In late September 2020, the renewal process in the Victorian Retail Leases Act changed. Did you miss it? Understandably, most people did, given everything else that was happening.
Landlord obligations have increased. Tenant’s rights have increased.
The result? Landlord’s don’t comply and tenant’s in the know (like our clients) being able to extend the term of a lease, withhold rent, get a market review before they have to exercise an option and even being able to terminate a lease after the exercise of an option to renew. Yes, you read that right.
Landlord Disclosure Statements on Renewal
Must be provided by landlords to tenants:
- where there is a further option, at least 21 days before the end of the term of the lease; or
- where there is agreement to renew the lease, no later than 14 days after the entering into of the agreement to renew the lease.
Failing this, the tenant may, no later than 90 days after the expiry of the relevant period above, give the landlord notice that the tenant has not been given the disclosure statement.
Following such notice by the tenant, the tenant:
- may withhold rent until a disclosure statement is given;
- is not liable to pay rent from the day the notice was given to the day the landlord gives the disclosure statement; and
- may terminate the lease within 7 days of landlord providing the disclosure statement.
Landlords Renewal Notice
Must be given if a lease contains an option exercisable by the tenant, no later than 3 months (instead of the previous 6 months) before the tenant’s option to renew the lease expires. This notice must set out:
- the last date by which the option can be exercised by the tenant;
- the rent payable in the first 12 months of the option term;
- the availability of an early market rent review;
- the availability of a cooling-off period; and
- any changes to the previous disclosure statement given to the tenant.
Previously, the landlord notice only needed to state the last date by which an option term may be exercised.
Failure to comply will result in the lease term and date to exercise the option being extended for three months after the notice is actually provided. The tenant also has the right to terminate the lease.
Early Rent Review
Where the lease provides for a market review, the tenant may request an early market rent review by notice to the landlord. The notice be done within 28 days of the landlord renewal notice. The last date by which an option term may be exercised by the tenant will then, if necessary, also be extended until 14 days after the determination of the market rent.
This change ensures that tenants are aware of the rent they will be paying prior to exercising an option to renew.
If the tenant does not request an early rent review but proceeds to exercise the option to renew the lease, a tenant may within 14 days of exercising its option (cooling off period), give notice to the landlord that it does not wish to proceed with the option.
If so, the term of the lease is extended by 14 days and the lease is taken not to have been renewed and the tenant will lose its right to an option.
What to do now?
Landlords must review and update their end of term notices and disclosure statement processes and procedures.
Tenants should consider and understand their right to request an early market rent review and their cooling off rights in relation to an exercise of an option to renew their lease.
Need more information?
If you would like more information or have questions, please contact us