Has the definition of retail expanded?

A recent decision in the matter of CB Cold Storage Pty Ltd v IMCC Group (Australia) Pty Ltd has expanded the meaning of retail premises.

To briefly recap the facts in that case:

· The premises under the lease comprised of warehouse facilities in Laverton, Victoria which included two large freezer warehouses, a chiller room, forklift charging area, loading docks, ramps, car parking, including to allow for reverse access to the loading docks, and an office area.

· The Use of Premises specified in the Schedule to the Lease was “Cold and cool storage warehouse and transport facility”.

· The Lease included a covenant that the Lessee “not use or permit to be used the Premises or any part thereof for any purpose other than (the specified Use of Premises) … or as retail premises”.

· The tenant brought the proceeding seeking to recover sums which had been paid under the Lease pursuant to terms which were voidable by reason of the operation of the RLA.

The crucial question was whether the premises fell within s.4 of the RLA, that is, were they used wholly or predominantly for the retail provision of services?

The new, wider meaning

In this case the Victorian Court of Appeal has interpreted the RLA to confirm that premises used for supplying commercial services to other businesses are retail premises and therefore covered by the RLA.

The decision in CB Cold Storage highlights that in determining whether premises are a retail premises, one should apply the ultimate consumer test and consider where and how the services are provided.

The decisions held that the premises in those cases are used for supplying services to other businesses as ‘ultimate consumers’ of those services and as such are covered by the RLA.

Prior to this decision, it may have been thought that this kind of lease would not be retail in nature as the services were not directed to the public at large. In this case, the tenant catered to a wide range of customers which included, producers, manufacturers, distributors, importers and exporters.

Landlords and tenants who have a commercial lease may be unaware of the effect of the decisions as they clarify that the RLA may have greater coverage than first thought in applying to premises used for selling goods to an end user which can be another business.

Examples of retail leases[1]

· Premises used for the sale of flour to a bakery which uses that flour to make bread may be covered by the RLA.

· Premises used for selling mixed concrete to a builder for used by the builder to construct a driveway may also be covered.

Advice to landlords and tenants

· Landlords should, if in any doubt as to a potential finding of ‘retail’ (and in particular in relation to premises providing services) consider negotiating on the basis that the premises are retail, and setting terms accordingly.

· Tenants should ensure that the permitted use is accurately stated, and be wary of prohibition clauses, particularly when these are included in the definition of permitted use.

The coverage provided by the Act is important as there are key differences between a commercial and retail lease. Examples include under a retail lease, a tenant cannot be required to pay land tax or capital costs. A further example is that a tenant does not have to pay outgoings unless they are provided with an annual estimate of outgoings beforehand.

Should you wish to discuss any of the forgoing in more detail or require any assistance or clarification, please do not hesitate to contact Sam Ferraro or Catherine Micallef of our office.

[1] Victorian Small Business Commissioner (https://www.vsbc.vic.gov.au/)