Under a retail lease, landlords need to take careful consideration of what is included as a landlord installation with a recent case finding a landlord was required to undertake repair and maintenance of items that it leases to a tenant.
In brief
The April 2019 decision in Cheng v Wang (Building and Property) [2019] VCAT 496 highlights the importance of the landlord's obligations to undertake repair and maintenance under a retail lease of items that it leases to a tenant. Essentially, if the landlord leases plant and equipment to a tenant, it will be responsible for repair and maintenance and, if appropriate, replacement of the plant and equipment.
What you need to know
In drafting a lease, be careful as to what may be included as a landlord installation or part of the premises leased to the tenant, as the landlord will be obliged under section 52 of the Retail Leases Act (Vic) to repair and maintain those items and, in certain circumstances, to replace those items. A landlord needs to be aware of its far-reaching obligations under section 52(2).
Background
In the case referred to above, the landlord leased premises to the tenant to be used as a restaurant and included as landlord's installations "a dishwasher, tables, chairs, crockery and cutlery, stoves, fridges and freezer, stereo, cool room and sundry equipment including pots and pans". The tenant sought to recover from the landlord the cost of undertaking various repairs, maintenance and where appropriate, replacement of the landlord's installations as the tenant had been running the restaurant from the premises for 30 years and numerous items needed attention.
The tenant argued successfully that the landlord has obligations under section 52 (2) to repair and maintain the landlord's installations, irrespective of any conflicting clauses in the lease. VCAT agreed and ordered the landlord to undertake various repairs, maintenance and, in the case of items at the end of their life, to replace those items.
Conclusion
If a lease is a retail lease, the landlord should be mindful of obligations imposed upon it pursuant to section 52. Whilst including various installations may have a positive effect on the rent payable, a landlord should be mindful that it will be responsible for repairing and maintaining those items. This can be an issue when a landlord is funding a tenant's fit out and the landlord is to continue to own those items. This will be discussed in next month's edition of my Valuer and Retail Leases Update.
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. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.
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