VCAT finds that a head lease is not a retail premises lease under the RLA 2003

In another recent development, this time under the Retail Leases Act 2003 (Vic) (RLA 2003),^[1] Senior Member Forde at VCAT has held that a head lease is not a lease of retail premises under that Act.

In Izett St Pty Ltd v Applgold Pty Ltd (Building and Property) [2021] VCAT 174, Senior Member Forde at VCAT heard as a preliminary quesiton in the proceeding arguments about whether a head lease could be considered a lease of retail premises under the RLA 2003.  

The head tenant’s main business was to sub-lease parts of the demised premises to retail tenants.  

The head tenant argued that the sub-tenants were the ultimate consumers of the sub-leased space and, as a result, the tenant was engaging in a retail supply, applying the reasoning from C B Cold Storage and similar cases.

The landlord argued that:

1. a retail premises must be open to the public;  and 
2. the head lease was not open to the public because the sub-tenants had exclsuive possession of those parts of the leased premises that they sub-leased.

The Tribunal rejected the landlord’s argument and held that:

44.    I am however satisfied that the Premises is ‘open to the public’ in the sense that between sublets it is possible for a member of the public to enter a space available for sublet. There is no evidence to suggest that any person is prohibited from subletting a space in the Premises. …

However, the Tribunal found for the landlord on a different basis.  Sub-section 4(1) of the RLA 2003 states that (emphasis added):

(1)       In this Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for—

(a)       the sale or hire of goods by retail or the retail provision of services; or

(b)       the carrying on of a specified business or a specified kind of business that the Minister determines under section 5 is a business to which this paragraph applies

The Tribunal made the following findings:

49.    … Once the sublease is granted, the applicant is no longer able to ‘use’ the premises. It has given exclusive possession to a subtenant. The only space available for the applicant to use after the Premises is sublet is the communal kitchen facilities.

50.    Had the applicant offered licences to the public to use parts of the Premises it may have been more akin to the provision of services. Unlike a caravan park, serviced office, conference centre or cold storage facility, the applicant gave exclusive possession often for years at a time to its subtenants thereby giving away the right to use the Premises. 

51.    Subletting premises is not the provision of a service in the sense required by the RLA. If that were the case every sublet premises could be classified as a retail premises. The provision of kitchen facilities by the applicant does not make the Premises retail premises. Unlike the tenant in Fitzroy Dental or Stringer, the applicant is not integral to the operation of the subleases once granted. 

52.    When all the features of the Premises are taken together as required by Cold Storage, the conclusion must be that the Premises is not retail. 

Practitioners should be aware of this decision in case it is suggested that a head lease falls under the RLA 2003.

^[1] It’s been so long since I have done a post about the RLA 2003 that I feel that I must redefine the term!