Leases:

A retail lease is a lease defined in the Retail Leases Act 1994 (NSW) as covering premises not larger than a thousand square metres. Of course, the premises must be used for a retail purpose as well. Rentals and outgoings must be disclosed to a Tenant by the Landlord before the lease is entered into and the Landlord cannot demand that key money be paid by the Tenant. Moreover, the Tenant will not be liable to cover the Landlord’s legal expenses unless the Tenant requests amendments to the lease. In the event that the lease is for a period of less than five years, a certificate to that extent must be provided. Certain protections exist for the benefit of the Tenant in the event that the Landlord intends to relocate the Tenant or redevelop the site.

Commercial leases are leases for a commercial purpose, but unlike retail leases, commercial leases are not governed by the Retail Leases Act 1994 (NSW). This does not mean however that there are no laws that relate to the liabilities and rights of parties that enter into commercial leases. The common law is a body of decisions of Courts which may form a regulatory matrix of legal principles that affect the relationship between Landlord and Tenant in commercial lease disputes. The general principles of contract law, and any legislative provisions that relate to them, may also be of assistance in resolving disputes of this nature.

There are several issues that may arise for Tenants under lease disputes. Some of the main issues are addressed below (the following list is not exhaustive, but represents some common areas where problems and disputes may arise between Lessors and Lessees):

• General Legal Advice

General legal advice should be obtained by Tenants before entering into any lease agreement. Leases may contain various clauses, some of which may be vague but have a significant and material impact on the rights and liabilities of the Lessee. Often, Lessees make assumptions about the meaning of terms and provisions and find out later that their expectations were not realized. This can give rise to a number of different disputes with the Landlord. Some provisions may in fact be unenforceable at law (those that are statutorily prohibited, unconscionable, unfair, harsh or oppressive).

• Locked Out

Sometimes a Landlord may become a little too enthusiastic about enforcing his or her rights and a Tenant may find himself locked out of the premises. There may be a good reason why the Landlord has acted this way and the Landlord may in fact have obtained legal advice to the effect that he or she is entitled to take this action. Either way, the Tenant’s right should never be disregarded and urgent legal advice should be obtained.

• Negotiation

Obtaining a solicitor to assist with the negotiation of the Lease terms will greatly benefit a Tenant, especially a one who has had little or no experience dealing with leases before. Leases can contain clauses that are drafted in highly technical language, and some of the phrases used may have a specific legal meaning which is quite different from their definition in colloquial or every-day usage. A solicitor will be able to identify those aspects of a lease that require attention in the negotiation phase and seek to ensure that the rights of his client are secured.

• Lease Disputes

Disputes involving leases are dealt with under the “Lease Disputes” tab below.

• Relocation and Demolition

A Tenant may receive a relocation and demolition order from the Landlord. Despite the terms of the order, if the lease is a Retail Lease, the Tenant has certain rights under the Retail Leases Act 1994 (NSW) which should not be ignored. A lease may also have a clause drafted which outlines the compensation that the Tenant will be entitled to in these circumstances. Optimally, these issues should have been considered in the negotiation phase of the lease. However, if there is any uncertainly regarding the rights and liabilities of a Tenant in this situation, legal advice should be obtained urgently before any action is taken.

• Options and their exercise

Rights under Options clauses should be exercised diligently and without delay by Tenants. If an Option is exercised, ordinarily this should be communicated to the Landlord in written form. Leases may have specific terms dealing with the manner in which notices regarding to the exercise of Options are to be served on the Tenant and so, it is always advisable to obtain legal advice prior to sending such notices.

• Unconscionability

Section 62B of the Retail Leases Act 1994 (NSW) concerns unconscionable conduct in retail shop transactions. It is not unusual for a Tenant who feels he has been treated poorly to think that the Landlord is guilty of unconscionable conduct. This however is not always the case. The law relating to unconscionability is a highly complex web of different interrelated concepts such as unfairness and harshness. Unconscionability may be defined in reference to these concepts, but establishing unfairness alone may not be evidence of unconscionable conduct as such. It is important to consider all the facts of a case, in light of the broader context of the relationship between the Landlord/Lessor and Tenant/Lessee; and then to apply the right legal authorities and cases before reaching a view as to whether the Landlord was indeed unconscionable. This can be a convoluted exercise involving the necessary legal research by a retail leases lawyer or property lawyer with experience in the field.

• Claims for disturbance to business operations

Section 34 of the Retail Leases Act 1994 (NSW) states that the Lessee is to be compensated for the Landlord’s disturbances to the Lessee’s business. There are specific provisions under the section that illustrate exactly what obligations the Landlord has and what rights the Lessee has when the Lessee’s business is interfered with. The application of this law, as is the case with other laws of similar nature, will depend on the facts of each case.  If you require legal advice about these issues, then you should consult a retail leases lawyer or a property lawyer.

• Misleading and deceptive conduct

Any misleading and deceptive conduct on the part of a Lessor (while the Lessor and the Lessee are engaged in negotiation over the terms of the lease) is prohibited under the law. What is misleading and deceptive will of course depend on the context and circumstances of the case. The common law has a constantly growing body of precedents that describe situations where misleading and deceptive conduct has been found to have occurred. A party to a lease who believes he or she has been mislead or deceived by the Landlord/Lessor should seek legal advice in respect to his or her rights under the law, and investigate options that may be available to rectify the situation. Leases can be amended or changed either by negotiation, or by order of a Court or Tribunal. In extreme cases, parts of leases can be declared void, terms that are not express may be read into them, or alleged liabilities that may arise on the part of innocent parties may be declared null, so as to cure any injustice resulting from the deception.

Potential disputes can arise for Landlords across various legal matters concerning leases. Some of the more common areas are addressed here (the following list is not exhaustive, but represents a selection of matters that can become problematic between Lessors and Lessees):

• Disclosure

When entering into a lease with a Lessee, the Landlord may be required either by statutory or other mandate, to make various disclosures to the Lessee. The disclosure statement is a summary of the lease itself and any other additional and relevant information that the Tenant would need to make an informed decision as to whether or not to enter into the lease. The particulars of a Lessor’s disclosure statement are contained in Schedule 2 of the Retail Leases Act 1994 (NSW).

• Drafting

Making sure that a lease is drafted with care is essential to the interests of any Landlord. Terms that are ambiguous, vague or uncertain, or provisions that are harsh, unconscionable, grossly unfair, unlawful or illegal, may lead to conflict with the Tenant/Lessee and any disputes could end up in Court or the Tribunal.  There is also some legal authority to suggest that where there is ambiguity in a document, then the document is to be interpreted against the person who drafted it.  It is always best to avoid disasters by getting all drafting completed to the highest professional standard.

• General Legal Advice

For Landlords that are seeking to exercise a right under the lease (such as terminating the lease) but who are nevertheless uncertain about whether or not they in fact are entitled to exercise that right (for example, a condition must first be met but there may be a question as to whether this has occurred), it is important to seek legal advice before taking any action. Taking action rashly may result in serious liabilities and the Tenant’s right to terminate. If a Landlord conducts himself or herself in a manner which was not open to him or her, that could potentially lead to a claim for damages or compensation on part of the innocent party.

• Lease Disputes

Disputes involving leases are deal with under the “Lease Disputes” tab below.

• Termination for Breach

The Tenant’s default can give rise to the Landlord’s right to terminate for breach of the lease. Specific procedures may be mandated under the terms of the lease that require certain things to be done in due course of terminating the lease. These can include special provisions relating to notices, their form and manner of service. If these procedures are not observed, the Tenant can say that the lease was never legitimately terminated and any action taken on part of the Landlord may give rise to a claim being made against the Landlord. It is therefore important that proper advice be obtained in relation to when the right to terminate the lease arises, and if it does arise, what must be done by the Landlord to terminate without infringing on the rights of the Tenant himself.

• Options and their exercise

Landlords have certain obligations relating to the Tenant’s exercise of Options. If the Tenant does not exercise the Option properly, it can be declared void. However, the Landlord should be careful not to be in default of his obligations in these cases. Accordingly, it pays to seek legal advice on the terms of the Option before any decisive action is taken.

A lease can come to an end in several situations, and this will depend on the circumstances of each individual case. Terms, conditions and warranties are likely to differ, sometimes widely, from one lease to another. Termination rights will usually (but not always) arise in either of the following cases:

• The term of the lease has come to pass and there is no Option clause or Hold-Over period;
• A party has breached an essential term of the lease which constitutes fundamental breach and allows the innocent party to terminate;
• A party unjustifiably repudiates a lease, giving rise to the innocent party’s right to rescind; and
• A term of the lease allows termination given a certain condition is met or certain conditions are met.

A dispute may arise where a party claims that it has a right to terminate, whereas the other party objects to the exercise of that right (or may even dispute that the right is exercisable under certain circumstances). Disputes may also arise in relation to the interpretation of options and hold over provisions. It is important not to act impulsively when a party is in these situations, because acting on what one may think is one’s right may in fact constitute a breach of the lease, which may have serious consequences. It is important that proper legal advice from a commercial leases lawyer be obtained before any action is taken to resolve problems that arise under leases.

Disputes invariably arise in relation to some leases, particularly if there is a question concerning the proper interpretation of certain provisions in the lease document. Often, disputes can centre around when a party to a lease has a right to exercise a particular right that may be contingent or conditional on some other thing or event occurring. Sometimes a collateral agreement may impact or affect the rights of parties to a lease, and these matters will also have to be taken under consideration before any action is taken to resolve any problem that arises between the Lessee and Lessor.

For retail leases, parties can go to the Retail Tenancy Unit for alternative dispute resolution before the matter is heard in the Retail Leases Division of the Administrative Decisions Tribunal. In any event, it is prudent to seek and obtain proper legal advice and representation from a commercial lease lawyer, as lease documents may be very confusing. The law itself may impose implied obligations that parties to the lease may not foresee or understand clearly. While it is always a good idea not to delay action to resolve any problem, for these reasons it is best not to act rashly, without appropriate legal guidance.

The services that Navado Lawyers and Solicitors can provide include:

• Drafting lease documents, and any collateral agreements, specifically tailored to the needs and requirements of each party’s circumstances. These may include:
  • Agreement for Lease;
  • Sublease;
  • Car Space Agreement;
  • Deed of Assignment;
  • Real Property License; and
  • Ancillary documents such as a Fit-Out or Incentive Agreement.
• Provision of advice on the terms, conditions, warranties and other provisions of existing lease documents, with a view to highlighting the rights and liabilities between parties;
• Offer legal advice and representation in any process of negotiation for the resolution of any disputes arising under lease documents; and
• Provide legal representation in the litigation of disputes before the relevant Court or Tribunal for matters relating to the enforcement of the terms of the lease.

Litigation can be a very expensive affair. Our property lawyers and commercial lease lawyers understand that many people who have interests under a lease may not be in a position to engage solicitors for protracted litigation. Mindful of these issues, we always seek to resolve any matter through negotiation and alternative dispute resolution before litigation is contemplated. Sometimes, going to Court is unavoidable and in these cases we are capable of representing our client’s interests, whether they are Lessors or Lessees.