Beware national lease registration system

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Victorian landlords and tenants should be slow to embrace the draft Uniform Torrens Title Act that has just been published.

At present there is no requirement in Victoria to register leases and s.42(2)(e) of the Transfer of Land Act 1958 provides that the interest of a tenant in possession of land is an exception to the rules regarding indefeasibility of title;  in effect the interest of a tenant in possession is protected when land is sold despite the lease not being registered.

The non-registration of leases in Victoria has worked well and landlords and tenants have not had to bear the cost of establishing and maintaining a registration system. Under the draft Act the exception to indefeasibility will apply only to leases of not more than 3 years (s.34(1)(g)). 

Many real estate agents will be delighted by the change because one of their complaints is that it is difficult for them to determine "market rents" in the absence of a database of leases. However, I have not heard any compelling arguments for registration of leases in Victoria. 

If registration is required, landlords and tenants can expect delays in the Titles Offer and inevitably rising registration fees.  Apart from the national "neatness" argument, the proponents of lease registration seem to have difficulty in pointing to its benefits.  The draft Act is the product of the Property Law Reform Alliance.

My clerk can be contacted via this link  http://www.greenslist.com.au/   if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Tenants need the protection of s.146 of the Property Law Act

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I have had a number of queries about a recent post concerning N.C.Reid & Co v Pencarl Pty Ltd [2011] VCAT 2241. In Reid Judge O'Neill held that before re-entering leased premises the landlord did not have to serve a notice that complied with s.146 of the Property Law Act 1958. 

The lease permitted the landlord to re-enter if the guarantor became bankrupt.  Section 146 requires service of a notice where a right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for "a breach of any covenant or condition in the lease, including a breach amounting to a repudiation". 

Judge O'Neill held that there was no "breach" and therefore a notice under s.146 was not required. If the case of  Reid stands it has major implications for tenants who will lose the protection afforded by s.146. 

Judge O'Neill does not appear to have been referred to authorities that might have persuaded him to adopt a different interpretation of s.146. For example, the application of the reasoning applied by McLelland J in Della Imports Pty Ltd v Birkenhead Investments Pty Ltd (1987) NSW Conv R 55-538 might have resulted in a different outcome.  

McLelland J had to consider a lease that permitted the lessor to enter premises and determine the lease without notice if the lessee entered into liquidation or was wound up. His Honour held that the right of re-entry under the lease was a "right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any....condition in the lease", within the meaning of s.129 of the Conveyancing Act 1919 (being the NSW equivalent of s.146) and which could not be enforced unless and until the lessor gave notice  under s.129 and in respect of which the tenant could apply for relief against forfeiture. 

His Honour held that a provision in a lease that provided for re-entry on the happening of an event, regardless of whether or not there was any obligation on the lessee to prevent that even happening, was a "condition" within the meaning of s.129 and that the word  "breach" in s.129 was equivalent to non-fulfilment".  His Honour held that this interpretation was supported "by the evident policy of the provision [ie s.129 in NSW or s.146 in Victoria] which would otherwise be manifestly inadequate for the protection of lessees which it obviously is intended to confer". 

 If Reid is the law in Victoria s.146 will need to be amended.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Collateral contract not a disposition of an interest in land

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Earlier today I referred to two recent cases in which tenants successfully claimed that they had entered into collateral contracts with the operator of the Melbourne Casino and Entertainment Complex that entitled them to a further 5 year term following the 5 year term provided for in the lease. See: Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown  Melbourne Limited (VCAT, unreported, 24 February 2012). 

I have been asked whether the collateral contracts were in writing and signed by Crown and, if not, why they were not caught by the Statute of Frauds. 

The collateral contracts alleged were oral. Crown alleged that the tenants could not succeed because there was nothing in writing signed by Crown as required by the Statute of Frauds (ie s.126 of the Instruments Act 1958). VCAT held that the oral contracts did not relate to a  disposition of an interest in land because all they required Crown to do was send a notice that it would renew the lease. 

The collateral contracts were effectively an option exercisable by the tenant: that is an offer to grant a further term which Crown was contractually precluded from withdrawing while the option remained exercisable; there was no disposition of an interest in land until the tenant exercised the option; if the tenant did not exercise the option there was no disposition of an interest in land. See: BS Stillwell & Co v Budget Rent a Car System [1990] VR 589 at 594. 

The cases contain an interesting discussion about the circumstances in which a collateral contract can be effective.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Tenants win claim for new 5 year term

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Despite no mention being made of additional terms in their leases, the operators of two restaurants in the Melbourne Casino and Entertainment Complex have succeeded in claims that they were entitled to additional 5 year terms.

In Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown  Melbourne Limited (VCAT, unreported, 24 February 2012) the tenants, who operated the restaurants "Waterfront" and "Cafe Greco" successfully contended that Crown had breached a collateral contract that they would be granted an additional 5 year term after the expiry of the 5 year term provided for in their leases.

 The principal of both tenants, Nicholas Zampelis, claimed that the tenants were induced to spend millions of dollars on fit-outs because of a promise that there existing leases would be renewed for a further term of 5 years. At the end of the initial 5 year term Crown refused to renew the leases and the areas occupied by "Waterfront" and "Cafe Greco" were leased to new tenants.

Crown denied the existence of any collateral contract. Damages are to be assessed. In an article published in the Sunday Age on 4 March 2012 a representative of Crown is reported to have said that Crown will appeal.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Michael Redfern - Barrister Deceased.

Michael Redfern died last Thursday night.

 Many readers will know Michael either personally or as one of Australia's leading property lawyers.

 Michael had been ill for a number of years.

Michael was a fine lawyer, a gentlemen, a mentor to many, generous and kind.

Any person who knew Michael could not help but like him.

Apart from his many years as a solicitor, Michael made major contributions to the law in Australia as co-author of  'Australian Tenancy Practice and Precedents', the author of many articles and the presenter of many seminars.

Michael will be sadly missed but his legacy lives on and he shall never be forgotten.

Michael's funeral will be held on Friday 9 March, 2:30pm at Le Pine, 1048 Whitehorse Rd Box Hill.

Michael, may you Rest in Peace.

Presumption that no agreement intended until formal contract signed

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Where an agreement concerns real estate there is a presumption that no binding contract was intended until "contracts" are exchanged.

If the agreement for sale refers to the execution of a more formal agreement, then the inference ordinarily to be drawn is that no binding contract is intended until execution of the formal agreement.

See: Elgas Ltd v A.J.Young Industries Pty Ltd (1986) 4 BPR 9,329 at 9,335 per McHugh JA.  In Encino Plaza Pty Ltd v Wilson International Pty Ltd (1988) V ConvR 63,908 Ormiston J at 63,914-5 referred to a number of cases that supported the proposition that:

where the evidence shows that involved in the negotiations is the preparation of an important commercial agreement, then the normal or prima facie inference is that the parties do not intend to be bound before the precise terms of that agreement have been finalised and executed and, if necessary, exchanged.

 My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Major victory for tenants in landlord's liquidation

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It has long been a vexed question whether a liquidator can disclaim a lease with the effect of extinguishing the tenant's leasehold estate or interest in the land?

In a major victory for tenants Justice Davies has answered that question with a resounding "no".

 In In the Matter of Willmott Forests Ltd (in liquidation) [2012] VSC 29 the liquidators of a "responsible entity" in a forestry scheme sought to disclaim leases to enable the transfer of clear title to land.

Section 568 of the Corporations Act 2001 permits a liquidator to "disclaim" certain types of property of the company.

The disclaimer terminates "the company's rights, interests, liabilities and property to or in respect of the disclaimed property" (s.568D(1)). In Willmott the liquidators submitted that when a lease is disclaimed, the leasehold estate ceased to exist.

Her Honour rejected the liquidator's submission. At [9] Her Honour said that the submission:

fails to give due regard to the position in law that a lease creates both contractual and proprietary rights. A lease is a contract between the parties but a lease is also the grant by the landlord of an estate in land in the tenant, which a different estate in land to the landlord's freehold estate. The leasehold estate is a legal estate of which the tenant is the owner.

Her Honour held [at 11] that a disclaimer by the liquidator would only terminate the rights, interests, liabilities and property of the landlord but would not bring the lease to an end for all purposes.  The tenant's proprietary interest in the land would not be brought to an end but would continue to subsist.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 

Author: Robert Hays Barrister subject to copyright under DMCA.