Landlords Alert: Relocating a Retail Tenant

In the recent case of Davinski Nominees v Bowler Holdings it was ruled that the notices served on the tenant did not satisfy the requirements under Section 55(3) of the Retail Leases Act 2003 (Vic) (“Act”).

A ‘Relocation Clause’ under a retail lease provides a landlord with the ability to relocate a tenant to alternate premises.

In the context of retail leasing, the relocation clause must be read in conjunction with Section 55 of the Act. Davinski Nominees v Bowler Holdings highlights the need for Landlords to provide tenants with satisfactory notice when seeking to relocate a sitting tenant. The case confirms the need for strict compliance with s.55(3) of the Act. The section stipulates that ‘a landlord cannot require a tenant’s business to be relocated….unless the landlord has given the tenant at least 3 months written notice of the relocation with details of reasonably comparable alternative retail premises to be made available to the tenant’. The above section does not stipulate the level of detail that must be included in the notice. This case provides landlords with guidance as to what details need to be included. The facts of the case are as follows:

• The landlord served two notices on the tenant;

• The notices confirmed that the tenant was to be relocated; and

• The notices detailed the address of the new premises

The Tribunal ruled that notices which did not give any details beyond the address of the proposed premises were insufficient for the purposes of satisfying Section 55(3). As the tenant operated a food outlet from the premises, the Tribunal held that a tenant is entitled to more information than merely the address of the new location. Specifically, the Tribunal determined that it would be appropriate for the tenant to receive information on the new premises that detailed gas linkages, water outlets, cooking facilities, seating facilities and toilet facilities. This suggests that the nature of the tenant’s business will dictate what is deemed ‘reasonable’ information for inclusion in a s.55(3) notice.

The Tribunal gave consideration to the term ‘reasonably comparable’ premises. The Tribunal held that the proposed new premises were in no way reasonably comparable to the former premises. The Tribunal determined that there were significant differences between the two premises. Specifically, the Tribunal decided that the new premises being located outside the shopping center and being located in an ‘unsavory’ location amounted to premises not being reasonably comparable to the leased premises

Landlords need to carefully prepare s.55(3) notices to ensure that information relevant to the tenant’s business is included in the notice. Tenants should insist on a Landlord’s strict compliance with s.55(3) of the Act.

Author: Damien Schulze