In retail leasing, renewal notices have long been treated as administrative housekeeping. Routine. Low risk. Something to be diarised, sent, and filed away.
A recent Victorian tribunal decision suggests those days are over.
In Pagica Pty Ltd v Inlet Property Pty Ltd [2024] VCAT 830, the Victorian Civil and Administrative Tribunal invalidated a landlord’s renewal notice because it was imprecise about one thing: rent. The outcome has implications well beyond the technicalities of leasing law. It goes to certainty, timing and control – all matters landlords and investors care deeply about in the current market.
To understand why this matters, it helps to revisit the purpose of renewal notices.
Under Victoria’s retail leasing regime, a tenant with an option to renew cannot be required to exercise that option unless the landlord first issues a formal reminder notice. The notice must tell the tenant when the option expires, what rent will apply in the renewed term, and outline a handful of statutory rights. The idea is consumer protection: tenants should not lose valuable rights through oversight or ambiguity.
For years, most renewal notices passed without scrutiny.
Pagica changes that.
The lease in question provided that rent at the start of the option term was to be determined by market review. The landlord’s notice, however, stated a fixed rental figure for the first year of the renewed term, while also referring to the tenant’s right to seek an early rent review.
VCAT found the notice invalid. The problem was not timing or form, but accuracy. Where a lease requires market rent, the notice must say exactly that. A guessed or “proposed” figure – even if well intentioned – does not meet the statutory requirement.
The result was commercially significant. Because the notice was invalid, the tenant gained additional time to decide whether to renew. The landlord lost certainty, not only as to income but as to whether the lease would continue at all.
That loss of certainty matters particularly in today’s environment.
Retail assets are under pressure. Interest rates remain elevated. Capital is more expensive. Transactions are taking longer. In that context, certainty around lease expiry dates, income continuity and timing is critical. A defective renewal notice can derail a sale, unsettle a refinancing, or give a tenant unexpected leverage in negotiations.
For property managers, the decision is a warning shot.
Many managers issue renewal notices on landlords’ behalf as part of their standard service offering. After Pagica, issuing a notice without carefully checking the lease’s rent review mechanics is no longer low risk. Market rent options, in particular, are a danger zone.
The broader lesson is a familiar one. When markets tighten, process and precision matter more. Small documentation errors can have outsized commercial consequences.
Renewal notices have quietly shifted from routine administration to risk management. Landlords and their advisers would be wise to treat them accordingly.
