The VSBC can assist parties in appointing a Specialist Retail Valuer when there is a disagreement between a landlord and tenant regarding market rent. The appointment of a Specialist Retail Valuer by the VSBC is a last resort if the landlord and tenant are unable to agree on rental and unable to agree on a choice of valuer themselves.
In these cases, the Retail Leases Act 2003 (the Act) sets out certain requirements for the appointment of a Specialist Retail Valuer and this function falls under the VSBC.
It is a good idea to weigh up your options before requesting that the VSBC appoint a Specialist Retail Valuer. The cost of the valuation may be high relative to the disputed rent. You may find that the issue could be resolved by further negotiation.
By law, the cost of the valuation is divided equally between the landlord and tenant.
Questions to ask when considering a Specialist Retail Valuer
Before you seek the assistance of the VSBC to appoint a Specialist Retail Valuer, ask yourself the following questions:
- Has a rental amount been suggested by the landlord or tenant?
- Has there been an attempt by all parties to reach an agreement on a rental amount?
- Has there been an attempt by all parties to reach an agreement on a valuer?
What you are trying to determine is whether both parties have made a substantial effort to reach an agreement on the rental amount and, if those discussions have been unsuccessful, if they have been able to reach an agreement about a valuer.
If the answer is yes or you need more information, Contact Us.
Requesting the appointment of a Specialist Retail Valuer
When you request the appointment of a Specialist Retail Valuer, the following will take place:
- Receipt of an application. The VSBC confirms that the parties cannot agree on rent or a valuer. If the criteria are met the VSBC provides details of the premises to either the Australian Property Institute or the Real Estate Institute of Victoria and requests that a suitably qualified and experienced valuer is nominated to undertake the valuation.
- Receipt of that nomination. The VSBC provides the contact details of the Specialist Retail Valuer to the parties, and requests the parties agree to the terms and conditions of the valuation. The VSBC has no involvement in these terms. The terms will contain the cost of the valuation, indemnities and confidentiality provisions.
- Disagreement. If one party does not agree to the valuer’s terms, the other party may seek an injunction at the Victorian Civil and Administrative Tribunal (VCAT) requiring the uncooperative party to sign the agreement.
- Valuation. The Specialist Retail Valuer values the property as an independent expert. When the valuation is complete, the valuer informs the VSBC.
- Rent is determined. Under section 37(3) of the Act, the rent that is determined by the Specialist Retail Valuer becomes the rent for the retail premises.
The cost of a rental determination by a Specialist Retail Valuer
The cost of a rental determination is determined by the Specialist Retail Valuer appointed by the VSBC. The cost is split equally between the landlord and the tenant.
The cost of a valuation can be significant, as it is based on the time and effort required by the valuer to satisfy his/her obligations under the Act.
This means that for some premises where the rent may be low, the cost of the valuation may be surprisingly high.
Rather than receiving a valuation, in many cases, particularly for relatively low rent premises, it may be in the parties’ commercial interest to negotiate a rent where the positions are not far apart. The VSBC may be able to assist with this.
These factors determine the valuer’s cost:
- the availability of relevant comparable premises;
- the availability of rental data from comparable premises;
- geographic location;
- complexity of the premises.
Parties may also wish to seek their own valuations to enable them to make informed submissions to the Specialist Retail Valuer, and these costs should be factored into the overall costs of the valuation.
Disagreeing with the Specialist Retail Valuer’s determination
If one of the parties does not ‘accept’ the Specialist Retail Valuer’s rental determination, the matter may need to be referred to the VSBC for dispute resolution. Alternatively it may require resolution at VCAT.
The Victorian Civil and Administrative Tribunal (VCAT) has handed down a number of decisions regarding the appointment of a Specialist Retail Valuer:
- Victorian Education Foundation Ltd v Brislugan Pty Ltd (Retail Tenancies)  VCAT 317 (25 February 2009)
- 1144 Nepean Highway Pty Ltd v Abnote Australasia Pty Ltd 2009 VSCA 308 (18 December 2009)
- Figgins Holdings Pty Ltd v Williamson Place Pty Ltd (Retail Tenancies)  VCAT 243 (25 February 2010)
- Serene Hotels Pty Ltd v Epping Hotels Pty Ltd  VSCA 228 (27 August 2015)
- Keriani Pty Ltd v Long (Building and Property)  VCAT 1212 (7 August 2015)