VCAT opinion restricts recovery by landlords of costs of essential safety measures and repairs and maintenance

On 1 May 2015, the President of the Victorian Civil Administrative Tribunal (VCAT) issued an advisory opinion in response to the Victorian Small Business Commissioner’s request as to whether a landlord of commercial premises can pass on the costs of Essential Safety Measures (ESM) and certain repair and maintenance obligations for retail premises to tenants.  The term ESM covers measures prescribed by building law for safety and fire protection.

The opinion confirms:

• A landlord of a commercial or retail premises can only require a tenant to undertake ESM obligations in limited circumstances and only at the landlord’s cost;
   
• If a term of a retail premises lease or non- retail commercial lease requires the tenant to meet the costs of ESM or perform the landlord’s ESM obligations, that term is void:
   
• A landlord of retail premises cannot require a tenant to pay as an outgoing its costs of repair and maintenance which are its responsibility under section 52 of the Retail Leases Act .

The extent to which a commercial landlord can recover from a tenant the cost of compliance with the landlord’s repair and maintenance obligations, including ESM obligations under the Building Act and the Building Regulations, has been a much debated issue.

It is hoped this opinion will settle the debate.

Implications

Landlords and tenants must review the way that compliance with ESM obligations is dealt with in their leases, as well as the recovery of costs for ESM and for repair and maintenance in light of this opinion.

A Court or Tribunal considering this issue will likely follow the advisory opinion, notwithstanding that the opinion is not binding.

If you have any queries or require more detailed advice, please contact:

Deborah Mann
Special Counsel
Harwood Andrews
T: 03 5226 8551
E: dmann@harwoodandrews.com.au

Stuart Monotti
Special Counsel
Harwood Andrews
T: 03 5226 8514
E: smonotti@harwoodandrews.com.au

Don Robinson
Principal
Harwood Andrews Ballarat 
T: 03 5329 6921
E: drobinson@harwoodandrews.com.au