The Retail Leases Amendment Act 2020 (Vic) came into full effect on 1 October 2020. It creates significant change to the way retail premises are leased and managed.

A summary of the key changes include:

• Essential Safety Measures
• Security deposits
• New Leases
• Lease Renewals

Essential Safety Measures

A clear determination has finally been made in this regard which will apply to all new and existing retail leases. If the landlord undertakes the ESM obligations, it can recover the costs from the tenant, providing the annual costs are set out in the Disclosure Statement. Alternatively, parties can agree that the tenant will perform the ESM obligations at their expense. Landlords are prevented form recovering ESM charges incurred prior to the commencement of the new legislation.

Security deposits

Security deposits must now be returned to the tenant within 30 days after the lease ends (instead of “as soon as practicable”), provided the tenant performs all of their obligations under the lease.

New Leases

Landlords must provide the tenant with the proposed lease and disclosure statement at least 14 days prior to the parties entering into the lease (previously 7 days). If not met, the lease is taken to commence 14 days after the disclosure statement and the lease is given to the tenant.

If the Lease is varied from the draft first given, Landlords must clearly articulate those changes to the tenant.

Lease Renewals

Option Notices: Where the lease contains an option for a further term, the tenant must be provided with a notice at least 3 months prior to the tenant’s last date to exercise the option that sets out the following information:

• the last day the tenant can exercise the option to renew;
• cooling off rights;
• rent payable for the first 12 months of the renewed term;
• availability of an early rent review; and
• any changes needed to the most recent disclosure statement provided

If not met, the tenant is granted a further 3 months extension to take up the option from the date this requirement is met.

Early Market Rent Review: where the renewed rent is to be reviewed to market, the tenant may request an early rent review by providing written notice within 28 days of receipt of the landlord’s Option notice as detailed above. The early rent review must be completed prior to the last day the tenant can exercise the option to renew. If not met, the tenant is granted 14 days from the date that the tenant is notified of the rent determination to exercise the option. This can occur even if the lease has already expired.

Cooling off rights: where a tenant has exercised its option to renew the lease, the tenant may rescind this within 14 days after exercising the option. If the tenant exercises its cooling off right, the right to renew the lease is extinguished and the current lease term is extended by 14 days. This right does not apply if the tenant has requested an early rent review.

GormanKelly is here to guide and support you and your tenants through these changes. If you have any queries in relation to the above please contact us.