https://www.sclqld.org.au/caselaw/QCAT/2015/275 . Pharmacy Lease. Current market rent.
Complexity: 8.5 / 10
Parties to Dispute:
Devery’s Pharmacy Services Pty Ltd t/a Westcourt Plaza Pharmacy v Direct Factory Outlets Cairns Pty Ltd  QCAT 275 (RSL011-14) parties legally represented by established law firms.
Instruction: Determine Current Market Rent.
Description of Dispute:
Original rent was $374,000. On exercising option Landlord proposed similar rent $383,000 represented by a SRV. DFO Centre had many vacancies. Tenant’s SRV submitted gross rent ought to be $225,000, again making a submission that could have been any set of numbers. Say off letter boxes.
Poor drafting of legislation caused loop-holes in the interpretation of the Act.
I made my determination at current market rent at $171,000, backed by Profits Method circa $143,000.
The Tribunal Found:
-  “There is no dispute between the parties as to the determination made by Mr Gilbert;
-  The valuation of the Current Market Rent was made in a valuation report prepared by Mr Don Gilbert, dated 13 November 2013. Mr Gilbert discussed the history of the shopping centre, and summarised his task as: 1. In sum: what is the current market rent for a pharmacy shop in a 431 square metre equivalent store without outside access, located in a DFO-format centre which appears not to have been fully accepted by the Cairns market, post GFC, facing stiff competition in its immediate catchment (including discount pharmacies), all when quite enormous changes are taking place both within the centre and the pharmacy industry, and the current Tenant business has been on rent relief but has just recently completed a refit? This is a complex task.
-  The current annual gross rent at the time of the valuation2 was $375,636.00 plus GST. The Landlord proposed a new rent of $383,125.00. The tenant proposed a new rent of $225,000.00. Mr Gilbert determined that3 the current market rent for the lease year commenced 8 September 2013 calculated on a gross rental basis was $171,000.00 excluding GST for the commencement of the five year option.
Inflated rents may significantly inflate the value of any property. Prior to acquiring an investment property, it is strongly suggested that one tests the veracity of the leases and the rent levels.