What is the Retail Leases Amendment Act 2020?
The Retail Leases Amendment Act 2020 was made law on 22 September 2020, changing some of the obligations of landlords and tenants under the Retail Leases Act 2003 (Vic) and the Building Act 1993 (Vic).
Key changes for landlords
Essential safety measures
In positive news for landlords, the costs of installing, repairing and maintaining ‘essential safety measures’ such as fire safety signage, smoke detectors etc. can now be passed on to a tenant. Please note that the lease and disclosure statement will need to reflect that this is an outgoing the tenant has agreed to pay and include an estimate of these costs just like all other outgoings.
Changes to a lease
If the proposed lease given to a tenant or a lease being renewed is changed in any way before a tenant enters into the new lease or renewal, the tenant must be made aware of any change. This is important when a document is being negotiated or finalised between parties and their lawyers – any amendments should be marked up and made clear to all.
A disclosure statement together with a copy of the proposed lease must be provided to a tenant at least 14 days before a new lease commences. If this is not complied with, the commencement date of the lease will be delayed to the date 14 days after valid documents have been provided to a tenant.
A landlord must give at least 3 months written notice of the last date to renew a lease for a further term. The notice must state the rent payable for the first 12 months of the renewed lease, any changes to the initial disclosure statement given to the tenant when entering into the lease, the availability of an early rent review and the availability of a cooling-off period amongst other things. A tenant now has a 14 day cooling off period to change their mind about renewing their lease if they have exercised their option but have not asked for an early market rent review (noting our comments below).
Early market rent review
If on commencement of a further term, a market rent review is set to take place, a tenant can ask for an early market rent review within 28 days after receiving a notice from the landlord in relation to renewing their lease. This is so a tenant knows what rent they will be paying before they exercise their option to renew their lease. It is likely tenants will exercise this right, particularly in the current market so landlords should be prepared and do their research before issuing their renewal notice.
Security deposits and bank guarantees
If a tenant has complied with its obligations under a lease, a landlord must return a security deposit or bank guarantee within 30 days of the end of the lease.
Next steps – what do I need to do as a landlord?
Familiarising yourself with your changed obligations is the first step. The second is reviewing your lease documents to make sure they are compliant with the updated provisions. It is best to speak with your representatives to make sure of this. For example, we will be speaking with our landlord clients to make sure their leases allow for them to pass on costs of any essential safety measures to their tenants.
If you are a landlord or tenant and have any following up questions regarding the new rules, please contact us to discuss.