Can restricting the permitted use prevent the Retail Leases Act 2003 (Vic) from applying?  Two recent decisions and an upcoming CPD

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].