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Reminder! Beware of providing your Tenant occupation before the Lease is finalised

The Retail Leases Act NSW (1994) (“the Act”) is filled with potential hazards for landlords. One of these hazards is the operation of Section 8 of the Act which “can give rise to a situation where a retail shop lease comes into effect to the surprise of all involved.”[1]

In Tarleton & Peters Pty Ltd v EK Nominees Pty Ltd [2010] NSWADT 248 it was found that a retail lease had been entered into and was binding on a landlord despite, seemingly, there being no meeting of the minds as to the commercial terms of the Lease. A Lease was submitted to a tenant and the tenant made amendments to the Lease, signed the Lease and returned it to the landlord’s solicitor.

Three days later the tenant took possession of the premises. Subsequently, five days after the tenant took possession, the landlord responded to the tenant that the amended terms submitted by the tenant were not agreed.

Despite the Lease being unsigned by the landlord and the tenant unilaterally amending the terms of the Lease before signing the Lease, the Tribunal found that ‘when there is entry prior to the final documentation; the statute creates what seems to be appropriate to describe as an interim retail shop lease which is eventually “overlaid” by the actual signed document. The terms of that interim statutory creature will depend on the individual circumstances of each matter.”[2]

The Tribunal Member found that “Section 8 overcomes the need for a concluded contract, and that the terms of the statutory occupancy can be found by reference to the extrinsic evidence.”[3]

The lesson learnt from this case is that, as a landlord, you must be very careful that a concluded agreement has been reached before a tenant is granted occupation of a retail premises.

[1] Fox R – Judicial Member in Tarleton & Peters Pty Ltd v EK Nominees Pty Ltd [2010] NSWADT 248 at paragraph 8.

[2] Ibid

[3] Ibid at paragraph 10.

Liability limited by a scheme approved under Professional Standards Legislation

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