When motel leases were first introduced in the 90’s, the star rating was a very relevant consideration. The AAA scheme was originally owned by the Australian Motoring Clubs and had been in operation since the 1950’s. It was recognised as Australia’s only independent, accredited accommodation scheme, and was seen as an independent assessment of how the property was being maintained. Many landlords were satisfied with the maintenance of their property, where a certain star rating was being achieved.
Times started to change with the increase in the digital world and the rise of various online review platforms, and subsequently the AAA rating system ceased to operate. In 2017, the Australian Tourism Council took over the star rating scheme and continues to operate as Star Ratings Australia.
Why is this relevant?
Most motel leases will still have an obligation to:
- maintain a certain star rating;
- arrange an inspection every 12 months;
- comply with the AAA inspection report; and
- provide a copy of that report to the landlord.
Usually the definition of AAA star rating will include any successors of the AAA, and Star Ratings Australia is generally accepted to be the successor of AAA.
Under Star Ratings Australia, the system was changed significantly and moteliers need to be a member of Star Ratings Australia to be part of the program. When first joining Star Ratings Australia there will be an initial inspection and then a site visit every 3 years thereafter. This is much less frequent than the reports prepared historically by AAA.
It may simply not be possible to comply with these lease obligations due to the change in the system, or it may be that the star rating system is not as relevant as it used to be for your motel.
It is also important to understand that the actual ‘star’ symbols are a licensed trademark and can only be used by properties that have been licensed to use them by the Australian Tourism Industry Council (ATIC).
Whilst many landlords are understanding of the changes, any incoming purchaser (and their financier) will want to see the lease amended and updated to ensure that they are not walking into a situation where they could technically be in breach of the lease from day one.
Maintenance and Redecoration
Historically, the star rating system was a guide of maintenance and redecoration for both landlords and tenants to ensure that the property was kept well maintained and refurbished. With the less frequent inspections, it is important that both landlords and tenants consider if their maintenance and redecorate clauses in their lease are still achieving what they are intended to achieve.
Often, older motel leases will provide that where the star rating ceases to exist and there is no alternative rating classification scheme, then the tenant must:
- at reasonable times, redecorate the motel;
- paint, repaint, re-cover, clean etc the interior and exterior of the building; and
- maintain the gardens and landscaping (which could include restoring and replacing).
New leases will require these tasks to be attended to at reasonable times throughout the term of the lease.
Often these types of works are done by tenants on an ad hoc basis or a rolling schedule, rather than in one big job. It is worthwhile checking to ensure that if you have any such “redecoration” obligations, you know what needs to be done and by when.
Key takeaways
If you haven’t read your lease lately then we strongly suggest that you do. If there is anything at all that you don’t understand then please ask us. A small investment of time now could save many hours – and potentially a lot of money – in the future.
After your own review of the lease, you may find that it is an opportune time to check in with your landlord and have a discussion about some possible updates. This can only be done with the agreement of both parties, however in our experience, it is much easier to reach an amicable agreement when the goal is to update the lease so that it serves the interests of both parties. This is certainly easier to do in times of peace than in the heat of a battle arguing about who needs to do what, or with the pressure of a sale.
As each lease and business situation will be different, please take our comments as general guidance and contact Mahoneys to obtain timely and practical legal advice on the actual issues you are facing.
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