I would like to draw to your attention to lesser-known provisions of the Retail Leases Act which may be of benefit to Tenants.
1. Opportunity for Tenants to have current market rent determined early (Section 32, Retail Leases Act)
It is very common for rent increases to be determined by a market review and this usually involves an opportunity for the landlord and tenant to negotiate a new rent and failing any agreement being reached, for the new rent to be the current market rent as determined by a valuer. If however the market review is to occur upon the exercise of an option to renew a lease, the tenant is in the uncertain situation of having to exercise the option to renew the lease without knowing what will be the commencing rent of the new lease, if the lease provides for a current market rent review to determine the commencing rent.
However, Clause 32 of the Retail Leases Act allows the Tenant to request a determination of the current market rent at any time within a period 3-6 months before the end of the lease. If the Tenant makes such a request in writing and the rent has not been determined by agreement, the current market rent is to be determined by a valuer in accordance with the usual provisions for determination of the current market rent as provided in Clause 31 of the Retail Leases Act.
Importantly, if such a request for an early determination of the current market rent is made, then the period within which the tenant must exercise the option is varied so that the last day on which the option can be exercised is extended to the 21st day after the determination of the rent has been made and the Tenant advised in writing of the determination.
The costs of determining the current market rent pursuant to this arrangement and which will largely be the valuer’s expenses, are to be equally shared between the Tenant and the Landlord.
Although this provision is not commonly used, it can be an invaluable tool for a tenant to be fully aware prior to exercising the option to renew a lease what the rent commitment will be during the new lease if the option is exercised.
2. Landlords notice of intentions at the end of the lease (Section 44 Retail Leases Act)
If a lease does not contain an option to renew and will come to an end upon its termination date, a Landlord is required at least six (6) months and no more than 12 months before the end of the lease, to advise the Tenant in writing that either:
- There is an offer to renew or extend the lease on the terms specified in the notice; or
- Inform the tenant that the Landlord does not propose to offer the Tenant a renewal or extension of the lease.
If the Landlord fails to give the required notification, the term of the Lease is extended until the end of six (6) months after the Landlord gives the required notification, however this only occurs if the Tenant requests that extension in writing to the Landlord before the Lease would otherwise have expired. If the Lease is so extended, the Tenant may terminate the Lease by giving not less than one (1) months’ notice of termination to the Landlord.
This provision enables a tenant who is in the last six (6) months of their Lease and the Landlord has not given the necessary written notification of the Landlord’s intention at the end of the Lease, to use this provision to be sure of at least six (6) months security of tenure in the premises rather than coming to the end of the Lease and proceeding to occupy the premises on a month to month holding over basis which allows the Landlord to give one (1) months’ notice to the Tenant to vacate the premises.
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