Quirk in s.64 nothing to get excited about

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A quirk in s.64 of the Retail Leases Act 2003 has caused some excitement. recently.

Section 64 applies where a retail premises lease does not have an option to renew the lease for a further term. At least 6 months and no more than 12 months before the lease term ends the landlord must give written notice to the tenant either offering the tenant a renewal of the lease or informing the tenant that the landlord does not propose to offer the tenant a renewal ("initial notice")(s.64(2)) .

If the landlord fails to give the initial notice the landlord must give the tenant a notice containing the same information as the initial notice ("the second notice") and the lease continues until the day specified in the second notice which must be at least 6 months after the second notice is given or the tenant gives the landlord a notice under s.64(5) ("the tenant's notice") (s.64(4)). If the landlord fails to give the initial notice the tenant may, irrespective of whether the landlord has given the later notice, give the tenant's notice terminating the lease "from a day that is not earlier than the day on which the term of the lease expires" (s.64(5)).

The section does not specify the latest date by which the tenant can terminate the lease.

The question arises whether the tenant's notice can nominate a day many years in the future for the termination of the lease. In my view, the answer is no: if the tenant gives a tenant's notice after the landlord has given the second notice the tenant's notice  can terminate the lease from a date earlier than that specified in the second notice, but cannot extend the date referred to in the second notice; in my view the purpose of the tenant's notice is to enable the tenant to terminate the lease from a day earlier that that specified by the landlord.

If the landlord does not serve the second notice and the tenant serves a tenant's notice the date specified in the tenant's notice will be the date the lease expires; however, if the landlord then serves the second notice the date specified for termination of the lease will be the relevant date provided it is at least 6 months after the second notice is given.

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

Section 146 notices

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There is a common misconception that receipt of a valid notice under s 146(1) of the Property Law Act 1958 requires the tenant to rectify the defaults alleged   within the time specified. 

The purpose of a notice is to give the tenant an opportunity to consider its position and give a response: See: Primary RE Limited v Great Southern Property Holdings Limited [2011] VSC 242 [147].

If the breach is capable of remedy, an adequate response may be to admit the breach and propose a course of remediation. See: Primary RE [147].  In Primary RE the tenants had failed to comply with lease and forestry agreements. At [132] Judd J said that a “sufficient response” by the tenant to the notices would have been to undertake to recommence management of the plantations and perform its obligations under each lease and to agree to pay compensation for any damage to the reversion. At [147] His Honour said:

 “…having received the noticed of default, a sufficient response from the tenant to avoid forfeiture, re-entry or termination, would have been to recommence management of the plantations in compliance with its obligations under each lease and forestry agreement, coupled with a proposal to pay reasonable compensation for any injury to the reversion. In my view it would not have been necessary for the tenant to do more in order to avoid the risk of termination, provided the tenant had the capacity and communicated a genuine intention to do as proposed. Nothing of the kind was communicated by the tenant to any of the landlords. The fact that the remediation work, identified in the notices, might take one or more years was not a determining factor in the calculation of a reasonable time within which to respond.”

As to what is a "reasonable time" for the lessee to respond to a statutory notice, Judd J said at [140} that this “depends upon the purpose for which the notice is given, the nature of the breaches alleged and what is required to be done to avoid forfeiture”.

A reasonable time is not the time necessary to actually undertake the work.

 The reference in s 146(1)  "compensation"  is directed to loss suffered as a consequence of damage to the reversion and is not “intended a substitute for remediation” ([133]). The landlord need not specify in the statutory notice the amount of "compensation" necessary to satisfy the demand.

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/