A vexing issue in retail and commercial leasing has been the extent to which a restriction on the permitted use in a lease can prevent the Retail Leases Act 2003 (Vic) (RLA 2003) from applying.

The decision in Sofos v Coburn (1992) V ConvR 54-439 suggests that the Act will not apply when the lease limits the tenant’s use to wholesale and export sales.

However, a number of other decisions have suggested that the analysis is more nuanced than simply looking at the permitted use, particularly in light of the prohibition on contracting out in s 94 of the RLA 2003 (eg Wellington v Norwich Union Life Insurance Society Ltd [1991] 1 VR 333; Access Solutions International Pty Ltd v Gamet Pty Ltd [2017] VCC 1563; Koga Nominees Pty Ltd v Loscam Australia Pty Ltd & Ors [2018] VSC 455).

The issue is significant for leasing practitioners as:

1. attempting to restrict the permitted use appears to be a drafting device used widely in retail and commercial leases in Victoria; and
2. the application or otherwise of the RLA 2003 to leases is becoming increasingly important as land tax liabilities increase in this state (for those who are new to this blog, land tax cannot be recovered as an outgoing in leases regulated by the RLA 2003).

The issue has arisen recently in two cases and we have scheduled an online CPD with Greens List on 10 June 2026 to discuss the cases in detail and the implications for practitioners.

The CPD is open for registration here.

In the meantime, a short summary of the Courts’ findings is set out below.

First, in Volk Road 2020 Pty Ltd v John White Pty Ltd [2026] VCC, a decision handed down on 13 April 2026, his Honour Judge Macnamara in the County Court considered a lease using the November 2012 version of the standard LIV copyright lease, with the permitted use:

… storage of caravans, watercraft and storage units

Item 15 of the Schedule stated that:

The Act does NOT apply.

The lease also contained a covenant in Additional Provision 3 that:

…

(c)          The tenant must not use the premises:

(i)            wholly or predominantly for the sale or hire of goods by retail or the retail provision of services; or

(ii)          in any manner which will result in the Retail Leases Act 2003 (Vic) applying to this lease.

Notwithstanding the clauses above, the tenant used the premises to conduct a business of warehousing other people’s goods.  A similar use has been held to be retail in other cases (eg IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178).

His Honour held that the Court was required to take into account the tenant’s actual use of the premises and had regard also to the managing agent’s knowledge of the tenant’s business, concluding that:

[27]       … based on the uncontradicted evidence of Mr White that the managing agent visited premises where the defendant company was carrying on this business, I conclude that it must have been evident to the agent what the relevant business was. Mr White said – and he was not challenged, and there was no evidence to contradict this – that the agent was the only point of contact between him and the plaintiff lessor. Therefore, I conclude that the knowledge of the agent should be attributed to the principal, namely the plaintiff. If that be true, the situation is one in which the plaintiff well knew the nature of the enterprise which the defendant was conducting, and contented itself in the expectation of escaping an onerous statutory regime with provisions restricting retail uses which, to the mutual knowledge of the relevant parties, was not intended to have contractual effect. Mr White has deposed to his premises being open for extensive hours to members of the public wishing to avail of the storage facilities, and further that these facilities are provided for reward.

The decision in Volk Road 2020 Pty Ltd v John White Pty Ltd is not available on AustLii and at this stage does not appear to have a complete medium neutral citation (at least on the version that we have), so we have attached a .pdf copy of the judgment for readers’ benefit.

Secondly, a similar issue was considered by his Honour Justice Croft in the decision of Karam Investments Pty Ltd v Close the Loop [2026] VSC 270, handed down on 8 May 2026.  In that case, his Honour considered the issue and held that (emphasis added):

[216]   It is not necessary for present purposes to express a view on whether Sofos v Coburn^[1] was wrongly decided, having regard to the ameliorating or remedial nature of the retail leases legislation since 1986.^[2]  Regard should also be had to the provisions of s 94 of the RLA, which prevents contracting out of its provisions by rendering void any provision of a retail premises lease or other agreement which seeks to do so.  It follows that in some circumstances evidence of actual use or, indeed, the permitted use provisions may provide a basis for concluding that a retail prohibition provision incorporated in the permitted use provisions may be no more than an attempted characterisation of the lease as other than retail and amount to an attempt to contract out of the provisions of the RLA, in breach of s 94.  It should be kept in mind, nevertheless, that such a finding may deprive a landlord of relief for breach of the permitted use covenant in the lease and so should not be made without careful consideration of all relevant factors in the application of the usual principles of construction to the permitted use provisions.^[3]  It follows, in my view, that the decision in Wellington v Norwich Union Life Insurance Society Ltd^[4] is more consistent with these considerations.

As a side note, the decision in Karam Investments addressed a number of other issues relevant to retail leasing practitioners that will be discussed in posts on this blog in the near future.

Sam Hopper SC

Liability limited by a scheme approved under professional standards legislation.

Dylan Matthews

Dylan Matthews is currently undertaking PLT at the College of Law.

[1] (1992) V ConvR ¶54–439.

[2] See, for example, Wellington v Norwich Union Life Insurance Society Ltd [1991] 1 VR 333, 334 (Nathan J), Peppercorn Nominees Pty Ltd v Loizou (1997) V ConvR ¶54–560, p 66,734 (Smith J), Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd [2013] VSC 344, [42] (Croft J) and CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd [2017] VSC 23, [20] (Croft J); and see Croft, Hay and Virgona, Retail Leases Victoria (LexisNexis) [10,030].

[3] See, for example, Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 and Koga Nominees Pty Ltd v Loscam Australia Pty Ltd [2018] VSC 455, [28] (Croft J).

[4] [1991] 1 VR 333; and see Cambridge Co‑ordinates Pty Ltd v Viking Press Pty Ltd (2001) V ConvR ¶58‑533, 65,035, [25].

Many readers will be familiar with the Ministerial determination that excludes lease with a term of 15 years or more (and certain other related leases) from the Retail Leases Act 2003 (Vic).  For those who are not, a copy of that determination is available by following the link here.

The 15 year determination has been a source of some controversy since it was first published in 2004.  His Honour Judge Macnamara in the County Court of Victoria recently gave detailed consideration to the meaning and effect of that determination in the case of LFRACM INC v Halski Pty Ltd & Anor [2025] VCC 1506 (16 October 2025) and in his Honour’s supplementary reasons in LFRACM INC v Halski Pty Ltd & Anor (No 2) [2025] VCC 1557.

The headline from his Honour’s decision is that:

1. a lease will not invoke the 15 year determination to exclude that lease from the RLA 2003 if it does not contain specific obligations to undertake substantial work that can be identified when the lease was entered into;  and
2. a general ‘keep in repair’ covenant is not sufficient, even if the covenant extends to any capital works that may arise during the term.

The decision also considered an argument (which his Honour did not accept) that the parties to a lease deed containing a covenant that the 15 year determination applies to the lease are estopped from denying that the determination applies.

So far as I am aware, this is the first time that the 15 year determination was considered by a court.  In the current climate of increasing state taxes on land, this decision is likely to prove significant in those industries in which leases of 15 years or more are commonplace.

Ben Kelly and I recently prepared a paper that considers his Honour’s decision, its background and implications in some detail.  The paper goes into these issues in quite a lot of detail, so I have provided a link to the whole paper here.

In the recent decision of Paramount Investments Group Pty Ltd v Club Fogolar Furlan Melbourne [2025] VSC 90, Croft J in the Supreme Court considered VCAT’s power to vary conditions on an order for relief against forfeiture after the order was made and after the tenant had failed to comply with the conditions.  His Honour reviewed the various powers in the VCAT Act and found that the Tribunal generally could not vary a final order, but held that relief from forfeiture was different and that the Tribunal did have the power to vary conditions placed on the grant of relief from forfeiture in the right circumstances.

His Honour also made reference to some other authorities that might become relevant to VCAT granting relief from forfeiture of commercial leases that are not regulated by the Retail Leases Act 2003 (Vic) (RLA 2003) that will be of interest to the lease nerds!

Background

The background to this case can be summarised as follows.

In December 2023, the tenant sought an interlocutory injunction to restrain re-entry by the landlord.  The Tribunal dismissed that application but ordered that the tenant should be granted relief from forfeiture on the condition that it pay certain arrears of rent by a specified date.   A copy of the Tribunal’s original decision is available here: Paramount Investments Pty Ltd v Club Fogolar Furlan Melbourne (Building and Property) [2024] VCAT 169.

The tenant missed those dates and then applied to the Tribunal for an extension of the time for compliance.

In July 2024, the Tribunal granted that extension of time.  Its reasons for that extension are reported here: Paramount Investments Group Pty Ltd v Club Fogolar Furlan Melbourne (No 3) (Building and Property) [2024] VCAT 666.

The landlord sought to appeal the July orders, arguing that:

• the Tribunal did not have the power under ss 126(2)(a) or 98(3) of the VCAT Act to amend its original orders and was functus officio; and
• even if the Tribunal did have the power to vary the original conditions, the Tribunal’s discretion to grant the extension was exercised wrongly.

In response, the tenant argued that:

• the Tribunal has both the power to issue self-executing orders and set aside or vary them;
• ss 130 and 131 of the VCAT Act grant the Tribunal a broad discretion to make orders or determinations with any conditions or further orders it deems appropriate; and
• in any event, the Court should not interfere with the exercise of the Tribunal’s discretion.

Decision

The Court ultimately accepted that the Tribunal generally cannot vary final orders under the terms of the VCAT Act.  However, it held that the Tribunal’s jurisdiction to grant relief against forfeiture of a retail premises lease carries with it the power to amend (in the right circumstances) conditions that are attached to the grant of that relief.

His Honour Justice Croft cited the following passage from Lord Greene (with whom Lord Clauson agreed), in Chandless‑Chandless v Nicholson [1942] 2 KB 321, 323–325:

The court, in exercising its jurisdiction to grant relief in cases of non‑payment of rent is, of course, proceeding on the old principles of the court of equity which always regarded the condition of re‑entry as being merely security for payment of the rent and gave relief if the landlord could get his rent.  If an order of this kind, in which relief is granted on terms to be observed within a limited time, is to be treated as one which the court has no jurisdiction to modify in point of time even though circumstances justify modification, then the order becomes as vicious as the original forfeiture clause itself.  I hold the view without hesitation that … an order of this kind, which gives relief on terms to be performed within a specified time, is one in respect of which the court retains jurisdiction to extend that time if circumstances are brought to its notice which would make it just and equitable that extension should be granted.  …

…. It is not, of course, to be understood from anything I say that lessees who obtain orders for relief are entitled to treat the conditions laid down in them lightly.  Any lessee who has obtained relief on conditions cannot expect to get further indulgence from the court in the matter of time unless good grounds are shown.  Lessees must not think for one moment that they are entitled to be slack or casual about the performance of terms.  If they are so and then endeavour to get further indulgence from the court, the court will know how to deal with them, but in a case where on all equitable grounds a period of limitation ought in fairness to be extended and its extension will do no more than apply the principle that the condition of re‑entry is nothing more than security for the rent, there is no reason why equity should not lend its aid notwithstanding the original order.  …

Implications for practitioners

This case highlights that VCAT’s power to grant relief from forfeiture is both broad and flexible and allows the Tribunal to fashion a remedy to avoid injustice in the circumstances.

This may be a source of frustration for landlords who see a tenant who has both breached the terms of the lease in the first place and then has failed to comply with the conditions that the Tribunal placed on the grant of relief from forfeiture.  Consequently, practitioners acting for landlords (particularly landlords who have not terminated a lease before) should advise their clients at the beginning of the process that VCAT has the power to grant relief from forfeiture subject to certain conditions and also has the power to vary or extend those conditions, and will exercise those powers in the right circumstances.  It often helps to explain to a landlord that their right to re-enter is not there to punish the tenant for breaches of the lease, but to secure compliance with its terms.

That being said, as is highlighted by the second paragraph from the extract above, defaulting tenants (and practitioners acting for them) should not treat the conditions attached to the grant of relief from forfeiture as optional.  A tenant that does not comply with those conditions does so at its peril and will need to provide to the Tribunal a good explanation for failing to meet the Tribunal’s conditions.

And one for the lease nerds…

There is an additional nugget for the lease nerds in his Honour’s reasons.

VCAT has a general jurisdiction to hear and determine disputes arising under commercial leases under the consumer and trader provisions of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACL&FTA) (see Zeus and Ra Pty Ltd v Nicolaou (2003) 6 VR 606).

However, whether VCAT has power under the ACL&FTA to grant relief from forfeiture of commercial leases that are not regulated by the RLA 2003 has been an ongoing issue in recent years.

Readers may recall the paper ‘VCAT’s jurisdiction: An endangered species?’ by Robert Hay KC and Brett Harding, a copy of which was posted on this blog here.  Paragraphs 45 to 57 of that paper raised the question of whether VCAT has the power to grant relief from forfeiture of a non-retail commercial lease under the ACL&FTA.  The authors raised arguments that suggested that VCAT does not have that power, but ultimately left the question open.

In the Paramount case, His Honour made the following remarks:

[106]   It is clear from the Tribunal Reasons and the orders that the Tribunal was exercising jurisdiction specifically conferred upon it to grant relief against forfeiture conferred by s 89 of the RLA.   …

[107]   It is also clear from earlier authorities with respect to the retail leases jurisdiction that such equitable jurisdiction and powers required an express legislative grant.  So much is clear from the decisions of Ormiston J in Jam Factory Pty Ltd v Sunny Paradise Pty Ltd[1] and Klewet Pty Ltd v Lansdown.[2]  True it is that these decisions were in the context of an arbitral dispute resolution scheme under the Retail Tenancies Act 1986 but, having regard to the jurisdiction to grant relief against forfeiture being a central and ancient part of the equitable jurisdiction, a matter clearly in the mind of Ormiston J, there is no doubt that a tribunal such as VCAT could not exercise any such jurisdiction without the enactment of provisions such as contained in s 89 of the RLA.

Section 89 of the RLA 2003 gives VCAT an express power to grant relief from forfeiture of a lease under the RLA 2003.  There is no express reference to relief from forfeiture in the consumer and trader provisions of the ACL&FTA.

While his Honour was not expressly considering the Tribunal’s powers under the ACL&FTA and did not determine the issue, the passages extracted above support the argument that the Tribunal does not have the power to grant relief from forfeiture under the consumer and trader provisions of the ACL&FTA.

Sam Hopper SC[3] and Dylan Matthews

Dylan Matthews is a final-year Bachelor of Property and Real Estate / Bachelor of Laws student from Deakin University.

[1] (1989) VR 584.

[2] (1989) VR 969.

[3] Liability limited by a scheme approved under Professional Standards Legislation.

A group of residents were successful this week in an application brought against the operators of the Wollert Lifestyle Community (Lifestyle).  The application concerned the validity of exit fees in residents’ Residential Site Agreements (RSA) and covenants that allow rent to be charged after a resident dies.  

Residents typically buy a home from Lifestyle and rent land on which the home is located, and are then required to enter an RSA which requires them to pay an exit fee, calculated as a percentage of the price when they on-sell their homes.  Also, on the death of a resident, the RSA says their estate must keep paying rent but they are not able to occupy the home.

VCAT President Justice Woodward delivered his ruling on Monday, 7 July 2025, finding that: 

1. exit fees in RSAs could not be charged if the amount of those fees is not disclosed up front.  As the amount of a resident’s exit fees is not known until sale, Lifestyle’s model of exit fees as a percentage of sale price can never comply with and cannot be charged under s 206S of the Residential Tenancies Act 1997 (Vic) (RTA);  and
2. to require grieving relatives of a deceased resident to pay rent but not be able to occupy the home is ‘harsh, if not unconscionable’, and the RSAs are to be varied under s 206G of the RTA to allow the estate of a deceased resident to sub-let the home before sale.

The decision will have flow-on affects for residents not only at Wollert Lifestyle Community, but any resident at the 24 operating Lifestyle Communities in Victoria with these kinds of clauses in their RSAs.

See below links to Justice Woodward’s ruling and recent media coverage by The Age and Sam’s interview with ABC Radio National Breakfast.

Sam Hopper SC and Eli Fryar

In the decision of Aldi Foods Pty Ltd v Northcote Shopping Centre Pty Ltd [2024] VSC 799 handed down this morning, Croft J has held that ‘caps’, or upper limits on rent reviews are permitted by sub-s 35(2) of the Retail Leases Act 2003 (Vic).

This decision overturns the VCAT decision in Northcote Shopping Centre Pty Ltd v Aldi Foods Pty Ltd [2024] VCAT 641, which is one four decisions from the Tribunal holding that a ‘cap’ on either a current market rent review or rent review by CPI or similar published index is a form of mixed review that is prohibited by sub-s 35(2) of the RLA 2003.  For discussion on the various VCAT decisions , see: here, here, here and here).

This decision is likely to be significant as there appear to be a significant number of retail premises leases in Victoria that have a ‘cap’ on rent increases in their terms.

As always, I will keep readers of this blog abreast of any further developments on this issue.

Sam Hopper SC and Callum Dawlings