When substantial works aren’t substantial enough
A recent Victorian County Court decision offers crucial clarity for landlords and tenants regarding one of the limbs of the Ministerial Determination dated 20 August 2004 (the Determination). This Determination is a key legal instrument that allows certain long-term leases to be excluded from the Retail Leases Act 2003 (Vic) (the Act) (Victoria's primary legislation governing retail tenancies) where certain criteria are met.. Specifically, one aspect of the listed criteria applies to leases where the tenant is obligated to undertake 'substantial works' – significant construction, installation, repair, or maintenance of major structural elements, fixtures, plant, or services.
In Lake Fyans Recreational Area Committee of Management Inc v Halsi Pty Ltk & Anor [2025] VCC 1506, the Court ruled that the tenant’s obligation to carry out substantial works was too ‘nebulous’ (meaning vague or unclear) and therefore did not meet the criteria for this limb of the Determination to apply. Consequently, the Act was found to govern the lease. The Court clarified that for a lease to be excluded from the Act under this limb of the Determination, it must impose a clear and specific obligation on the tenant to perform substantial, identified works (eg new construction or major upgrades), rather than just general repair or maintenance duties. This decision reinforces that parties cannot simply agree to 'contract out' of the Act protections.
The Determination represents one of the few exemptions to the Act’s application to a lease, so this ruling provides valuable guidance for both landlords and tenants seeking to understand the true application of the Act to their long-term lease agreements.
Background
This case originated from a dispute concerning a 21-year lease of a holiday park complex in Lake Fyans, Victoria. In 2010, Lake Fyans Recreational Area Committee of Management Inc (Lake Fyans) leased the property to Vision Accommodation Pty Ltd. The lease was later assigned to Halski Pty Ltd (Halski). The lease included clauses for market rent reviews and placed what were described as ‘significant’ repair and maintenance responsibilities on the tenant.
Lake Fyans alleged underpayment of rent and sought to end the lease and claim damages. However, Halski argued that the lease was governed by the Act, which would impact the validity of the rent determination and Lake Fyans' right to terminate.
While the lease used a standard commercial lease form, it included a special condition specifically referring to the Determination and stating the premises were not subject to the Act.
Understanding the Ministerial Determination
The Ministerial Determination of 20 August 2004 generally excludes from the Act those leases with an initial term of 15 years or longer (excluding options) that also impose specific tenant obligations. For the Determination to apply, the lease must satisfy either of limbs (d), (e) or (f), which provide:
- impose an obligation on the tenant (or any other person) to carry out any substantial work on the Premises which involves the building, installation, repair or maintenance of the structure or fixtures, the plant or equipment or the appliances, fittings or fixtures relating to gas, electricity, water, drainage or other services; or
- impose an obligation on the tenant to pay any substantial amount in respect of the cost of the substantial work items mentioned above; or
- disentitle the tenant in a significant respect from removing the substantial work items above at any time or at the end of the lease.
The Court reaffirmed the now generally accepted position that these conditions are alternative options; not all three must be satisfied for the Determination to apply. This case dealt primarily with the first limb (limb (d)).
The Court referenced the Victorian Small Business Commission guidelines from 2019 (Guidelines), which describe the Determination as 'complex' and advise careful consideration of its policy background. While there was some discussion about the determinative weight of the Guidelines, the Court ultimately held they should be given at least the authority of academic commentary, without setting any outer limits.
Importantly, the Guidelines explain that the Determination was primarily designed to address issues arising from Crown land leases and similar long-term arrangements. These leases often require the tenant to be responsible for constructing, repairing, and maintaining buildings, similar to ground leases, and are often used for community infrastructure. The Act's application changed the landlord's role in these specific types of leases from an administrator to a property manager, which went against the original intentions of the parties and could frustrate the concept and purpose of this type of lease. But the Determination is not limited to these types of leases and is relevant and applicable to many other commercial scenarios.
The Court's key findings
The Court found that simply stating in the lease that the Determination applies, and therefore the Act does not, is not decisive. This device, often seen in leases, has long been understood to have little effect due to section 94 of the Act, which renders void any lease provision that attempts to exclude the Act's provisions.
Ultimately, the case hinged on how the 'substantial work' obligation was interpreted and whether it was sufficient to satisfy limb (d). The Court concluded the obligation was not specific enough to compel the tenant to carry out any particular work, instead merely making the tenant responsible for ‘indefinite substantial work’ if or when it arose. Without clear details about the types of work and timing, the obligation was considered vague ('nebulous'), and the need for such work might never actually arise.
Practical implications and key takeaways
To fall within the 'substantial works' categorisation in limb (d) of the Determination, a lease should clearly specify the substantial work to be carried out, along with timing requirements. This will likely be highly case-specific and require careful consideration of the property's nature, aligning with the policy background outlined in the Guidelines.
Landlords cannot solely rely on a tenant’s initial agreement that the Act does not apply. While parties may be aligned at the commencement of the lease that the Act should not apply, because the Determination only applies to longer-term leases, there is an inherent risk that the circumstances may change. Further, as was the case here, the question of the Act’s application often arises as a secondary issue during other disputes under the lease.
If you are a landlord with a longer-term lease that you believe may fall within the scope of limb (d) of the Determination, it would be prudent to review the specific terms of your lease in light of this recent case to ensure its application is clear and consistent with current legal guidance.
