Retail shop leases commonly provide for occasions where the rent
would be changed to the current market rent for the retail shop
premises. Where the parties to the lease do not reach agreement on
what the actual amount of that current market rent is to be, they
can jointly appoint a specialist retail valuer to make that
determination. If they cannot even agree on that appointment, then
they can apply to the Administrative Decisions Tribunal
(the"Tribunal') to make the appointment of a specialist
When making the current market rent determination for retail
shop premises, the specialist retail valuer must pay careful and
close attention to the criteria for current market rent that are
set out in each part, including each sub-paragraph of section 19
(1) (a), of the Retail Leases Act 1994. If they fail to do so, a
dissatisfied party to the lease can apply to the Tribunal for an
order stating that the current market rent determination is
'non-complying' and that a different specialist retail
valuer should be appointed to do the job properly.
A recent Tribunal decision to that effect occurred in April 2011
in the matter of Eastpoint Shopping Village Pty Ltd v Grayson
Pty Limited. In that decision the Tribunal held that the
specialist retail valuer must make the valuation only on the basis
as authorized by section 19(1) (a) of the Act, but would allow
that, provided the basis for the determination was not compromised,
the valuer could also have regard to other relevant factors that
relate to the prescribed factors . This would also depend on the
valuer's expert skills and accepted valuation practices.
The problem in that case however was that the valuer had failed
to address any rent concessions that might be offered to
prospective tenants of unoccupied retail shops, nor had the valuer
fully considered the gross rent less the lessor's outgoings as
are payable by the Lessee. As a result the Tribunal was able to
rule that in this case the valuation (regardless of whether it was
a full and considered market rent determination ) did not comply
with section 19 (1) (a) by not addressing each of the factors set
out therein and providing reasons for how each factor was in fact
dealt with by the valuer. Therefore it was held that the valuation
did not bind the parties to the Lease.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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