On 21 November 2008, the Victorian Government issued a media
release announcing that it had moved to close a loophole which
allowed the use of complex long-term lease arrangements to escape
stamp duty liability. The changes take effect immediately. However,
the media release provides little detail as to the exact types of
long-term leases that are affected.
What types of long-term leases are affected?
The media release provides that "long-term lease
schemes allow a small number of parties to use and control leased
land equivalent to ownership without having to pay the appropriate
stamp duty" and that effectively "a purchaser
can acquire rights which are equivalent to ownership but not pay
The media release provides that "typically these
arrangements are used at the top end of the property
market" and that the changes "will not affect
those entering into ordinary commercial leases".
The media release does provide that the changes will bring
Victoria closer into line with other jurisdictions.
However, the media release provides no further detail on the
types of long-term leases that will be affected. Questions that are
left unanswered include:
What length of lease term (e.g. 50 years or 99 years?) will be
required for a lease to qualify as a long-term lease?
How will options to renew be treated?
Will the changes only apply to leases with a lease premium or
where the rent has been pre-paid?
Will the changes apply to Crown leases?
When do the changes take effect?
The Government states in the media release that legislation to
affect the changes will be introduced during the current session of
Parliament and that the changes will take effect immediately from
the date of the media release. Given next week is Parliament's
last sitting week this year, legislation can be expected to be
introduced next week, but is unlikely to be passed until Parliament
resumes sitting next year.
Who could be affected by the changes?
Property developers using long-term lease structures are likely
to be affected by the changes.
Depending on the extent of the changes, retirement village and
aged care facility operators may also be affected. Residents are
commonly given tenure through long-term lease arrangements.
Likewise, operators of such facilities are commonly provided with
rights to communal facilities through long-term 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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Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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