Ruling on rent review

THE Australian Competition and Consumer Commission (ACCC) has handed down its ruling on commercial rent reviews, permitting property owners to use an independently published underlying inflation rate when adjusting future consumer price index linked rents.

However, while accepting the Property Council’s proposal on CPI rents, the ACCC has reserved judgement on how turnover rents can be calculated.

The ACCC announced: “should an official estimate not be available, but an estimate be required by the parties in a contract and those parties agree to use an adjusted CPI determined by an expert, independent third party, the Commission would be unlikely to object to the use of such an estimate”.

The Property Council also secured some breathing space for property owners who have had difficulties estimating the cost savings that should be passed on to tenants.

The ACCC will allow property owners to retrospectively adjust their prices every six months and pass through any savings to tenants.

The Commission stated it considered the recommendation proposed by the Property Council to enable cost savings to be passed on to tenants to be an effective way of complying with price exploitation requirements.

On turnover rents, the Property Council’s proposal to publish formulas that can be applied to individual retail categories during rent negotiations satisfied the ACCC’s price exploitation guidelines.

However, the Commission pointed out that it would need to see the formulas and satisfy itself of their suitability before endorsing their use.

* Joe Lenzo is chief executive of the Property Council of Australia (WA)

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