FAQ: What Essential Safety Measures will I be charged for?

With the Retail Leases Amendment Act 2020 now in effect, many retail tenants have found themselves uncertain about the additional costs that they may be charged. The amendments have been put in place to clarify the obligations of landlords and tenants under retail leases per the Retail Leases Act 2003 (which we will cover at a later time); as well as to amend the Building Act 1993 to clarify the obligations of landlords and tenants under retail premises leases in respect of essential safety measures.

The essential safety measures (ESM) that Tenants may begin to incur costs for include smoke detectors, sprinkler systems, fire extinguishers, fire exit signs, and annual safety inspections.

The amendments made will allow Landlords and Tenants to come to an agreement on which party will bear the cost of installation, repairs, and maintenance of ESMs. Landlords can recover ESM costs as outgoings where agreed; and Tenants will only be charged for ESMs in instances where the lease and disclosure statement, or annual estimate of outgoings, require the Tenant to do so.

A key point to note is that, although the changes apply to both new and existing leases, they do not enable Landlords to recover ESM costs that were already paid prior to 23 September 2020. Landlords will only be permitted to recover ESM costs incurred on and from 23 September 2020.

It is also important to note that the Landlord (as the owner of a building) is still primarily liable for any non-compliance under the Building Act and the Building Regulations 2018 (VIC), despite being able to require a Tenant to carry out works related to ESM.

So does this mean that current retail tenants are suddenly going to start receiving more invoices for outgoings? The simple answer is, as usual, that it depends on what is written in the agreed lease. If you’re still unsure or need further clarification, have a conversation with your property manager.

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