The Victorian Court of Appeal held that a cap on rent increases in a retail lease rent review clause does not contravene s 35(2) of the Retail Leases Act 2003. A percentage cap on the outcome of a market rent review or CPI rent review does not constitute the adoption of a second 'basis or formula' (a fixed percentage under s 35(2)(a)), because the cap does not alter the methodology by which the review is conducted but merely imposes a ceiling on the result after the specified basis or formula has been applied. The Court also held that s 35(2) does not impliedly prohibit qualifications on the outcome of a rent review, noting that such an implication would render the express anti-ratchet provision in s 35(3) otiose, though the Court expressly left open whether a clause that modifies a specified basis or formula in a generally applicable way (such as 'half of the CPI' or 'twice the current market rent') would comply with s 35(2).
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