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 retail valuer.

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.