In brief: As noted in my last Valuer Update, last month the Court of Appeal of the Supreme Court upheld the decision in IMCC Group v CB Cold Storage Pty Ltd. The effect of this decision is that a warehouse or storage facility lease is likely to fall under the Retail Leases Act 2003 (Vic) (Act), assuming that the lease is not to a public listed company, or the rent and outgoings exceeds $1 million per annum at the time the lease is entered into.

What you need to know:

  • If you are valuing a premise that is leased as a storage facility or warehouse, you need to consider whether the lease is governed by the Act.
  • Not every lease of a storage facility or warehouse will be governed by the Act. In each instance, you should seek the agreement of the landlord and tenant as to whether the lease is or is not governed by the Act.
  • Should there be a dispute regarding the valuation of a premises, it is recommended that you obtain an expert opinion, which will be binding on the parties.

Background

The Court approved the ultimate consumer test in stating that the services are to be used by the person to whom they are supplied and are not passed on to a third party. However, in determining that the premises were retail, the court placed importance on the following matters:

  • the service is available for a fee
  • the services are not passed onto any other person, that is, the person receiving the service is the ultimate consumer of that service (in this case, the person paying for the storage had the use of the storage facilities and did not seek to sell that service to a third party
  • members of the public could acquire the service, so that the lease did not limit the sale of the service to business customers only, and
  • Parliament has not sought to change the meaning of retail service in the legislation but has allowed certain leases to be excluded via Ministerial determination.

The above factors will all be seen as important by the Court. Accordingly, it is difficult to know in any particular circumstance whether a lease of a storage facility or warehouse will fall under the Act, without a detailed review of the lease and the circumstances of the relevant tenant’s occupation of the premises.

Conclusion

If you are asked to value a storage or warehouse facility, consideration should be given to whether the lease is governed by the Act. If the parties are not in agreement as to whether the Act applies, you should seek an expert opinion, at the cost of parties. As you will note from the above, there is no straightforward answer. 

 

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