In Commonwealth of Australia v MTAA Superannuation Fund (RG
Casey Building) Property Pty Ltd (2009) 168 ACTR 55, the ACT
Supreme Court held that the Commonwealth's exclusive use as
tenant of the public areas of a building was a valid consideration
in determining the current market rent.
The Department of Foreign Affairs and Trade (DFAT) leased the
majority of a commercial office building under a registered lease
from MTAA Superannuation Fund Property (R G Casey Building)
Property Pty Ltd and Sparad (No. 24) Pty Limited (Landlord).
Under the lease, unless the parties agreed to the rent amount,
the rent was to be reviewed every two years to the current market
rent value. The parties' valuers failed to reach a joint
valuation and, in accordance with the lease, a third valuer was
appointed as an umpire to determine the rent (Umpire).
A dispute arose as to whether the requirement for the Umpire not
to take into account areas other than the "net letable
area" of the premises in determining the market rent was
breached when, in making his determination, the Umpire added a
premium amount for DFAT's exclusive right to access and use the
"public areas" of the building.
The legal principles permitting a challenge to a valuation under
a rent review clause were first considered by the NSW Court of
Appeal in Legal and General Life of Australia Limited v A
Hudson Pty Limited (1985) 1 NSWLR 314. In that case it was
held that whether a valuation is binding on the parties will depend
on the terms of the contract between the landlord and tenant and
"whether the valuation complies with the terms of the
contract". These principles were not disputed in the current
This principle has been subsequently accepted by other courts,
including the Supreme Court of Victoria in Commonwealth of
Australia v Wawbe Pty Ltd  VSC 82 where the Court held
that any mistake in the valuation process "must be of a kind
which demonstrates that the valuer did not perform his tasks as
required by the contract" in order to enable the court to set
aside the valuation.
In the current case, the Umpire was required to take into
account the terms and conditions generally of the lease. The
Landlord had granted significant rights to DFAT under the lease in
respect of the use of public areas of the building, including
installation of artworks and the right to exclusively operate the
reception desk in the foyer of the building.
Accordingly, the Court held that by taking into account the
public areas of the building, the Umpire had not made a mistake
which would invalidate the determination, as this was not a matter
which the lease stipulated should not to be taken into account.
The Court confirmed that a valuer acting as an expert is not
expected to obtain independent legal advice in respect of the
provisions of the lease concerning the rental review. As such, if
significant exclusive use rights or particular provisions of the
lease are not intended to be taken into account in the
determination of the market rent, then the provisions governing the
rent review must specify this intention or the parties risk these
matters being taken into account by a determining valuer.
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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