By Russell Cocks, Solicitor
First published in the Law Institute Journal
Section 52 Retail Leases Act 2003 makes the landlord of retail premises responsible for maintaining the structure, fittings, plant & equipment and appliances. But for how long?
Traditionally leases were drawn by the landlord’s lawyer and offered to a prospective tenant on a ‘take it or leave it basis’. All the power lay with the landlord. However such a disproportionate relationship is anathema to the consumer protection society and retail tenants, like their residential cousins before them, have become the beneficiaries of protection designed to create a more balanced relationship between landlord and tenant.
Section 52 implies into every retail lease a maintenance obligation on the landlord. This may be contrasted with the traditional approach of foisting repair obligations (excluding the euphemistic ‘structural’ repairs) on to tenants. In a retail environment the obligation to maintain (and therefore repair) primarily falls on the landlord, although leases continue to try to pass ‘residual’ repair obligations on to the tenant.
A number of cases have considered the length of time of the maintenance obligation. From the beginning of the lease the landlord must maintain the premises. For a relatively short term lease, such as 2 years, it might be expected that the premises might not deteriorate substantially and this maintenance obligation might not be too burdensome. However for a long term lease, such as 10 years, it might be expected that substantial maintenance may be required. Indeed, a tenant may take advantage of a number of options to extend the lease to a period of 15 or 20 years. The landlord could expect that the level of maintenance required in such circumstances will involve a substantial cost that needs to be taken into account when negotiating rental.
Ross-Hunt P/L v Cianjan P/L [2009] VCAT 829 considered the landlord’s obligation to repair the air conditioning in a retail office. Air conditioning falls within s 52 and is a facility that deteriorates over time. The cost of maintaining the air conditioning system can be significant and the replacement cost at the end of the life of the equipment can amount to a substantial proportion of the annual rental. The lease had been renewed and the Tribunal concluded that the need for repairs to the air conditioning arose early in the renewed term and was the landlord’s responsibility. The Tribunal concluded that the ‘comparator’ date was the date of renewal. This means that the condition of the premises at the date that complaint is made is compared with the condition of the premises at the last renewal and the landlord is responsible for maintaining the premises in the condition that they were at the time of the last renewal.
Versus v ANH Nominees P/L [2015] VSC 515 however cast doubt on this ‘comparator’ date, at least in respect of damage to the premises requiring repair that arose during the previous term and had not be repaired before the expiration of the previous term. The landlord had argued that the renewal created a new comparator, that the premises after renewal were in precisely the same condition that they were in at the time of renewal and that the landlord therefore had no obligation to improve the premises. Croft J. rejected this argument on the basis that the landlord cannot be permitted to be in a better position after renewal precisely because the landlord had failed to fulfill its s 52 duties during the previous term. Such an outcome would also be contrary to the ameliorating and remedial intention of the Act.
Croft J. also commented that there is no basis to suggest that Parliament could not have intended the landlord to have a continuing repair obligation in a particularly long term lease, such as 20 years. Provided that the landlord observes the repair obligation during the term, the premises should be in a similar state of repair after 20 years, fair wear and tear excepted, and the continuing obligation to repair should not be excessively onerous.
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Whilst written for Victoria this article has interest and relevance for practitioners in all states.