VCAT Advisory Opinion limits the cost of essential safety measures to commercial and retail tenants

To help Victorian leaseholders and landlords avoid disputes, new guidance has been issued about the limits on maintenance and repair costs a landlord can pass on to tenants.

On 1 May 2015, Justice Garde, a Supreme Court Judge and the President of Victorian Civil and Administrative Tribunal (VCAT/Tribunal) provided an Advisory Opinion to the Victorian Small Business Commissioner (VSBC).1

The Advisory Opinion, being the first of its kind, provides some clarity on the operation of the Building Act 1993 (Building Act), the Building Regulations 2006 (Building Regulations) and the Retail Leases Act 2003 (RLA) and the ability of landlords to pass on the costs of essential safety measures (ESM's) to commercial and retail tenants.

BACKGROUND & KEY FINDINGS

Whether a landlord can pass on the costs of their maintenance and repair obligations, including ESM's, has been subject of considerable debate. Two articles published in the Law Institute Journal as well as two decisions by the Tribunal have considered the question.

So the VSBC in May 2014 applied to VCAT requesting answers to five related questions. In accepting VSBC's reference, the Tribunal agreed the referral was 'in the public interest' and confirmed 'the need for clarification of the rights and obligations of landlords and tenants under these leases'.

In short, the opinion found:

A landlord must bear the cost of compliance with ESM obligations; A landlord cannot pass on certain maintenance and repair costs to a tenant; and A landlord can require a tenant to do some types of ESM work, but if so, the tenant can recover the cost from the landlord. LEGISLATION

The Advisory...