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Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

Who owns the Tenant’s installations? And how can this impact a market rent review? - A Case Study

Who owns the Tenant’s installations?

In a recent case involving our Landlord customer, the above question was key while determining the rent during the Lease term subject to market review.

Background facts

Following the Tenant exercising its option to renew the Lease for a further term, the Landlord consented to the Tenant undertaking major building works (“the Installations”) on the premises at the Tenant’s sole cost.  A Deed of Variation was executed between the parties to include the relevant permits for the building works.

The Lease required the rent for the following term to be calculated based on market review.  During negotiations, the Tenant argued that as the Installations were owned by the Tenant, they were excluded for the purposes of determining the current market rent pursuant to Section 37 of the Retail Leases Act (RLA).  

The Landlord, however, argued that the Installations were substantial and structural in nature and that the Landlord consented to the Installations in consideration for the option term granted to the Tenant. Additionally, the Installations had irreversibly altered the premises to such an extent that the Tenant could not ‘make good’ the premises at the end of the Lease term. On that basis, the Landlord argued that the Installations were effectively a part of the Landlord’s building and could not be excluded when determining rent based on market review.

The key issue

The parties considered whether Section 154A (1) of the Property Law Act (PLA) was applicable given the executed Deed of Variation to the Lease (prepared by our customer’s previous solicitors) was silent on who owns the Installations and/or if the Installations were carried out by the Tenant on behalf of the Landlord. The exclusion on the Installations from the market review would lead to a significant drop in the current rent paid by the Tenant to the Landlord. The parties engaged an independent valuer to assess the market rent who, for the purposes of determining the rent, sought legal advice on the issue of who owned the Installations.

Outcome

The Tenant owned the Installations and Section 154A (1) of the PLA was applicable.

Section154A (1) of the PLA which came into operation on 1 August 2010 states:

“A tenant who at his or her own cost or expense has installed fixtures on, or renovated, altered or added to, a rented premises owns those fixtures, renovations, alterations or additions and may remove them before the relevant agreement terminates or during the extended period of possession of the premises, but not afterwards”.

Section154A of the PLA overrides any common law position as to if the Installations were fixtures. In the recent case of AWF Prop Co 2 Pty Ltd v Ararat Wind Farm Pty Ltd [2020] VSC 853 it was stated that Parliament intended Section 154A of the PLA to displace the common law of fixtures. Furthermore, the decision also affirmed that any fixtures installedby a Tenant on the leased premises remained the personal property of the Tenant.

As a result, the Installations were excluded from the market rent review.

Conclusion

The above case study highlights the significance of a clearly worded Lease and/orvariation to the Lease between the parties to accurately reflect any provisions relating to Tenant’s installations and ownership of those installations. Both the Landlord and Tenant should give good consideration as to what effect the installations would have on their rent should the Lease be subject to market review, and whether the Tenant is able to make good the provisions at the end of the term. Failure to do so would result in a costly exercise for both parties and may also mar the relationship between the parties long term.

How Sharrock Pitman Legal can help

As Accredited Specialists in Property Law, we provide cost-effective legal advice on all lease-related issues for both landlords and tenants alike. If specific advice is sought in relation to the matters contained in this article, or any other property related matters, feel free to contact us on 1300 205 506or by email at sp@sharrockpitman.com.au. Alternatively, contact the author directly at sabina@sharrockpitman.com.au.

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

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

,

.

Sabina Mehra

For further information contact

Sabina Mehra

Sabina is a senior property lawyer in our Property team and has experience in dealing with a wide range of complex property and commercial law matters.

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Property Law

Who owns the Tenant’s installations? And how can this impact a market rent review? - A Case Study

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

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.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

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For fifty years Sharrock Pitman Legal has made a significant and long term contribution to meeting the legal needs of business owners and residents in the City of Monash and greater Melbourne area.