In June 2013 Surfers Paradise tenant Amricama wrote to the managing agent requesting “an early determination” of fair market rent, as per its entitlement pursuant to S 27A of the Retail Shop Leases Act, so as to decide “rental affordability” before formally exercising its option to renew.

No disagreement when conditions are perfectCorrespondence ensued but no agreement reached. The tenant then applied to QCAT for a rental determination for five year renewal from 1 May 2014, but in the course of the mediation mandated by that process, the parties agreed to appoint a valuer to assess the rent.

Acting on behalf of the landlord, Red Carpet Real Estate knew that CBRE’s Graeme Smith – the expert who had been selected – was not a specialist retail valuer and therefore not someone who could decide “fair market rent” in a retail lease dispute situation.

Smith’s assessment in March 2014 of fair market annual rent at $160k plus GST and outgoings prompted the tenant to exercise the option immediately following its receipt.

Obviously disappointed with the outcome of the valuation, the landlord instructed Red Carpet to challenge the valuation on grounds that Smith did not hold the “specialist retail” qualifications as required by the RSLA.

Amricama sought court orders that it had validly exercised its option to renew the lease and that the rent payable was that as determined by Smith according to the agreed process.

It contended that it was not necessary to follow the RSLA s 28 rent valuation method because it had already been determined via an agreed method by the jointly appointed valuer. It pointed out that the operative provisions in the lease did not mandate determination by a specialist retail valuer.

Supreme Court Justice Glen Martin dismissed this argument noting that RSLA s 20 specifies that a provision of the Act prevails over anything in the lease and thus the s 28 method was required to be followed.

“As Mr Smith was not a specialist retail valuer, his valuation was not a determination of current market rent and the tenant can not rely on it for the purposes of the renewed lease”.

The court also rejected the argument that the parties could waive the statutory requirement, or that the landlord could be estopped from relying on the act by agreeing to a different course of action.

The tenant failed in its application and rent will have to be re-determined, this time by an appropriately qualified valuer, so that the lease for the extended term can be finalised.

Amricama Pty Ltd v Red Carpet Real Estate [2014] QSC 267 Martin J 31/10/2014

 


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