When Does the Retail Leases Act Apply in Victoria?

Why the Classification Matters

If a lease is a retail lease, the Retail Leases Act overrides the parties' freedom of contract in a number of important respects. Among other things, the Act imposes obligations and protections relating to:

• landlord disclosure before the lease is entered into;
• a minimum lease term, including any options;
• limits on the costs the landlord can recover from the tenant (including certain capital costs, land tax and some legal costs);
• rules around repairs, maintenance and essential safety measures;
• outgoings disclosure, annual estimates and reconciliation statements;
• notice requirements for renewal, market rent reviews and end-of-term arrangements; and
• a structured dispute resolution process through the Victorian Small Business Commission (VSBC) and the Victorian Civil and Administrative Tribunal (VCAT).

For a non-retail commercial lease, much of that framework does not apply. Whether the Act applies is therefore not a technicality — it changes how the lease must be negotiated, drafted, disclosed and administered for its entire life.

What Is a "Retail Premises"?

Section 4 of the Retail Leases Act defines retail premises, in broad terms, as premises used, or to be used, wholly or predominantly for:

• the sale or hire of goods by retail; or
• the retail provision of services.

"Retail" is not limited to shops selling physical goods. Premises used for the retail provision of services — such as personal services, professional services delivered to consumers, health and beauty services, training, hire services and many others — can fall within the Act even though no goods are sold from the premises.

Whether premises are used "wholly or predominantly" for a retail purpose is a question of substance, not the label the parties have used in the lease. Permitted use clauses are highly relevant, but so is the actual conduct of the business and the way the premises are presented to the public.

Disclosure Obligations

For a new retail lease, the landlord must give the prospective tenant a copy of the proposed lease and a disclosure statement in the prescribed form no later than 14 days before the lease is entered into. The landlord must also provide the VSBC's information brochure where applicable.

The disclosure statement is designed to give the tenant a clear picture of the rent, outgoings, term, options, fit-out obligations, trading hours, owners corporation arrangements (where applicable) and other matters material to their decision to enter the lease.

Disclosure obligations are time-sensitive. Where the landlord misses the 14-day window, or where the disclosure statement is materially defective, the tenant can have significant rights — including the right to withhold rent, claim compensation, or resist the recovery of certain outgoings or capital costs. Older guidance referring to a "7-day" disclosure period reflects superseded law and should be ignored.

Common Exclusions from the Act

Even if premises appear to be used for a retail purpose, the Act may not apply because of one of the specific exclusions in the legislation or in a ministerial determination. The most common are summarised below. Each should be checked carefully against the current Act, Regulations and determinations before being relied on.

• Short-term leases. Leases for a term of less than one year, where the tenant is not in continuous possession of the premises for more than one year, are generally excluded.
• Leases above the occupancy-cost threshold. Leases where the occupancy costs exceed the prescribed threshold — currently $1 million per annum exclusive of GST, subject to verification against the current Retail Leases Regulations 2023 — are generally excluded.
• Leases to listed corporations. Leases where the tenant is a listed corporation (or a subsidiary of a listed corporation within the meaning of the Corporations Act) are excluded.
• Premises or leases excluded by ministerial determination. The Minister has power to declare specified classes of premises or leases either inside or outside the Act. These determinations should be checked rather than assumed.
• Retail services above the first three storeys. Certain premises used for the retail provision of services located above the first three storeys of a multi-storey building may be excluded. The exclusion does not generally apply to the sale or hire of goods by retail (see further below).
• Long-term leases of 15 years or more. Certain long-term leases of 15 years or more may be excluded where the requirements of the relevant ministerial determination are satisfied.
• Barristers' chambers. Leases of barristers' chambers are excluded.
• Certain community or charitable purpose leases. Specific community or charitable purpose leases may be excluded under a ministerial determination.

These exclusions are technical and tightly defined. Whether one applies in a given case is rarely obvious from the lease alone.

Ministerial Determinations

The Act expressly contemplates that the Minister may, by determination published in the Government Gazette, include or exclude particular classes of premises or leases. These determinations change over time and should be checked against the current versions rather than relied on from memory.

Ministerial determinations have, at various times, been used to clarify or modify the position in respect of long-term leases, multi-storey premises and certain specific industries. Before relying on any exclusion based on a determination, the current text of the determination and its commencement date should be confirmed.

The "Fourth Storey and Above" Issue

One of the most misunderstood exclusions is the so-called "storey-space" exclusion. In summary:

• it applies to certain premises used for the retail provision of services that are located above the first three storeys of a multi-storey building;
• it does not apply automatically in every multi-storey situation — the building layout, common areas and the way storeys are counted all matter;
• it does not generally apply to premises used for the sale or hire of goods by retail; and
• it should not be assumed without verifying the building configuration, the actual use of the premises and the current ministerial determination.

Misapplying this exclusion is a common source of dispute, particularly for landlords of mixed-use buildings who assume that any premises above the third floor are automatically outside the Act.

Essential Safety Measures

Since the 2020 amendments to the Act, a landlord may pass on certain essential safety measures costs — including repairs, maintenance and inspections — to the tenant only where the lease and the disclosure statement (or the annual estimate of outgoings) properly permit the recovery.

The rule is narrower than is sometimes assumed. If the recovery is not properly disclosed and documented, the landlord may be unable to recover those costs from the tenant. The drafting of the lease and the content of the disclosure statement therefore need to align carefully.

The Minimum Five-Year Term

A retail lease must generally provide for a minimum total term of five years, including any options to renew. The tenant can elect to take a shorter term by obtaining a certificate from the Victorian Small Business Commission before entering into the lease.

Failing to address the five-year requirement properly at the outset can leave both parties uncertain about the true length of the tenancy — a common source of disputes about renewal, holding over and end-of-term obligations.

Practical Risks of Getting Classification Wrong

Where a landlord treats a retail lease as a non-retail lease (or vice versa), the consequences can be significant. They commonly include:

• defective disclosure, with rights for the tenant to withhold rent or claim compensation;
• inability to recover certain outgoings, land tax, capital costs or essential safety measures costs;
• disputes about which outgoings have been properly disclosed and estimated;
• incorrect assumptions about the lease's commencement date or term;
• repair and maintenance disputes where the Act overrides the lease drafting;
• missed or invalid renewal and option notices, particularly where the landlord fails to comply with statutory notice requirements;
• unexpected referral of the matter to the VSBC and VCAT; and
• exposure to claims for compensation and, in some cases, lost rent.

Where these issues arise mid-lease, the cost of unwinding them often dwarfs the cost of obtaining advice at the outset.

Practical Checklist for Landlords and Tenants

The following checklist is a useful starting point when assessing whether a lease is — or is likely to be — a retail lease under the Act:

• What is the permitted use under the lease?
• Is the use the sale or hire of goods by retail, the retail provision of services, or something else (industrial, warehouse, head-office only, etc.)?
• What are the total occupancy costs (rent plus outgoings), and how do they compare with the current threshold?
• Is the tenant a listed corporation or a subsidiary of a listed corporation?
• What is the term, including options — and is the five-year minimum addressed?
• Are the premises in a shopping centre, and if so, do the additional shopping centre provisions apply?
• Which storey is the premises on, and how is the building configured?
• Is there any current ministerial determination that affects classification?
• Has a proper disclosure statement been given at least 14 days before the lease is entered into?
• Are outgoings, capital costs and essential safety measures properly disclosed and documented?

Why Legal Advice Matters Before Signing

Retail lease classification is technical and depends on the specific lease terms, the permitted use, the occupancy costs, the identity of the tenant, the location of the premises and any applicable ministerial determination. A short legal check before the lease is issued or signed is almost always cheaper than addressing the consequences of misclassification later.

Parke Lawyers advises commercial landlords, retail tenants, investors and advisers across Victoria on the full life cycle of a lease — from initial classification and disclosure, to negotiation, drafting, mid-lease variations, renewals, exits and disputes. See our Commercial & Business Law and Property & Conveyancing service pages for related work, and our Litigation & Dispute Resolution service for retail lease disputes referred to the VSBC or VCAT. Useful companion reading includes our guides on tenant rights in Victoria, resolving a business dispute before court and going to VCAT.

Frequently Asked Questions