Friday, 1 July 2011

What is the tenant to do if the landlord unreasonbly withholds consentto an assignment?

There is a translation key(widget)  on this blog for ease of reading for non-English speaking members of the public or professionals.

Where a landlord refuses consent to an assignment of the term of the lease the tenant's usual remedy is to seek a declaration that the landlord has unreasonably withheld consent. Damages are not normally available because in the absence of clear words provisions requiring the landlord's consent are construed as merely amounting to a qualification of the covenant not to assign.

See: Bradbrook, Croft & Hay Commercial Tenancy Law, para 15.9. Vickery J's decision in Xiao  v Perpetual Trustee Company Limited & Anor [2008] VSC 41 poses real problems for tenants because at [21] he held that s.124(1) of the VCAT Act only empowered VCAT to grant a declaration instead of an order it could make or in addition to an order it could make. His Honour said:

"Given that Mr Xiao does not claim damages, in order to enliven the jurisdiction of VCAT to grant a declaration, he would have needed to claim, or demonstrate that he was entitled to claim, other relief, for example by way of a permanent injunction pursuant to s 123 of the VCAT Act, before a declaration could be granted."

Because the tenant is not usually seeking other relief or not entitled to other relief what is it to do?

The same problem will arise if a tenant and landlord seek a declaration that moneys to be paid by a tenant are not key money (see s.23 of the Retail Leases Act 2003)

My clerk can be contacted via this link for bookings

Parliament needs to clarify VCAT's powers to grant declarations.

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