The President of the Victorian Civil Administrative Tribunal (VCAT) issued an advisory opinion on 1 May 2015, responding 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.  Measures prescribed by building law for safety and fire protection are covered by the ESM.

The advisory opinion confirms that:

• 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.

There has been much debate over 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. It is anticipated this advisory opinion will help settle the debate.

Landlords and tenants must review the way that compliance with ESM obligations is dealt with in their leases, and the recovery of costs for ESM and 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.

For more information contact:

Sarah Rizk
Principal
03 9611 0111
srizk@sladen.com.au

or

Leneen Forde
Principal
Sladen Legal
03 9611 0142
lforde@sladen.com.au