Are we dealing with ‘retail premises’?

Are we dealing with ‘retail premises’ under the Retail Leases Act 2003 (“Act”)? This is a crucial question to ask when reviewing any lease. If the Act applies, the consequences for landlords are significant:

  • A right to a minimum 5 year term;
  • Land tax cannot be recovered from the tenant;
  • More onerous maintenance and repair obligations;
  • Non recovery of capital costs; and
  • The requirement to provide a tenant with a disclosure statement which details an estimate of all outgoings.

What do the courts say?

The Supreme Court of Victoria (“SC”) has now on 2 occasions provided some much needed guidance as to what constitutes “retail premises” by applying the ultimate consumer test. The application of the ultimate consumer test has meant that the following have been found to be ‘retail premises’:

  • A logistics business which consists of shipping/transport and storage/warehousing;
  • Serviced apartments;
  • Premises which comprised a café/restaurant and a conference centre which were leased to a tenant who took bookings from conference/function providers who on-supplied the space to delegates;
  • A patent attorney’s office; and
  • Provision of blood testing services.

However, it is also necessary to precisely identify and characterize the service that is being provided at the premises. The SC has found that premises may be retail even if used for a business purpose.

The County Court of Victoria has considered whether or not a tenant’s premises were ‘retail premises’ by applying the ultimate consumer test where services were supplied. The tenant manufactured electrically operated security doors and gates. The majority of the tenant’s work involved the supply of gates and doors to builders. The Court held that this was not the supply of goods, but the supply of services. The builder was held to be the ultimate consumer of the service on the basis that the door or gate was an input into the builder’s productive process to deliver a product to the builder’s customer.

In light of these recent decisions, premises which previously may not have been considered to be retail (such as manufacturing, warehouse and logistics) may now be ‘retail premises’ under the Act.