An Appeal Court has confirmed that a ‘retail premises lease’ cannot cease to be a retail lease even if the initial criteria that qualified it as falling under the legislation, may change during the term of the lease. Key issues included the annual occupancy cost exceeding $1.0m pa during the term which may have otherwise excluded it from legislative application. The potential recovery of substantial Land Tax was a strategic motivation in this dispute. This decision gives weighty direction when considering whether a lease is governed by Retail Shop Leases legislation.
The lease began in 1998 of premises known as the Wantirna Club to be used as licensed gaming premises. It was subsequently varied by agreement 2004 extending the initial term from 10 to 20 years from the same commencement date. At that time, it was agreed that the premises constituted ‘retail premises’ within the meaning of section 4 of the Retail Leases Act 2003 (Vic) (RLA).
The lease included a requirement that the Tenant reimburse the Landlord its annual land tax payable in respect of the premises. This was unenforceable as section 50 of the RLA which prohibits such recovery.
By 2016 the annual occupancy costs exceeded the $1 million threshold prescribed by the Act. The Lessor applied to VCAT essentially arguing the Act no longer applied to the lease. The Tribunal agreed. The Lessee appealed that decision to the Victorian Supreme Court which agreed with the Lessee finding that if a lease was for retail premises (and hence subject to the Retail Leases Act) when it is entered into, then it will remain a lease for retail premises and subject to the Act for its duration.
The Lessor then unsuccessfully appealed this decision to the State’s highest Court. The Appeal Court found that “… if a lease is a ‘retail premises’ lease at the commencement of the lease, it remains subject to the Act even if the premises cease to be retail premises. In short, the text, context and purpose of the Act strongly support the view that it is not possible [for a lease] to jump in and out of the Act from time to time depending on whether the premises continue to fall within the definition of ‘retail premises’.
Verraty Pty Ltd v Richmond Football Club Ltd [2020] VSCA 267
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