Can an industrial premises be a retail premises for the Retail Leases Act 2003 (Vic)(“the Act”)?

Yes.  In CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017] VSC 23, the Victorian Supreme Court held that a lease of industrial premises was a retail premises lease for the purposes of the Act.

This case was an appeal from VCAT.
The relevant land was zoned as Industrial 2 use. The permitted use under the lease was “Cold and cool storage warehouse and transport facility”.

Essentially, there was no sale of goods to the public or advertising inviting them to enter the premises.  The tenant provided cool storage services for clients, storing client products in freezer warehouses. 

The Court held that the relevant premises were retail premises because the clients of the cold storage services were the ultimate consumers of the services.  They purchased a service which was conducted at the premises and which was not onsold to another entity.

Consequently, such a tenant would not have to pay land tax, the landlord would have to satisfy the various disclosure provisions in the Act (which might not ordinarily apply in such a lease), the tenant would obtain certain termination rights if those disclosure provisions were not observed, and the term of the lease could well have to be for a term of at least 5 years.

If you as a landlord are concerned about the impact of this decision on industrial property that you have leased, you have to consider your particular factual matrix.

Does the permitted use of your property deny a use, or qualify the use, so that the relevant premises does not come within the operation of the Act?

The Act may also not apply if the occupany costs exceed the amount set out in the Act or if your tenants is a listed company (or its subsidiary) at the time on entering into the lease.

However, if you are not able to carve out your particular lease from the operation of the Act (perhaps because of the permitted use agreed by the parties), then the landlord must ensure that he, she or it is familiar with the disclosure obligations imposed by the Act on the landlord and ensure compliance therewith. 

Do you have a legally binding contract?

To have a legally binding contract, there must be an intention to create legal relations.  Whether or not there is such an intention is measured objectively.

The High Court in Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 held that certain representations made by the landlord during negotiations were not intended (and were too uncertain) to be binding.

During negotiations, the tenant had expressed concerns about refurbishments costs and the fact that the lease was only for a term of 5 years with no option to renew. Crown told the tenant that it would be “looked after at renewal time”.  

The High Court held that a reasonable observer in the position of the parties would not have understood representations such as that made by Crown to be binding.

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Is your heads of agreement legally binding?

In Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123, the Court held that the particular heads of agreement (“HOA”) was legally binding.  However, it was only a legally binding agreement to negotiate, not to grant a lease.

On the facts, there was no executed lease agreement.  However, the HOA contained a clause that it was legally binding. This was despite the fact that several terms of the lease still were yet to be negotiated.

The concept that the HOA was said to be legally binding can be seen to be diametrically opposed to the fact that not all the lease terms were agreed.  

Accordingly, the Court resolved this tension by declaring the HOA to be only an agreement to negotiate.

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