In brief
A tenant is not required to provide its turnover figures to a valuer, unless specifically stated in the lease agreement. However, if a lease requires that a tenant provide such figures to a valuer, then the tenant should comply with that lease requirement. It’s a matter for the valuer to determine how much weight should be given to those figures in carrying out a rent valuation.
What you need to know
- If you are conducting a rent review, you are not obliged to ask for turnover figures, even if the premises you are valuing is a hotel or supermarket.
- If the lease requires that the tenant provide turnover figures to a valuer, then the tenant should provide such figures. However, the question remains for the valuer to determine how much weight is given to those figures in determining the rent.
Background
Recently we were requested to advise on a lease, which specified that the tenant must provide its turnover figures, if reasonably requested by a valuer. With the absence of such a requirement in a lease, we are of the view that a tenant is not obliged to provide turnover figures to a valuer, and the decision in Epping Hotels Pty Ltd v Serene Hotels Pty Ltd (2015) does not specify that a tenant must provide such figures.In this particular lease we advised on, the tenant was only obliged to provide turnover figures if reasonably requested by a valuer based on a lease obligation. The lease did not state that the tenant must provide audited figures or provide any evidence of what turnover was declared in its tax return. As such, how can a determining valuer know that it is receiving accurate figures? A determining valuer needs to exercise his or her judgement as to how much weight should be given to such figures.
Furthermore, the lease we were asked to review did not require the determining valuer to determine a rent based upon the turnover figures but only to take them into account. In our view, the valuer is free to assign as much weight to the figures as the valuer determines.
Conclusion
A tenant is not obliged to provide its turnover figures, unless the lease mandates that the tenant do so. Further, a valuer is not obliged to request, or take into account turnover figures, even where the premises are a hotel or supermarket. A valuer will only be obliged to determine the rent based upon the turnover figures where the lease demands that the valuer do so.
In our experience, we are yet to see a retail lease that demands that the rent is determined based upon turnover of the tenant. Of course, leases to Woolworths and Coles are not retail leases, and often such leases do specify that the rent is determined based upon the turnover of the supermarket operator.
