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Victoria Retail Lease and Disclosure Statements, Vic Shop Lease

Many Australian state governments have expanded their concept of consumer protection to include small business consumers who were bargaining on a far from level playing field, where owners of large shopping centres had all the advantages and all the power . They seek to provide this protection by making sure that prospective tenants have sufficient information to make a sound business decision when entering into or renewing a lease.

Recent amendments clearly offer further protection to tenants, the Government regarding them as the less powerful party in most retail leasing transactions.  As a result, the amendments require greater responsibility and pro-active behaviour from the landlord.

Disclosure Statements

A landlord in a retail lease must not, in connection with the lease, engage in conduct that that is misleading or deceptive to a tenant or guarantor. A party who suffers damage by reason of misleading or deceptive conduct of another party may make a claim for compensation.

If a landlord fails to give sufficient information it is guilty of Unconscionable Conduct. At the disclosure stage, Landlords and their agents will now be required to provide a copy of a retail tenancy guide to any prospective tenant as soon as negotiations are entered into.  The law requires the landlord to give the tenant a disclosure statement at least seven days before entering into the lease. Tough penalties apply if it isn’t, or if the statement is inaccurate.

In particular, the Act renders void lease provisions which require any tenant’s payment for contribution to fit out that has not been disclosed in a disclosure statement. In most states law entitles the tenant, if he/she gives you the proper notice, to withhold payment of rent until the disclosure requirements are complied with (but any rent they do pay is non refundable).

For new leases a landlord has to provide the tenant with a copy of the unsigned agreement (with the names and addresses of the parties included), a disclosure statement, and a government prepared information brochure when negotiations are commenced, and in no case less than 7 days before the lease is entered into. (That is, negotiations must proceed for 7 days; a landlord can’t just sign a tenant up on the spot). A copy of the proposed lease has to be provided once it has been signed. The copies can be photocopies. If the landlord doesn’t supply a full copy of the lease, or doesn’t do it within 28 days of it being signed, or the disclosure statement is wrong, the tenant can also end the lease.

The tenant doesn’t have to pay for fit-out contributions if the liability to pay them is not disclosed in the disclosure statement.

Landlords may be kept on their toes throughout the duration of the lease with new powerful remedies for tenants to withhold payments when information is not provided on time. This can particularly occur in the case of providing estimates or statements of outgoings.  Strata levies are also to be included in the list of outgoings. 

Lease Periods

In Victoria a landlord needs the permission of the Small Business Commissioner to have a lease of less than 5 years.

Outgoings

A landlord has to provide a written estimate, before entering into the lease and 1 month before the start of each accounting period, of the outgoings to which the tenant is liable to contribute under the lease, (including rates, taxes and shares of things like car parking contributions) otherwise the tenant doesn’t have to pay them. If a landlord wants the tenant to pay for a share of the expenses (other than usual outgoings – such as marketing expenses) he/she must provide an audited account, which is generally both too hard and too expensive.

A landlord can’t ask a tenant for capital costs or interest on any loans. In Victoria , he/she also can’t ask the tenant to pay land tax or any legal or other expenses relating to drawing up of the lease, the disclosure statement or other documents required by the Act.

A landlord can ask for reimbursement in respect of any assignment of the lease or a sublease, including investigating anyone’s suitability.

In Victoria a tenant cannot be asked to pay Key Money.

Registering

A landlord must notify the Small Business Commissioner of the agreement, including the names and addresses of the parties, the start and expiry date; and details about the options.

Bonds

A landlord may ask for a bond, or security deposit. If received, it has to be put in an interest bearing account and the interest belongs to the tenant. Landlords must return a security deposit to the tenant as soon as practicable after the lease ends where the tenant has performed all obligations under the lease. The tenant has the option to provide a bank guarantee instead of a security deposit. Any security deposit must be held in an interest bearing account, the interest being added to and held with the principal.

Rent Increases

As the market ones are so complicated it is recommended that the rent be reviewed at the end of each lease period.

Breach Notices

A landlord is required to give the tenant a notice of breach and at least 14 days to rectify the breach prior to he/she entering the premises.

Renewal and Options to renew

In all states, if an option for renewal is not exercised at the right time it will be lost.
The tenant can exercise an option for renewal even if there has been a breach of the lease, generally the lease will set out the provisions to exercise the option.

moreVictoria Retail Tenancy Lease Agreement Available for Immediate Download