The RLA 2003 permits a ‘late exit’ part 2

My good friend and fellow retail leasing blogger Robert Hay QC has just posted a note here about the recent decision of Senior Member Forde at VCAT in Verraty Pty Ltd v Richmond Football Club Ltd [2019] VCAT 1073, which confirmed that a retail premises lease can ‘jump out’ of, or have a ‘late exit’ from the RLA 2003 if its occupancy costs exceed $1M.

Senior Member Forde’s recent decision adopts a similar approach to the obiter remarks by Deputy President Riegler in William Buck (Vic) Pty Ltd v Motta Holdings Pty Ltd (Building and Property) [2018] VCAT 15 discussed here.

Robert’s note is very comprehensive and all practitioners in this area should read it and consider the implications for their clients’ leases.

The upshot of the decision is that a lease that starts its life as a retail premises lease can fall out of the Act during the lease term if its occupancy costs exceed $1M.

This is significant because many practitioners have util now assumed that:

1. a lease was governed by the RLA 2003 at the start of its term will remain regulated by the Act until the term ends;  and
2. the RLA 2003 can only ‘stop’ applying when a new lease is entered into.

The two decisions arose in the context of $1M occupancy costs exclusion.  However, a similar issue would arise if a tenant or its parent company are listed on or are acquired by a company listed on the ASX or its overseas equivalent (see here) or if they fall outside the Act for any other reason.

Also, it is unclear at this stage whether the Act would cease to apply if the tenant stops retailing mid-term (eg if it changes its business to predominantly wholesale).  However, based on the reasoning in both the William Buck and the Verraty cases, that seems to be arguable.