Retail Leases Act application to 15 year leases limited

A recent VCAT decision has clarified that application of the Retail Leases Act 2003 (Vic) (RLA 2003) to leases for a term of 15 years or longer.

RLA 2003

Section 4(2)(f) provides that the Minister can declare premises not to be retail premises for the purposes of the Act.

The 15 years Determination

The relevant Minister issued a Determination in August 2004 that premises do not constitute retail premises for the purpose of the RLA 2003 if they are leased for a term (excluding options for renewal) of 15 years or longer AND contain any provisions that:

4. 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:

i. the structure of, or fixtures in, the Premises; or

ii. the plant or equipment at the Premises; or

iii. the appliances, fittings or fixtures relating to the gas, electricity, water, drainage or other services; or

5. impose an obligation on the tenant or any other person to pay any substantial amount in respect of the cost of any of the matters set out in sub-paragraphs (d)(i), (ii) or (iii); or
6. in any significant respect disentitles the tenant or any other person to remove any of the things specified in paragraph (d) at or at any time after the end of any of the leases to which paragraphs (a), (b) or (c) apply.

Interpretation of “or”

There has been some conjecture as to whether the “or” between paragraphs (e) and (f) should be considered to be a conjunction, or whether it should simply be read as “or”. If read as a conjunction (effectively if read as the word “and” instead of the word “or”), the application of the Determination would be reduced, increasing the number of leases to which the RLA 2003 applies.

The Small Business Commissioner had previously advised that the “or” in this Determination must really be read as an “and”. However, in the VCAT decision of Luchio Nominees Pty Ltd v Epping Fresh Food Market Pty Ltd (Building and Property) [2016] VCAT 937 published on 14 June 2016, Member Edquist concluded that the argument that “or” should be read as a conjunction was unsustainable. He found that “or” (surprisingly) actually means “or” for the purposes of the Determination.

As such, if a lease of 15 years or longer fits into any of (d), (e) or (f) above, it will be excluded from the operation of the RLA 2003.