The Supreme Court has held that caps ARE permissible in retail premises leases

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