Property Law: Ferguson & Moyes Lawyers, Research Paper Example

TO: Kim Smith

FROM: Law Student

DATE:

SUBJECT: Property Law

Introduction

The purpose of this memorandum of advice is to advise Kim Smith on her legal dilemma between Kim Jones and Fountain Lake Shopping Centre. Kim Smith has sought out legal advice and/or representation in the potential matter presented by Kath Jones. This memorandum will provide a closer look at the case facts and provide the Australian Property Laws that relates to the case at hand.

Can Kim Smith Assign Agreements Under Her Lease Agreement?

Retail and Commercial lease laws have changed since the Retail and Commercial Leases Act of 1995. Our client Kim Smith, resides in Melbourne, Australia and currently has a retail lease agreement with Fountain Lake Shopping Centre. Within the lease agreement is a lease provision that states, “The lessee shall not assign or sublet the shop or any part of it without the consent of the lessor.” This is a common provision in retail leases that protect the company and the tenant from any liability. In order for Kim Smith to assign a lease, she first needs or needed to obtain permission from the manager of Fountain Lake Shopping Centre, Harry Boss. Kim Smith made an agreement for a one year period with Kath Jones, to sublease, Kim Smith storeroom at a rate of $300 per month. Kath Jones began working in February 2013, the agreement was signed in June by Kath Jones and August by our client Kim Smith. Kath Jones worked until interruption by manager, Harry Boss in October. From that time Kath Jones has paid ten months of rent as a sublease. Under Leases (Commercial and Retail) Act 2001, Sect 93:

“Before asking for the lessor’s consent to assign or sublet a lease under section 95, the tenant must give a prospective assignee or subtenant a copy of the disclosure statement (if any) given to the tenant in relation to the lease, together with details of any material change that has happened in the information contained in the statement since it was given to the tenant.” [1]

The manager, Henry Boss, can certainly give consent or withhold consent under the provisions set forth in the Leases (Commercial and Retail) Act 2001. While outlined in the disclosure statement of the lease agreement between Fountain Lake Shopping Centre and Kim Smith, legislation has passed, “the landlord is required to provide more in depth information about key issues affecting the tenant’s rights and obligations.” [2] These new updates are also important in the situations of the current lease agreement and the agreement with Kath Jones. More importantly the new update to the disclosure statement, “details of any current legal proceedings relating to the lawful use of the leased shop or the retail shopping centre.” [3]

Does Kim Smith have the right to ask Kath Jones to leave? 

Our client Kim Smith resides in Melbourne, Australia and has a lease agreement with Kath Jones and the Fountain Lake Shopping Centre. Kim Smith has asked for our advice in the case of property law of lease agreements with the two parties. Kim Smith originally has a lease agreement with Fountain Lake Shopping Centre, and recently signed a one year lease agreement with Kath Jones for space in Kim Smith shop, unbeknownst to Fountain Lake Shopping Centre. Kath Jones and our client Kim Smith signed an agreement for one year for Kath Jones to rent out the storeroom within Kim Smith’s retail shop. The rental agreement is for $300 per month, with both Kim and Kath holding keys to the storeroom. Kim Smith and Kath Jones sign a letter that clearly states that Kath Jones will use the 10 square metre storeroom in Kim Smith’s retail shop, Shop 10, inside Fountain Lake Shopping Centre for a year. If Kath Jones wanted to leave before the one year period was over, she was required to give a one month notice.

According to The Leases (Commercial and Retail) Act 2001, parties can entered into a tenant/landlord relationship when the landlord agrees to rent any residential or commercial premises. “An agreement in writing or not, or occupation exclusively or not, or a fixed term, periodically or at will. (b) A sublease or licence.” [4] Kath opened up shop in February 2013, and Kath and Kim signed the letter of agreement in June and August respectively. It wasn’t until October that the Fountain Lake Shopping Centre manager realized the arrangement. According to the Act, the clause in the lease agreement is covered under the Act that allows for the landlord (Fountain Lake Shopping Centre) to withhold its consent unless Kim Smith agrees to be liable for Kath Jones. However, it is clear from Harry Boss reaction that this is not the intent of the Shopping Centre. Under the Act, If Kim Jones and Kath Smith cannot come to dissolution of the agreement established between the two parties, Fountain Lake Shopping Centre has the rights to terminate the contract between them and Kim Smith. The breach of contract is presented in Sec 118, where notification wasn’t given. [5] However, our client Kim Smith can attest that the agreement held with Kath Jones isn’t not a valid lease, and she is not in breach of contract with her lease agreement to the shopping centre.

Kath Jones Lease Agreement :The problem lies with the type of agreement that Kath Jones and Kim Smith signed. Under the Retail and Commercial Leases Act 1995, “

“(a) if the lease is not to be registered, the lessor must provide the lessee with an executed copy of the stamped lease within one month after the lease is returned to the lessor or the lessor’s lawyer or agent following payment of stamp duty on the lease.”[6]

Our client Kim Smith stated that after she signed the letter from Kath, she didn’t receive any more documentation or paperwork after that. The lease to Kim Smith’s knowledge has not been stamped or registered. To the knowledge of Kath Smith the two parties have not entered into a tenancy agreement. Although they have a written contract for sublet, Kath Smith didn’t give “Exclusive Possession” to Kim Jones. The storeroom while used primarily by Kim Jones, was also used at the convenience of our client Kath Smith. The validity of the agreement could still persists as Kim Jones goes into possession once payment of rent begins under the Act. [7] This provision under Section 127 of the Act is presented in the case of Radaick v Smith (1959). [8]

Facts: Both parties entered into an agreement in order to rent or license the premises. The two parties although wanted to be licensee and licensor, were considered landlord and tenant because the agreement clearly gave exclusive possession of the premises and draft the rent payments for the agreement. The ruling was held to be a leases due to the Landlord and Tenant relationship that gave exclusive possession to the tenant. Reasoning: The reasoning behind the verdict was due that the stated provision, the definition of a licensee contract that unlike a lease gives the party the right to occupy.

The landlord still retains the rights of access, while in a lease agreement the landlord is excluded. [9] No matter the intent under law the agreement was seen as tendency agreement, in the case if the two parties did not intend to make a legally binding contract, but could give personal privilege like in the case of Cobb v Lane (1952), that were a similar situation where the parties intended to be treated as a licence, however the agreement met the three common law requirements to be valued as a lease. [10] In several cases the courts have either stepped aside or interjected itself into the parties agreement like in the case of Association v Jones (1990)[11] the Court of Appeal did not want to grant whether the agreement was seen as a license or a tenancy agreement, however in the case of Westminster City Council v Clark (1992) they did.[12] Under the provisions of the Landlord and Tenant Act 1954 (LTA 1954) license/lease agreements were not protected by the Act.[13] These provisions would benefit the landlord, however, the Commercial and Retail Act both parties can easily opt out of the agreement without the court interference.

The agreement wasn’t registered, and under this requirement the agreement is voided. This is held by the case held by the Supreme Court, Epworth Group Holdings Pty Ltd v Permanent Custodians Limited (2010) SASC 327, which sets a precedent for highlighting the priority issues of unregistered lease. [14] Facts: Epworth Group Holdings Pty Ltd leaser their city office to Y.H. Epworth Pty Ltd written in an unregistered lease. Epworth Group (Tenant) did not register a caveat in order to protect their interests under the lease. The lease was negotiated to last for a period of two years, with a one year renewal. Y.H. Epworth (Owner) gave his permission to the Epworth Group to sublease the office space to a law firm that conducted work on the premises. [15] The lease agreement was recognized under the Retail and Commercial Leases Act 1995 (SA).[16]While the initial tenant, Epworth Group did not register their lease, the owner, Y.H. Epworth took out a mortgage registered on the Certificate of Title for security purposes. However, Y.H. Epworth defaulted, the Mortgage then served to Epworth Group, and the subleased law firm, that they needed to vacate the premises, and forfeit their possession of the premises. The Mortgage prevailed over the unregistered lease, while Epworth Group and the law firm lost out on business, and their location. This case explains the Supreme Court ruling that highlights the importance of registering the lease a step that Kim Jones failed to take.

Conclusion

In conclusion the findings of the situation presented by Kim Smith points that the agreement held with Kath Jones, is not considered a lease under the The Leases (Commercial and Retail) Act 2001, and therefore she can ask her to leave. However, if applicable since notice wasn’t given monetary fees can be paid to Kath Jones. While Fountain Lake Shopping Centre has the right to terminate contract if Kim Smith was found in violation, they are not warranted do so if Kim Smith complies with the manager’s, Harry Boss, requests of removing Kath Jones from the premises. The memorandum has provided legal advice on the legal implications of the situations that Kim Smith has presented in dealing with Kath Jones, and Fountain Lake Shopping Centre.

Bibliographies

A Articles/Books/Reports

Alderman, Piper, Thomas, Brooke. “New landlord disclosure for retail shop leases.” (2011). Lexology. http://www.lexology.com/library/detail.aspx?g=841e1754-0189-4e24-863a-35d03ddbc4bf

“Property Update. Protect Your Lease or Lose It.” Lavan Legal. (2011). http://www.lavanlegal.com.au/images/galleries/Protect_your_lease_or_lose_it._August_2011._Property._Perth,_Western_Australia1.pdf

Utz, Clayton. “Issues Relating To Commercial Leasing. Australia.” (2009). GPG. Lex Mundi Publication.

C Legislation

Association v Jones (1990).

Cobb v Lane (1952).

Epworth Group Holdings Pty Ltd v Permanent Custodians Limited (2010) SASC 327.

Landlord and Tenant Act 1954 (LTA 1954).

Leases (Commercial and Retail) Act 2001, Sect 93

Radaick v Smith (1959).

Retail and Commercial Leases Act 1995 (SA).

The Leases (Commercial and Retail) Act 2001 (Cth)

Westminster City Council v Clark (1992).

[1] Leases (Commercial and Retail) Act 2001, Sect 93

[2] Alderman, Piper, Thomas, Brooke. “New landlord disclosure for retail shop leases.” (2011). Lexology. http://www.lexology.com/library/detail.aspx?g=841e1754-0189-4e24-863a-35d03ddbc4bf

[3] Ibid.

[4] The Leases (Commercial and Retail) Act 2001 (Cth)

[5] The Leases (Commercial and Retail) Act 2001. Sec 118.

[6] RETAIL AND COMMERCIAL LEASES ACT 1995 – SECT 16

[7] The Leases (Commercial and Retail) Act 2001 (Cth)

[8] Radaick v Smith (1959).

[9] Radaick v Smith (1959).

[10] Cobb v Lane (1952).

[11] Association v Jones (1990).

[12] Westminster City Council v Clark (1992).

[13] Landlord and Tenant Act 1954 (LTA 1954).

[14] Epworth Group Holdings Pty Ltd v Permanent Custodians Limited (2010) SASC 327.

[15] “Property Update. Protect Your Lease or Lose It.” Lavan Legal. (2011).

[16] Retail and Commercial Leases Act 1995 (SA).