Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 29 September 2018.
Klever Kitchens Pty Ltd (KK) sets-up a kitchen manufacturing business at premises owned by Ethical Lessor Pty Ltd (EL) and enters into a six-year lease.
For the protection of the lessee (tenant), the legislation requires a lease of more than three years to be registered, but unfortunately on this occasion, the lease was not registered.
After two years, the lessor (landlord), EL sells the premises to another company, Quick Bucks Pty Ltd (QB) and EL puts a special condition in the contract which says ‘the purchaser acknowledges that the purchaser takes title to the property subject to the unregistered lease attached to the contract’. It is thought by EL and KK that this would protect KK from being evicted.
However, after settlement of the sale, QB serves a notice to vacate on KK and says it is not bound by KK’s lease on the basis that it was unregistered.
KK immediately sees a solicitor and institutes proceedings to protect their position.
The court decides that it is unethical for QB to evict KK where they have notice of the tenancy in accordance with the special condition in the contract even though the lease is for a period of more than three years.
Consequently, KK is allowed to remain as a tenant in the property and the lease is later registered.
Unfortunately, QB gets into financial difficulty and the mortgagee attempts to take possession of the property.
KK again seeks legal advice and is informed that because the lease is now registered, the bank can only take the property subject to the lease and when the bank sells the property, the purchaser will also take the property subject to the lease to KK.
If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.
