Industrial and warehousing leases and the Retail Leases Act

 Thursday, March 23, 2017

The recent decision in CB Cold Storage Pty Ltd v IMCC Group Pty Ltd [2017] VSC 23 (CB Cold Storage) could mean that landlords leasing premises to industrial or warehousing business in Victoria may no longer be able to recover land tax from a tenant and market rent reviews that do not allow the rent to decreased may be void.

Under the Retail Leases Act 2003 (Vic) (RLA) landlords are liable for the payment land tax and any provision of a retail lease that makes the tenant liable to pay land tax is void. There is also a prohibition against provisions in retail leases that do not allow for a decrease of rent after a market rent review.

Until recently, it has been commonly accepted that the RLA does not apply to industrial and warehousing leases. However, CB Cold Storage follows a line of recent cases which have the effect of broadening the application of the RLA. In CB Cold Storage, Croft J determined that the lease in question was in fact a retail lease and thus covered by the RLA. The tenant’s business in CB Cold Storage provided cold storage services to individuals and companies out of the landlord’s warehouse.

The decision in CB Cold Storage used the ‘ultimate consumer’ test to characterise the lease and after considering the nature of the services provided by the tenant to the ‘ultimate consumer or user’, the Supreme Court concluded that the Tenant’s business was ‘retail’.

Given this characterisation of the tenant’s business other industrial and warehousing leases could also be subject to the RLA. Parties cannot contract out of the RLA and its effect is retrospective from the start of the lease. Therefore a tenant may be entitled to be refunded any land tax or incorrect rent paid.

If you consider you may be affected as landlord or tenant by the CB Cold Storage case, please contact Cosgriff Lawyers on (03) 5480 6344.