A case that has clarified the definition of what are retail premises will have serious implications for landlords and tenants who currently have a commercial lease, the Victorian Small Business Commissioner (VSBC) Judy O’Connell has warned.
The Victorian Court of Appeal’s decision in the IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd has interpreted the Retail Leases Act 2003 (the Act) to confirm that premises used for supplying commercial services to other businesses are covered by the Act.
Many landlords and tenants who have a commercial lease may be unaware of the effect of this decision as it clarifies the Act may have greater coverage than previously first thought.
For example, premises used for the sale of flour to a bakery which uses that flour to make bread may be covered by the Act. Premises used for selling mixed concrete to a builder for use by the builder to construct a driveway may also be covered.
Ms O’Connell said that the court decision affects a wide range of landlords and small business tenants in many ways.
“There are key differences between a commercial and retail lease. Some important examples for a retail lease are the landlord cannot make the tenant pay land tax and capital costs. Also, the landlord cannot make the tenant pay any outgoings such as insurance, rates or owners corporate fees unless an annual estimate of these expenses is given beforehand.”
Furthermore, a dispute under a retail lease, other than a dispute relating solely to the payment of rent or the market value of rent payable under the lease, cannot be the subject of proceedings in a Court and must be referred to the VSBC before proceeding to VCAT.
“Any dispute involving a landlord and tenant under the Act needs to be taken to the Victorian Small Business Commission before going to VCAT.”, Ms O’Connell pointed out.
In the CB Cold Storage case, a warehouse was tenanted by a business providing refrigeration services to mostly business customers. The tenant claimed that the Act applied and took legal action to recover land tax it claimed should not have been passed on to it by the landlord.
The initial VCAT decision determined that the tenant’s warehouse were not retail premises and therefore not covered by the Act. In overturning the decision, the Court of Appeal confirmed that the tenant’s sale of services to an end user was a retail sale, and therefore the premises were retail premises covered by the Act.
MEDIA ENQUIRIES: Tim Price, Victorian Small Business Commission, on 9651 7619