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Retail Landlords – Note your Notices!

2 April 2013

A recent QCAT decision of White v Downes [2012] QCAT 450 again highlights the importance of retail landlords being aware of and complying with its notice obligations in the context of options to renew.

Section 46AA of the Retail Shop Leases Act 1994 requires a landlord to give written notice to a tenant within a certain prescribed period where the retail shop lease does not provide an option for the tenant to extend the lease and is not the subject of an agreement for its extension.

The landlord's notice must be given at  least 6 months, but not longer than one year, before the lease is to end (where the lease is for a term of more than one year).

The notice must either offer the tenant an extension on terms stated in the notice or tell the tenant that the landlord does not intend to offer an extension.  Any offer for extension in the notice cannot be revoked until one month after it is made.

The consequences of a landlord failing to give this notice can be significant.  Essentially, the lease term is extended until 6 months after the landlord gives the notice, but this only applies where the tenant has asked for an extension by written notice to the landlord before the lease would otherwise have expired. 

Such an extension of the lease term  could substantially interfere with a landlord's future plans for the premises, for example, where a redevelopment of the centre  is planned or where a new lease has been  negotiated for the space with a different tenant.

The recent QCAT decision involved a lease of retail premises in Charters Towers.  The lease had no further options and was due to expire on 31 October 2010.  The Tribunal accepted that the tenant had purported to exercise a "non-existent" option on 1 August 2010 by way of a letter posted to the landlord (albeit the landlord denied ever receiving such a letter).  The landlord did not give notice under section 46AA of the Act offering an extension on certain terms until 4 April 2012, some 19 months after the lease term ought to have expired.  When the parties were unable to reach agreement on the terms of the offer, the landlord gave a notice to quit to the tenant on 15 June 2012, giving one month's notice on the basis the tenant was holding over under the expired lease as a monthly tenant.

The Tribunal held that the notice to quit was not a lawful termination by the landlord.  It found that the tenant's letter purporting to exercise an option which did not in fact exist was a sufficient notice under section 46AA(4A) of the Act for the purposes of being a request by the tenant for an extension.

This meant that the failure of the landlord to give its notice under section 46AA resulted in the lease being extended to 6 months after the landlord finally complied with its notice obligations - that is, the lease was extended to 3 October 2012.  The landlord was not entitled to require the tenant to vacate the premises before then.

The lesson to be learned for every retail landlord is that you must carefully diarise the date by which you must give notice under section 46AA to a tenant where the lease does not provide for an option and there is no agreement reached for a further term with the tenant.  If not, you run the risk of the lease term being extended - an outcome which may be a most unpleasant surprise if you have other plans!

For more information contact:

Rebecca Castley | Partner
Mullins Lawyers
t +61 7 3224 0211
f +61 7 3224 0333
rcastley@mullinslaw.com.au

Fiona Sears | Senior Associate
Mullins Lawyers
t +61 7 3224 0272
f +61 7 3224 0333
fsears@mullinslaw.com.au 

 

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