Landlords will be aware that pursuant to section 28 of the
Retail Leases Act 2003 (Vic) a landlord "must notify the
tenant in writing of the date after which the option is no longer
exercisable at least 6 months and no more than 12 months before
that date". The purpose of the section is to remind the tenant
of the last date upon which it can exercise its option under the
lease. The recommended practice adopted by landlords, is to post
the notice to the tenant by express post, or registered post, so
there is a record that the notice was sent.
Unfortunately, the recent decision in Xiao v Perpetual Trustee
Company Limited (2008) VSC 412, has decided that this general
practice adopted by landlords is no longer sufficient in order to
notify the tenant of the last date it can exercise its option. In
that case, the landlord sent the notice by registered post on 4
December 2007 but the tenant did not actually collect the notice
until 31 December 2007. The tenant sought to exercise its option on
19 June 2008, which was within 6 months of the date the tenant
collected the notice, but was more than 6 months from when the
notice was sent.
The Court decided that in order to notify the tenant, the tenant
needed to actually receive the notice within the prescribed
timeframe. Sending a notice in the post is not sufficient to
'notify' the tenant as there can be no guarantee that the
tenant will actually receive the notice within the prescribed
The decision is unusual and contrary to what has been the
general practice adopted by landlords, as recommended by lawyers,
with respect to notifying tenants of the last date to exercise
their options under leases. We would not be surprised if Parliament
introduces legislation to overcome the decision in Xiao, but until
that time, given that it is a decision of the Supreme Court of
Victoria, landlords will need to change the practice of how tenants
are notified of the last date to exercise an option under a lease.
We now recommend that a landlord physically serve notice on the
tenant and make a note of the time, date and place that the notice
was actually handed to the tenant. Whilst this will no doubt be an
administrative burden on landlords, it seems that there is no
alternative given the Supreme Court decision.
It should also be noted that section 53 of the Retail Leases Act
2003 (Vic) also requires for a tenant to be notified where the
landlord intends undertaking alterations or refurbishments to
premises. It may well be that in that situation a landlord is also
required to give personal service of the notice to the tenant,
rather than sending the notice by post.
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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