Retail or not? Why your Lease needs to be clear from the start

Situation

In the recent Building and Property decision of Grand View Trading Pty Ltd v SJV Properties Pty Ltd [2025] VCAT 545, Deputy President Riegler considered a preliminary question of whether certain leased premises were retail premises for the purposes of the Retail Leases Act 2003 (Vic), within the broader context of a dispute over outgoings. 

As there was no dispute between the parties that some retail sales activity was taking place at the premises, the judgment under scores that the Act defines retail premises by reference to the whole or predominant use of the premises under the terms of the lease. The Tribunal therefore framed the question as whether the lease permitted the tenant to use the premises predominantly for retail sales, thereby focusing the enquiry on the terms of the lease rather than on the tenant’s past or current business activities. 

The decision draws from the Supreme Court’s findings in LONTAV Pty Ltd v Pine Cross Custodial Services Pty Ltd [2011] VSC 485 and Richmond Football Club Ltd v Verity Pty Ltd [2019] VSC 597 (confirmed on appeal), which held that evidence of what the tenant was intending to use the premises for after securing a lease or evidence as to its current use detracts from the critical question of what the parties actually agreed to at the time the lease was entered into.   

Accordingly, if the Retail Leases Act is to apply, it must apply from the commencement of the lease (or of a renewal period) or not at all. To achieve the certainty the Act is designed to provide to parties, a change in circumstances or intentions during the term of the lease does not alter the character of the premises as retail premises (or not) for the purposes of the Act. 

In making this determination, the lease terms are the primary consideration. However, the Tribunal may have regard to pre-contractual conduct where it sheds light on ambiguities in the lease, provided such evidence illuminates the objective intention of the parties. 

In this case, the lease expressly permitted retail activity at the premises but, on its terms, limited that use such that retail activity was subordinate to the dominant use as a warehouse and office. 

Decision

Deputy President Riegler found that the intention of the parties, recorded in the executed lease and supported by their pre-contractual conduct and communications, was that the landlord would permit some retail activity from the premises, but only if it remained subordinate to the warehouse and office use. 

He further observed that clauses in the lease which limited the use of the premises in a way that would exclude the application of the Act, if the premises were used as so agreed, did not fall foul of section 94 of the Act. This was because the clauses were not inconsistent with the Act and did not purport to exclude its operation. 

In the result, Deputy President Riegler found that the premises were not retail premises for the purposes of the Retail Leases Act, as the tenant had not established that it was permitted, under the lease, to use the premises predominantly for retail sales. 

Key Takeaway

There is an increasing number of disputes emerging between commercial landlords and tenants over whether their lease agreements are subject to the Retail Leases Act, particularly in relation to those outgoings which are not recoverable from the tenant under the Act.    

Whether the Act applies ultimately depends on whether the premises are “retail premises” in the relevant sense that the lease allows for the whole or predominant use of the premises for a retail use.  

Whether there is a retail use of the premises is determined with reference to the tests enunciated and developed in cases such as IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017] VSCA 178, Bulk Powders Pty Ltd v Seicon Pty Ltd [2018]VCAT 2000 and Eastcombe Pty Ltd v Fagersta Steels Pty Ltd [2022] VCAT 780. 

This decision builds on those precedents by affirming that, once a retail use is established, the express terms of the lease can be decisive in determining whether that use is permitted as a predominant or whole use of the premises. 

It is therefore important to carefully scrutinise the terms of a lease before entering into it, and not to assume that a standard form lease will protect your interests. Whether you are a landlord or a tenant, obtain legal advice on the terms of a proposed lease or extension, and always ensure that your intentions are clearly expressed in the lease. 

How Sharrock Pitman Legal can help?

Sharrock Pitman Legal drew up the lease in question and represented the successful landlord in the proceeding.

Our Property Team is therefore well-placed to advice you and prepare your lease, while our Litigation Team is there to handle any disputes which may arise. Please do not hesitate to contact us on 1300 205 506 or email sp@sharrockpitman.com.au.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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