A recent decision in the Victorian Supreme Court highlights the severe consequences that can be paid by parties who try and avoid the Retail Leases Act. In this case, the landlord/vendor lost about $90,000.00 to which they thought they were entitled to receive under the lease.

Facts

  • Mr & Mrs Spirovski owned a hotel premises in Fitzroy. In January 2008, an agreement was entered into to lease the premises to Univest Asset Merchants Syndicators Pty Ltd. 
  • The agreement provided that Univest would pay $90,000.00 to the Spirovski’s on signing the lease, and a further $90,000.00 upon exercising the option (if this occurred). This payment was not expressed in the lease, but was expressed in a contract for the sale of business, although no business was being sold.
  • Univest paid the initial contribution of $90,000.00 to the Spirovski’s.
  • After this payment had been made, Univest sought to recoup this money by arguing that the payment was a ‘premium’ under the Retail Leases Act and that the provision in the contract was void and the money should be refunded to them. Under the Retail Leases Act, it is illegal for the lessor to ask for any money in relation to entering into a lease. 

Decision

  • The court decided that the payment of the $90,000.00 was a ‘premium’ under the Retail Leases Act, and ordered the lessor to repay the money to the lessee.
  • The court held that the contract for the sale of business which expressed the payment of $90,000.00 to the lessor was a sham, and that the contract for sale of business was a disguise for what was actually a ‘premium’ under the Retail Leases Act.

This case serves to illustrate the point that you cannot contract out of your obligations under the Retail Leases Act, and you cannot disguise payments in ancillary documents instead of the lease. The lessor paid the price for trying to deceive the lessee, and the lessee was entitled to a full refund of the $90,000.00 they had paid to the lessor.