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A stained relationship
Ell v Cisera [2000] NSWSC 768
A commercial lease stipulated a period of 18 months. The lease stated that unless either party gave a months notice before vacant possession the lease should continue on a periodic basis from month to month at the same rent. The lease provided for an option to renew for a further one and a half years. The premises were only supposed to be used as a printing workshop and the lease required the tenant to ‘take care of the premises and keep them in a clean condition.’
On 16 February, the landlord’s solicitor sent the tenant a letter terminating the lease with 14 days notice, citing failure to pay rent monies and failure to properly secure the premises. On 7 March, the landlord locked the tenant out of the premises and, upon entering the premises, found that the floor had been substantially stained by ink and oil emanating from the offset printing press. A judge made orders for the tenant to be allowed back onto the premises on the understanding that they would reinstate the premises to a suitable condition.
The landlord thought that the repair work being carried out to clean the floor was a destructive process to which they had not agreed. The tenants then sent a letter to the landlord’s solicitor giving notice of their option to take a further term on the lease. The landlord responded by stating that they intended to treat the tenant’s breaches of the lease as preventing renewal under the option.
The court held that the terms of the lease and the terms of the agreement set out in the court orders, was to stipulate that should adequate reinstatement of the property occur, the plaintiff would be allowed to occupy the premises pursuant to the lease. If , on the other hand, adequate reinstatement did take place, the lease would be taken to have been validly terminated as of the landlord’s re-entry on 7 March.
The court stated that the process by which the tenants had attempted to restore the floor to an adequate state could not be considered ‘destructive’. Thus the tenant was entitled to damages for any loss they had suffered as a result of their clean up being prevented. Nevertheless, the court denied the tenant the opportunity to renew the lease. It said that the failure to pay rent combined with the general attitude of the tenant towards their financial obligations and the breach of the condition as to the state of the premises, made it unfair to force the unwilling landlord to allow the tenant to renew.
Hotel confusion
Boreland v Docker [2007] NSWCA 94
Boreland agreed to lease a hotel from Docker. The lease could be terminated by either party at one months notice. Docker wrote to Boreland and said that they would permit Boreland to remain in the hotel until August 2007, providing that Boreland continued to observe the covenants of the lease and that he pay all GST moneys in arrears.
Boreland responded by saying that he accepted this offer and by paying the GST monies, even though he felt the amount oppressive. Docker then responded by enclosing a new lease and stating that unless it was signed, the lease would continue to operate on a week to week basis. Subsequently, Docker issued Boreland with a notice to quit. Boreland denied that this notice was effective. He asserted that the term of the lease had already been extended by the initial correspondence between the two parties.
On appeal the court held in favour of Boreland, construing the language of the letter to evince an intention on behalf of the parties that the lease be extended. Although he was ultimately successful, this case is really an example of how not to vary the terms of a commercial lease. It would have been preferable to effect the variation by a formal instrument, making the intention of the parties easier to discern. This would have avoided costly and time consuming litigation.
Re-development headaches for tenant
Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd NSWSC 840
The plaintiff leased premises in a large complex in Sydney. They negotiated with the building’s owner to have certain renovations made to the premises in order to better carry out their business. The owner, wishing to secure the plaintiff as a tenant, agreed to these changes.
The owners were then granted approval for a re-development plan. The plaintiffs argued that the plan constituted a serious breach of the covenant of quiet enjoyment of the premises and that implementation of the proposals would render the premises materially less fit for the particular purpose for which the lease had been granted. Alternatively, they argued that the proposed work would breach an implied term of the lease.
The aspects of the development which particularly affected the plaintiff were the loading dock, the goods lift and the first floor corridor. The defendant's redevelopment required the demolition of one of the loading bays and the removal of the goods lift. When that work commenced, the goods delivered for the plaintiff at the loading dock would have to be carried through a corridor on the ground floor into an area which had only a small passenger lift.
The court held that the plaintiff was entitled to an injunction restraining the owners from removing the goods lift or demolishing the foyer and passenger lift for the term of the plaintiff’s lease. This decision demonstrates the potential conflicts that can arise when the lessor desires to refurbish or renovate in a way that substantially interferes with the lessee’s use of the leased premises.