A landlord may wish to relocate a tenant for a variety of reasons. With a view to maintaining a harmonious relationship between the parties, a landlord would normally seek to reach agreement with its tenant so that the relocation takes place on a co-operative basis. However, when the parties cannot reach agreement and the relocation clause in the lease must be triggered, the implied provisions in the Retail Shop Leases Act require the landlord to give the tenant certain information before the relocation notice is effective. Specifically, the relocation notice must give the tenant:
- details of the proposed refurbishment, redevelopment or extension of the Centre ("the proposed works");
- details of the "reasonably comparable" alternative premises; and
- the date by which the tenant must vacate
Simple? Probably not because there is likely to be an element of uncertainty over whether there is a "genuine proposal" to carry out the proposed works or whether the alternative premises are "reasonably comparable". If the tenant disputes the validity of your relocation notice then you may find yourself in the Tribunal. There are no apparent limits on what the Tribunal may take into account when considering what constitutes a "genuine proposal" or what is "reasonably comparable".
Some recent decisions under equivalent retail leases legislation in Victoria and NSW have provided useful guidance as to how the Tribunal may interpret the implied provisions in the Retail Shop Leases Act.
1. Details of the proposed works
There must be enough details in the relocation notice so that the affected tenant can come to a conclusion about whether the proposed works:
- are a "genuine proposal";
- will be carried out within a reasonably practicable time after the tenant is relocated; and
- cannot be carried out without vacant possession.
Consequently, we recommend that you provide as many details of the proposed works as you can when giving a relocation notice.
2. Details of the "reasonably comparable alternative premises"
The relocation notice must give the tenant enough details about the alternative premises so that it can form a view as to whether the alternative premises are "reasonably comparable" to the existing premises. Apart from the obvious details like size, location and any adjusted rent, the Tribunal may also consider the commercial value, exposure to traffic, or general appearance of the alternative premises to determine whether they are "reasonably comparable".
The minimum information that should be set out in a relocation notice includes:
- the size, layout and location of the alternative premises (preferably shown on detailed plans);
- the proposed rent (if it is to be adjusted to take account of the different commercial value of the alternative premises);
- any unusual or distinguishing features of the alternative premises; and
- any information of special relevance to a particular tenant (e.g. a food retailer should be given information about the location and size of any grease trap servicing the alternative premises).
3. The date by which the tenant must vacate
The relocation notice must be given at least 3 months before the tenant is required to relocate. As always, it is best to issue the notice as early as possible. The closer it is to the commencement of the works, the stronger the bargaining position of the tenant if the notice is defective.
Generally, you should also ensure that the relocation notice is given to the tenant in the manner provided for in the lease. When posting, you should allow a minimum of 2 business days for delivery. Service by fax or email is not recommended unless specifically provided for in the lease.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.