Companies leasing warehouse facilities in Victoria may be entitled to a refund from their landlords thanks to a recent decision made by the Victorian Supreme Court of Appeal.
Essentially, the Court held that the lease of premises used to provide cold storage and logistics services was a ‘retail lease’ for the purposes of the Retail Leases Act 2003 (Vic), Hunt & Hunt lawyers has shared.
Hunt & Hunt noted that the decision has practical implications for warehouse operators and freight forwarders, making many entitled to repayment of expenses including land tax and repair costs going back six years.
The Retail Leases Act impacts all aspects of the formation, operation and ending of covered leases. In terms of costs for tenants, landlords are not able to pass on land tax liability or legal costs associated with the preparation of leases, and
landlord are responsible for maintaining premises in the same condition as at the beginning of the lease, this includes equipment, appliances and fittings provided on the premises under the lease.
For the case that brought about the decision, IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd , the Court had to consider whether a lease of premises used to operate cool storage facilities would be classed as a retail lease.
“The landlord argued it was not due largely to the nature of the services provided and the fact that almost all of the tenant’s customers were businesses,” Hunt & Hunt shared. “The Court of Appeal held that the lease was a retail lease and took the following factors into account: any person could purchase the storage services if the appropriate fee was paid; the tenant’s business was open during normal business hours; and the tenants customers were the actual consumers of the storage service.”
The Court was reportedly not concerned that the premises were acquired for a business purpose.
Hunt & Hunt advises that the criteria for ascertaining whether a warehousing and logistics business’ lease is eligible to be classified as retail will include the rental amount, the size of the premises, whether customers can attend the premises, the hours of operation, the services provided and the permitted use of the premises under the lease.
“Every tenant that provides warehousing and logistics services should have their lease reviewed to determine whether it is potentially a retail lease,” Hunt & Hunt noted. “If it is a retail lease under the law, but the tenant has been paying land tax and maintenance and essential safety maintenance costs, there may be a very strong case to demand repayment of those costs from the landlord.”