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Vic Government passes “fundamentally flawed” retail leases bill

The controversial Retail Leases Amendment Bill 2019 was passed by the Victorian Government yesterday.

This comes despite the uncertain nature of the current pandemic, and the Real Estate Institute of Victoria’s numerous pleas directly to the Premier, the Treasurer and other Ministers to pull the Bill from Parliament until well into 2021.

The new bill will allow landlords of retail premises to recover the cost of essential safety measures from retail tenants, if the tenant has agreed to bear that cost.

It also gives retail tenants the ability to request a rental review before they exercise their option to extend their lease.

“The significant impact of the Covid-19 pandemic on the retail sector has substantially changed the landscape since this flawed piece of legislation was first drafted,” the REIV said in a statement.

“There was no genuine consultation with industry about the proposed changes last year.

“The REIV advised Small Business Victoria from the very beginning that the legislation was fundamentally flawed.

“With the onset of COVID-19 and the impact on the retail sector, a great deal of it will be unworkable and severely impact on retail.”

They point out that accurately determining marker rents during COVID-19 is “almost impossible” to do.

“The introduction of the legislation will result in many retail tenants requesting early rent reviews from Specialised Retail Valuers who will be faced with the difficult task of establishing a market rental during a crisis where very few new retail leases have been settled and many retail tenants have negotiated temporary rent reductions, all within tight new time frames.”

REIV CEO Gil King expressed frustration, noting it appeared the government “refuses to talk with industry under the cover of COVID-19”.

“A number of pleas for the Bill to be pulled from Parliament were ignored and not even responded to.

“These changes will increase costs for retail tenants at this difficult time as the cost of maintenance of essential safety measures are passed onto them.”

Meanwhile REIV President Leah Calnan said the lack of government consultation was proving an unsettling trend.

“To proceed with these changes without even speaking with the industry is typical of what we are experiencing from the Victorian Government on many fronts during the rental moratorium,” Ms Calnan said.

A full copy of the Bill can be read here.

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