VCAT’s decision and how it impacts payment of outgoings
In May this year, VCAT handed down a decision in the Phillips v Abel  VCAT 1031 case that has important implications when it comes to outgoings.
A landlord leased bare land (a quarry) to a tenant who ran a business from the premises extracting and selling sand and other materials. The tenant wanted to renew their lease but the landlord refused. The landlord claimed that under their commercial non-retail lease, the tenant had failed to pay land tax and other outgoings. The tenant said they didn’t have to pay these costs because their lease was covered by the Retail Leases Act 2003 (the Act). The tenant also said they were not provided with an annual estimate of outgoings.
The Act states that the tenant doesn’t have to pay any outgoings if the landlord hasn’t given the tenant an annual estimate of outgoings. The Act also states a tenant doesn’t have to pay land tax.
In Phillips v Abel, VCAT found it would be unfair and create uncertainty if a landlord was able to retrospectively claim outgoings that accrued before they gave the tenant the estimate.
VCAT also held that the Act can apply to bare land premises where the land is used for the retail sale of goods or services to consumers, including other businesses. The tenant’s sale of sand, gravel and clay to other businesses is considered the retail sale of goods and services because the businesses mainly use these products for their own purposes. This means the Act can apply to premises that people might not have thought were retail premises, for example, premises used to sell flour to bakeries that use the flour to make bread and pastries.
For more information about retail leases under the Act, visit our web pages on the rights and responsibilities of tenants and landlords. You will find information about entering into a retail lease, outgoings and charges, repairs and maintenance, transferring a retail lease and more.