CMCIE Pty Ltd atf CMCIE Family Trust v Zambrero Property Group Pty Ltd

[2024] QCAT 283

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

CMCIE Pty Ltd atf CMCIE Family Trust v Zambrero Property Group Pty Ltd [2024] QCAT 283

PARTIES:

CMCIE PTY LTD AS TRUSTEE FOR CMCIE FAMILY TRUST
(applicant)

v

ZAMBRERO PROPERTY GROUP PTY LTD
(respondent)

APPLICATION NO/S:

RSL115-22

MATTER TYPE:

Retail shop leases matters

DELIVERED ON:

17 July 2024

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Member Cranwell
Member Judge

Member McBryde

ORDERS:

1.     It is declared that the determination of current market rent by Jeremy Apted dated 1 July 2021 does not comply with the Retail Shop Leases Act 1994 (Qld) and is not a valid determination.

2.     The determination of current market rent is set aside.

3.     A further determination of current market rent is to be undertaken in compliance with the Retail Shop Leases Act 1994 (Qld) by a different specialist retail valuer.

4.     The counter-application is dismissed.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OTHER MATTERS – where specialist retail valuer was appointed to determine the current market rent – whether the determination complied with the Retail Shop Leases Act 1994 (Qld)

Retail Shop Leases Act 1994 (Qld), s 5A, s 28, s 28A,
s 29, s 83, s 103

REPRESENTATION & APPEARANCES:

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld).

REASONS FOR DECISION

1. CMCIE Pty Ltd as trustee for CMCIE Family Trust (‘CMCIE’) is the owner of leased premises at Nerang. Zambrero Property Group Pty Ltd (‘Zambrero’) is the tenant of the leased premises. It is not in dispute that the lease is a ‘retail shop lease’ as defined in s 5A of the Retail Shop Leases Act 1994 (Qld) (‘the Act’).

2. The lease is for a term of 10 years, and commenced on 9 March 2016.  The lease provided for a market review of the rent after five years.

3. Jeremy Apted was appointed as a “specialist retail valuer” by the chief executive pursuant to s 28 of the Act.

4. Mr Apted provided a determination of current market rent dated 1 July 2021.  Under heading 2.2, he described the premises as follows:

   The Premises plan, which is annexed to the Lease, is as follows.  The Lease shows the Gross Lettable Area Retail (GLAR) to be 176 square metres, which is essentially the internal area of the Premises.  As shown in the photo below, the leased area also includes the canopy area and bike racks to the south as they are also shown as shaded on the Lease plan.  This area, however, by definition, is excluded from the GLAR.

5. Under heading 6.0, he noted the following submissions:

   In accordance with section 28A of the RSLA the parties were invited to make a written submission about the current market rent within the submission period. The submission period ended on 28 May 2021. The Lessee provided a submission which was also given to the Lessor. The Lessor did not make a submission within the submission period and neither did it provide a response to the Lessee’s submission. The Lessor and Lessee have provided further information on my request for the purpose of making my determination.

6. The evidence before the Tribunal consists of two affidavits from Carlos Nader dated 8 June 2023 and 17 July 2023.  Mr Nader was the sole director and secretary of CMCIE.

7. Mr Nader’s affidavit dated 8 June 2023 annexes a copy of the lease.  Relevantly, the lease describes the premises leased as being:

   That part of the ground floor of the Lot (described above) known as Lease 2A, as hatched in black on the plan attached as “Annexure A”.

8. Annexure A is a premises plan showing a hatched area of 208m².  This plan was prepared by Norris Clarke & O’Brien Pty Ltd, licensed surveyors.

9. Clause 1.2 defines the lettable area as the “gross lettable area calculated by the Landlord’s survey”.  Item 15 of the reference schedule to the lease describes the lettable area for the purpose of clause 1.2 as 176m². 

10. Further, Mr Nader’s affidavit dated 8 June 2023 also annexes copies of:

    (a)submissions made by Zambrero to Mr Apted dated 28 May 2021; and

    (b)submissions made by Kelly Property (on behalf of CMCIE) to Mr Apted dated 1 June 2021.

11. Mr Nader deposes that he received Zambrero’s submissions on 2 June 2021.  These submissions describe the lettable area as 176m². 

12. Section 103(2)(a) of the Act relevantly provides that the Tribunal has jurisdiction to hear a retail tenancy dispute about “the procedure for the determination of rent payable under a retail shop lease, but not the actual amount of the rent”.

    Lettable area

13. CMCIE has submitted that Mr Apted’s determination should be set aside on four grounds, namely:

    (a) Firstly, the Valuer did not determine the rent that would be reasonable expected to be paid for the retail shop if it were unoccupied and offered for leasing for the same or a substantially similar use for which the shop may be used under the Lease, by:

    (i) considering the area of the retail show as 176m², rather than the correct area of 208m²; and

    (ii) considering as comparable properties where the Value did not know the market incentives that were applied.

    Secondly, the Valuer did not determine the rent on the basis of gross rent less lessor’s outgoings payable by the lessee under the Lease; by incorrectly calculating the outgoings based on the area of 176m², rather than the correct area of 208m².

    Thirdly, the Valuer did not determine the rent on an effective rent basis, by:

    (i) failing to take into account the correct area of 208m²;

    (ii) failing to take into account the correct area of 208m², when determining the effective rent basis for comparable properties; and

    (iii) failing to take into account comparable premises with a similar area to the Premises.

    Fourthly, the Value did not have regard to the terms and conditions of the Lease.

14. These grounds all centre on Mr Apted’s use of 176m² as the lettable area.  It is apparent to the Tribunal that the 176m² figure contained in item 15 of the reference schedule is erroneous.  The premises plan contained in Annexure A, prepared by a licensed surveyor, clearly shows a gross lettable area of 208m² for the purposes of clause 1.2, which defines the area by reference to the survey.

15. Section 29(1) of the Act provides:

    In making a determination of the current market rent, the specialist retail valuer—

    (a) must determine the rent—

    (i) on the basis of the rent that would be reasonably expected to be paid for the retail shop if it were unoccupied and offered for leasing for the same or a substantially similar use for which the shop may be used under the lease; and

    (ii) on the basis of gross rent less lessor’s outgoings payable by the lessee under the lease; and

    (iii) on an effective rent basis; and

    (b) must not have regard to the value of the goodwill of the lessee’s business or the lessee’s fixtures and fittings in the retail shop; and

    (c) must have regard to—

    (i) the terms and conditions of the lease; and

    (ii) submissions and responses from the lessor and lessee about the market rent of the shop; and

    (iii) the other matters prescribed by regulation.

16. Mr Apted’s use of the incorrect area infected his valuation such that it cannot be said that the determination complies with s 29(a)(i) and s 29(1)(c).

    Response to submissions

17. Alternatively, it is apparent that Mr Apted did not comply with s 28A(7), in that he did not set a response date for CMCIE to respond to the submission by Zambrero in relation to the lettable area.

18. Section 28A of the Act provides:

    (1) This section applies if the current market rent under a retail shop lease is to be determined by a specialist retail valuer under section 28.

    (2)     The valuer must advise the lessor and lessee that the lessor and lessee may give the valuer a submission about the current market rent of the leased shop by a stated date decided by the valuer (the submission date).

    (3) The submission date must be not less than 14 days after the valuer is agreed to or appointed under section 28.

    (4) If the lessor or lessee does not give a submission to the valuer by the submission date, the lessor or lessee is taken to have not made a submission for the purposes of this section or section 29(1)(c)(ii).

    (5)     A lessor or lessee who gives a submission to the valuer must also give a copy of it to the other party by the submission date.

    (6)     A lessor or lessee who receives a copy of a submission may give the valuer a written response to it.

    (7)     The response must be given by a stated date decided by the valuer (the response date) that is reasonable in the circumstances.

    (8) If the lessor or lessee does not give a response to the valuer by the response date, the lessor or lessee is taken to have not made a response for the purposes of this section or section 29(1)(c)(ii).

19. As set out above, s 29(1)(c)(ii) requires that the specialist market valuer must have regard to “submissions and responses from the lessor and lessee about the market rent of the shop”. In circumstances where no response date was set, thereby precluding any opportunity for the CMCIE to provide a response which the specialist market valuer would then be required to have regard to, the Tribunal finds that Mr Apted has not made the determination in compliance with the Act.

    Disposition

20. Section 83(2) of the Act sets out orders which the Tribunal may make, including the following at paragraph (j):

    if QCAT finds that, in making a determination of current market rent, a specialist retail valuer did not comply with section 29—an order that the determination be set aside and a further determination, in compliance with the section, be made.

21. The Tribunal considers it appropriate that any further determination be conducted by a different specialist valuer.

22. For completeness, the Tribunal notes that Zambrero also filed a counter-application seeking a reduction in outgoings payable under the lease based on the lettable area set out in Mr Apted’s determination of market value.  Given that Mr Apted’s determination is to be set aside, it follows that the counter-application should be dismissed.

23. Accordingly, the appropriate orders are:

    (a)It is declared that the determination of current market rent by Jeremy Apted dated 1 July 2021 does not comply with the Retail Shop Leases Act 1994 (Qld) and is not a valid determination.

    (b)The determination of current market rent is set aside.

    (c)A further determination of current market rent is to be undertaken in compliance with the Retail Shop Leases Act 1994 (Qld) by a different specialist retail valuer.

    (d)The counter-application is dismissed.