Retail Leases - Options to Renew

by Dianne Hodge

THE PERIOD of a lease and any options to renew it are highly prized and scrutinized elements given a prospective tenant’s desire to realise their business objectives and to recover invested capital. In granting a retail premises lease containing an option to renew the lease for a further term, Victorian landlords are under an obligation to notify their tenants of the date after which an option to renew is no longer exercisable. This strict requirement is set out under section 28 of the Retail Leases Act 2003 (Vic) (Act).

Notice in writing

The notice must be in writing. No particular form of notice is prescribed under the Act.

Strict time frame for notice

The notice must be given to the tenant not more than 12 months, or not less than 6 months, before the last date on which the option can be exercised. It is important to note that the relevant date for the purpose of calculating this date is not the expiry of the term of the lease. The relevant date is usually 3 months prior to the expiration of the term which is being renewed.

Failure to notify tenant

A failure to comply with this requirement results in the date of the last day for exercising the option being extended until 6 months after the required notice has been given. Importantly, if the extended date is after the date that the term of the lease ends, then the lease continues until that date.

No option to renew

Where a lease contains no option to renew, the landlord is under no obligation to renew the lease, even if the tenant has developed substantial goodwill in the premises. If no further terms are provided for in the lease the landlord is required to give the tenant a written notice, and offer the tenant a renewal of lease or advise the tenant that no renewal is available, not more than 12 months, or less than 6 months, before the end of the term.

Disclosure Statement

Where a tenant exercises an option to renew, the landlord must give the tenant a Disclosure Statement at least 21 days before the end of the current lease, or not more than 14 days after the parties have agreed to renew when there is no option.

Dianne Hodge
Senior Associate
Hicks Oakley Chessell Williams
www.hocw.com.au




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