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

1. Leasing
21 October 2014
Emma Dunlevie, Senior Associate
Kate Bartlett, Lawyer
KXB 3812350v1

2. Maintenance and Repair Obligations
General Law
> 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
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3. General Law cont.
> 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
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4. Exceptions
> 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
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5. Retail Leases Act 2003 (Vic)
> 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
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6. Retail Leases Act cont.
> 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
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7. Retail Leases Act cont.
> 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
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8. Building Act 1993
> 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!
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9. Building Act cont.
> 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
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10. Building Act cont.
> 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
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11. 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 spaces 11
> 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

12. Application of Retail Leases Act 2003
 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
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13. Ministerial Determination (“MD”)
under Retail Leases Act 2003
> 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.
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14. New Ministerial Determination
> 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
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15. New Ministerial Determination cont.
> 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
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16. New Ministerial Determination cont.
> 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.
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17. New Ministerial Determination cont.
> 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)
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18. New Ministerial Determination cont.
> 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.
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19. New Ministerial Determination cont.
> 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)
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20. 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.

21. 21
QUESTIONS

22. Disclaimer
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.
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23. 23
Emma Dunlevie
Senior Associate
Telephone: 9609 1637
Email: edunlevie@rk.com.au
Kate Bartlett
Lawyer
Telephone: 8640 2367
Email: kbartlett@rk.com.au