In brief
In the August edition, I mentioned that property managers must give an estimate of outgoings to tenants where the lease is governed by the Retail Leases Act 2003 (Vic) (Act).
This has now been confirmed in the July decision of Verraty Pty Ltd v Richmond Football Club Ltd (Building and Property) [2019] VCAT 1073. I also referred to this decision last month which confirms that a lease may fall out of the protection of the Act. I will comment further on this next month.
What you need to know
As mentioned in the August update, property managers need to ensure that a tenant under the Act is given an estimate of the outgoings in accordance with the Act. Therefore an estimate needs to be given before the commencement of the Act and annually thereafter.
Background
Please refer to the August update for the details on the relevant section, namely section 46 of the Act.
In the current case, the landlord did not provide an estimate of the outgoings to the tenant due to the outgoings (being both rent and outgoings) totalling over $1 million during the term of the Lease and therefore falling outside of the Act. VCAT stated as follows:
"The only penalty for not giving notice by that time is that the liability to contribute to outgoings does not arise. I reject Verraty's submission that even when the estimate is given late, the tenant remains liable to pay outgoings relate to the period before the estimate is given. Such an interpretation makes consequence of the landlord not giving notice meaningless."
So, if an estimate is not given, the tenant does not need to pay outgoings for the period prior to the estimate being given.
Conclusion
An estimate of outgoings must be given if the lease is governed by the Act, both before the lease is entered into and annually, assuming that outgoings are recovered annually. Outgoings cannot be recovered for a period prior to the estimate being given.
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.
