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Landlords beware: A student accommodation business or serviced apartment may be considered a retail lease

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By Shelley Wolman, Lawyer, MST Lawyers

In the case of Stringer and Ors v Gilandos Pty Ltd [2012] VSC 361, it was held that a lease of a serviced apartment complex constituted a retail premises lease under the Retail Leases Act 2003.

The case concerned leases of units forming part of an apartment/resort complex located in Bright, Victoria and near the snow ski fields of Falls Creek and Mt Hotham known as The Bright Chalet (“TBC”).

The TBC comprises 28 strata units or apartments some of which are owned by the defendant Gilandos Pty Ltd and some of which are owned by third parties, including those owned by the plaintiffs in the proceeding. Each of the plaintiffs had entered into leases of their units with the defendant (under which the defendant pays rent to the plaintiffs). The defendant undertakes day to day management of the TBC and of the plaintiffs’ units, performs house-keeping services and rents the plaintiffs’ units to members of the public.

The TBC includes facilities such as a restaurant, swimming pool, tennis court, bar, ski-hire facilities, conference centre, and gardens which are owned by the defendant, and which members of the public staying at the TBC are entitled to use.

It was held by Croft J that whether or not premises described as serviced apartments were to be characterised as retail premises depends on the specific circumstances. A Court will look at the nature of the premises, the manner in which occupancy is provided and the nature of that occupancy. The description of premises as “serviced apartments” can represent a range of possibilities. For instance, a serviced apartment complex may be operated in a manner similar to a motel or hotel, in which case the premises would most likely be characterised as retail premises. On the other hand, a serviced apartment complex may be operated in a manner similar to long term residential accommodation, in which case the premises would most likely not be characterised as retail. Each lease should be assessed on a case by case basis.

In the case of Wang v Orion Holdings Australia Pty Ltd (Building and Property) [2014] VCAT 812, VCAT held that premises let as student accommodation were retail premises under the Retail Leases Act 2003.

Orion Holdings Australia Pty Ltd (“Orion”) owned the premises at 692 – 694 Whitehorse Road, Mont Albert Victoria. Wang leased the premises for the purpose of operating a student accommodation business.

Orion submitted that because the use of the premises was individual residential accommodation rooms for students, typically for periods of six months, the premises as a whole should be regarded as being intended for use as a residence and therefore falling outside the definition of retail premises.

Senior Member Farrelly considered the case of Stringer and Ors v Gilandos Pty Ltd and found that there were a number of features of the business operated by Wang which placed the business, not at the “block of residential units” end of the spectrum, but at the retail premises end of the spectrum as described by Croft J in the case of Stringer and Ors v Gilandos Pty Ltd. For instance, Wang was providing personal advice and assistance on a range of daily issues to Chinese students, selling meals and providing tutoring services.

Senior Member Farrelly was of the view that the evidence presented in this case was enough to distinguish the premises as something other than long term residential accommodation.

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