A market rent determination made by a valuer in respect of a retail lease can be overturned if the valuer has not followed the rules.

The Rules

The Supreme Court of Victoria recently held that when determining the “current market rent” of premises subject to the Retail Lease Act 2003 (“the Act”), a valuer must, in accordance with the requirements of section 37(6) of the Act:

  • set out the valuation determination in writing;

and

  • set out in the determination ‘detailed reasons’ for the valuer’s determination;

and

  • set out the matters to which the valuer had regard to.

It is not possible to contract out of these requirements, as section 94(1) of the Act sets out that a provision of a Lease or any other Agreement will be void if it contradicts any provision of the Act.

Determinations in Practice

A valuer must fully, and in transparent detail:

  • divulge all relevant materials that the valuer has used to make a determination;

and

  • disclose why those materials were necessary to consider.

A valuation will not comply with section 37(6) just because a valuer has experience in making similar market rental determinations, or has knowledge of similar premises in the area.

For example, a valuer cannot simply say ‘based on my knowledge and experience’ or, ‘based on information which I hold on file, I determine the market rent to be…’

What Does This Mean?

A determination of market rent will be void and will not comply with the requirements of section 37(6) of the Act, where a valuer fails to provide detailed reasons, or does not specify the matters to which the valuer had regard to.

Either the Landlord or the Tenant may request a new determination and start the process of determining the market rent for a retail premises, from scratch, If a determination made by a valuer does not comply with the Act.

Alternatively, either the Landlord or the Tenant may take the matter to VCAT for a ruling on the validity of the valuer’s determination to uphold their rights under the Act.