No annual estimate received? No Outgoings Payable under Retail Leases

Property Law: 10 October 2023

Author: Robert Bradley - Our People

Landlords under retail leases who do not give their tenant an annual estimate of outgoings cannot recover outgoings from that tenant.

Section 46(3) of the Retail Leases Act 2003 Vic. implies a provision into every retail lease^I which requires an annual estimate which itemises outgoingsⁱⁱ to be given at least one month before the start of “each of the landlord’s accounting periods”ⁱⁱⁱ. Section 46(4) implies a provision that the tenant is not liable to contribute to any outgoings if the required estimate has not been given.

Although the words “the landlord’s accounting periods” might seem to apply only to leases which require the tenant to make regular outgoings payments pursuant to an annual outgoings budget, section 46 does seem to also apply to leases which simply require tenants to pay (or reimburse the landlord for) rates, insurance premiums and other invoices upon receipt^iv.

The requirement for the estimate to be given at least one month before the start of each of “the landlord’s accounting periods” has been interpreted by VCAT to prevent an estimate having retrospective effect – i.e. the tenant will not be liable until the estimate is given^v.

The position of the landlord is partly ameliorated because:

1. attempts by tenants to seek reimbursement of outgoings contributions previously paid in the absence of a required estimate, have been refused by VCAT^vi;
2. if a tenant refuses to pay, a landlord under a well-drafted lease can declare a “landlord’s accounting period” to commence in one month’s time and recover outgoings as from the start of that period^vii; and
3. the Act imposes no penalty for inaccurate estimates (although an unreasonable estimate might be held to be non-compliance).

ⁱ A lease cannot contract out of such provisions due to section 94(1) of the Retail Leases Act 2003 Vic.
ⁱⁱ “Outgoings” is widely defined in s.3.
ⁱⁱⁱ “Accounting Period” is defined in s.3 to mean the period of 12 months specified in the lease.
^iv A search of reported cases on point has not uncovered any distinction; “Retail Lease Outgoings” R. Cocks in Oct 2019 LIJ 65.
^v Phillips v Abel [[2019] VCAT 1031; Amazing Accommodation Pty Ltd v Ou [2023] VCAT 986 at [51];.
^vi Australian Asset consulting Pty Ltd v Staples Super Pty Ltd [2016] VCAT 1726; Richmond Football Club Ltd v Verraty [2011] VCAT 2104.
^vii Or possibly earlier, see Jones v Mega Bargains Pty Ltd [2007] VCAT 344 at [45] where an estimate for the current accounting period was held to be acceptable; this decision was not followed in the cases cited in endnote v above.