Another case from VCAT saying that a cap on a market rent review does not comply with sub-s 35(2) of the RLA 2003

VCAT just published another decision in which a Tribunal member held that market rent review cause with a ‘cap’does not comply with sub-s 35(2) of the Retail Leases Act 2003 (Vic) (RLA 2003).

In the case of Cote Noire Pty Ltd v Roberts Family Enterprises Pty Ltd (Building and Property) 2024 VCAT 810 Deputy President Riegler considered a market rent review clause that included the following text:

(h) Notwithstanding any such agreement or determination and unless otherwise excluded pursuant to the Act, the annual rental payable in the first year following any Market Rent Review Date shall in no circumstances be less than 103% and no more than 105% of the annual rental paid in the year immediately prior to the Market Review Date in question.

The Tribunal cited the reasoning of Member Nash (as the Acting Senior Member was then) from the decision in Roberts Family Enterprises Pty Ltd v Meddles Bekirofski and Reshar Bekirofski (Building and Property) [2023] VCAT 121, discussed here, and held that:

[9]  I accept and adopt the reasoning of Member Nash set out above. In my view, clause 3.5(h) constitutes a hybrid method for calculating rent review and is contrary to those methods which are prescribed under s 35(2) of the RLA. It is a “mixed rent review” or hybrid version of either a fixed annual amount (s 35(2)(c) of the RLA) because it purports to fix variables between 3.5 and 5 percent of the exit rent; or purports to restrict current market rent within those parameters (s 35(2)(d) of the RLA).

This is now the fourth decision from VCAT holding that a rent review clause with a ‘cap’ is not permitted by sub-s 35(3) of the RLA 2003.

As discussed in an earlier post here, a decision on the same point of law in Northcote Shopping Centre Pty Ltd v Aldi Foods Pty Ltd [2024] VCAT 641 has been appealed to the Supreme Court.  The Court has now listed that appeal for a hearing on 21 November 2024.