This article is from the Australian Property Journal archive
YEARS of confusions has finally been resolved after the Victorian Civil and Administrative Tribunal found landlords are responsible for safety costs under the Retail Leases Act 2003, and cannot pass on these costs to commercial tenants.
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The VCAT Advisory Opinion clarification has been welcomed by Victoria`s Small Business Commissioner Geoff Browne, whose application to VCAT was supported by the Law Institute of Victoria and the Real Estate Institute of Victoria.
The Victorian Small Business Commissioner had used additional powers acquired last year, to seek the Advisory Opinion from VCAT as to whether the landlord can impose the cost of compliance on the tenant.
The VCAT Advisory Opinion looked into the ability of landlords to pass on the costs of Essential Safety Measures (ESMs) and certain repair and maintenance obligations to commercial tenants.
ESMs are a broad range of obligations ranging from sprinkler and air conditioning systems to fire extinguishers, exit signs, and compliance reports.
VCAT found that a landlord must bear the cost of compliance with ESMs obligations and cannot pass these costs on to the tenant.
For some obligations, the landlord may agree with the tenant for the tenant to meet the requirements, but it must be at the landlord’s expense.
More generally, the landlord cannot pass on to the tenant as outgoings the cost of complying with certain repair and maintenance obligations under the Retail Leases Act 2003.
Brown said there has been significant legal debate for a number of years on whether a landlord could require a tenant to either fulfil or pay for a landlord’s obligations relating to Essential Safety Measures.
“Many of the 1000 retail lease disputes we receive each year relate to obligations of landlord and tenant in regard to repair and maintenance of leased premises, and a significant number of these involve complying with Essential Safety Measures.
“The Tribunal confirmed that “the referral is in the public interest given the frequency and significance of disputes under retail premises leases about ESMs and the need for clarification of the rights and obligations of landlords and tenants under these leases,” Browne said.
“This VCAT Advisory Opinion will assist us to provide better information and guidance to commercial tenants and landlords, in Victoria, about repair and maintenance obligations, help prevent disputes and also assist in their resolution,” Browne concluded.
Australian Property Journal
