Market Rent Reviews

Liquor Licensing

By Tony Joyce
November 25, 2015

Epping Hotel Case
The long running Epping Hotel case concluded on the 27 August 2015 when the Supreme Court of Appeal handed down its decision.

By way of background a valuer had made a rental determination as to the appropriate rent of the Epping Hotel on the 1 February 2012. The determination was challenged by the tenant on the basis that the valuer had failed to take into account the relevant provisions of the Retail Leases Act 2003 (“RLA”) in his determination.

Proceedings were issued by the owner in VCAT to uphold the rental determination. Member M Farrelly of VCAT made an Order in February 2014 that the parties were not bound by the rental determination.

The relevant provisions of the RLA are that in making an assessment of the current rent the valuer is to have regard to:

  • The provisions of the lease.
  • The rent that would reasonably be expected to be paid for the premises if they are unoccupied and offered for lease for
  • the same or a substantially similar use to which the premises may be put under the lease.
  • The landlord’s outgoings to the extent that the tenant is liable to contribute to those outgoings;
  • Any concessions or other benefits offered to prospective tenants of an occupied premises;

But the current market rent is not to take into account the value of the goodwill created by the tenant’s occupation or the value of the tenant’s fixtures and fittings.

As is usual in rental determinations for hotels with gaming entitlements the valuer took into account the revenue from the gaming machines and other income streams e.g. food, beverages, bar, accommodation etc. The tenant argued that this was prohibited by the RLA provisions outlined above.

Member M Farrelly of VCAT found this traditional methodology was contrary to the provisions of the RLA set out above as he said it took into account the value of the tenant’s fixtures and fittings and goodwill.

The owner applied for leave to appeal the VCAT decision to the Supreme Court. The tenant opposed that application. Associate Justice Muktar granted leave to appeal and the appeal was heard by Justice Croft on the 24 March 2015. On 25 April 2015 Justice Croft found that the valuer had complied with the provisions of the RLA; the decision of VCAT was set aside, the rental determination upheld and costs awarded in favour of the owner.

The tenant sought leave to appeal the decision of Justice Croft and to conduct an appeal.

These applications were heard before Judges Weinberg and Tate JJA and Robson AJA on the 31 July 2015. In their Judgement handed down on the 27 August 2015 the three Judges unanimously granted the application for leave to appeal and unanimously dismissed the appeal with costs against the tenant.

The law is now settled in this matter and it will be a relief to valuers and the hotel industry generally.

Tony Joyce of Wisewould Mahony represented the owner in all the proceedings.

Tony Joyce
Consultant
Corporate & Commercial