Student Accommodation: Residential or Retail Lease?
The rights and obligations of a Landlord and Tenant depend upon what a property is used for. Owners of properties for lease usually consider their property is either residential or commercial.
A recent ruling by the Victorian Civil and Administrative Tribunal (VCAT) has decided that premises used for student accommodation should be classified as retail premises.
The Tribunal’s finding was notwithstanding most students occupied their rooms for 6 months, cooked their own meals, used common facilities and cleaned the premises.
Provision of some services by the Tenant to some students such as the sale of meals, short term accommodation and advertising tutoring services (even if provided by a different tutor) meant the premises were retail and not residential premises.
Landlords who incorrectly consider their premises are being used for residential and not retail purposes are likely to contravene the Retail Leases Act 2003 or similar laws or engage in unconscionable conduct.
Penalties apply for breaches of the Retail Leases Act 2003. For example, a Tenant who suffers loss or damage as a result of unconscionable conduct by a Landlord can recover that amount of loss or damage.
Conversely Landlords may be able to recover some outgoings from Tenants that are not recoverable if premises are used only for residential purposes. For example, council and water rates are recoverable from Tenants where premises are used for retail premises but not residential premises.
Careful consideration needs to be given to all aspects of the proposed use of the premises when entering into a Lease.
Both Landlords and Tenants should obtain legal advice to ensure they are complying with relevant laws and that their interests are being protected.