operated better than the original system (para [96]) but accepted that there might be circumstances where a roof had to be replaced rather than repaired if it were to survive the duration of the tenancy (para [127]).

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/