What are essential safety measures?
Essential safety measures (ESMs) can be classified into a variety of categories depending on the aspect of building safety they cover. A few common examples include:
- Fireproofing
- Installation of fire extinguishers, smoke detectors and sprinkler systems
- Emergency exits and appropriate lighting or signage
- Fire and other alarm systems
- Lifts
- Power failure backup
- Hot and cold water
- Building safety clearance
- Annual inspections
It is ideal for you to consult with Melbourne property lawyers to ensure your commercial property complies with the Building Code of Australia. Different measures apply for buildings constructed before 1 July 1994, in which case the landlord should hire a building consultant to advise on the required ESMs to be installed, if any. For buildings constructed after 1 July 1994, the essential safety measures should be outlined in the building occupancy permit.
Who pays for essential safety measures in Victoria?
The Retail Leases Amendment Act 2020, which amends the Retail Leases Act 2003, now allows landlords and tenants to reach an agreement on which party bears the costs of essential safety measures. Under a commercial lease, a landlord can pass on the costs of installing, repairing, and maintaining ESMs to their tenants as outgoings, only if the lease or occupancy permit enables them to do so. The tenant is also allowed to carry out any repair or maintenance works to existing ESMs.
The Act defines outgoings as including ‘the cost, or part of the cost, of repairs or maintenance work in respect of an essential safety measure or an installation’.
These changes were put into effect on 23 September 2020 for both new and existing commercial leases. However, these changes do not apply for any ESM costs that were already settled before this date. Landlords will be able to recover ESM payments made after 23 September 2020 as part of the agreement reached with the tenant.
It is important to note that though tenants can now bear costs related to installation, repair, and maintenance of ESMs, landlords are still responsible for any violations of the Australian Building Code and the Victorian Building Regulations 2018. Your Melbourne property lawyers will advise you on what areas need to be covered to ensure compliance in time for an inspection.
What does the amendment mean for commercial leases?
Tenants need not worry about any sudden increase in outgoings – the agreements still remain the same as written in the existing lease. The amendment is more likely to benefit landlords of multi-retail and sophisticated establishments like shopping centres.
In many cases, qualifying to be entitled to recover the cost of essential safety measures incurs additional expense, and often outweighs the recoverable costs. So most landlords may not choose to recover the ESM costs. The Retail Leases Act 2003 still states that a landlord is required to provide an itemised statement to recover any outgoings from the tenant at least one month before the start of each lease year. These statements must comply with the necessary accounting standards and if applicable, be audited with proof of evidence of payment. For smaller establishments with single tenants, weighing up these expenses may not justify recovering the ESM costs.
Get all your ESMs questions answered with P&B Law
If you’re still unsure how the changes in laws relating to essential safety measures affect you, the right Melbourne property lawyers will be happy to help. P&B Law’s highly experienced legal team will guide you through all you need to know about ESMs and commercial leasing. Contact us today to learn more about what we can do for you.