Welcome to part 4 of “Tenant rights under a Retail Shop Lease” This article will discuss the circumstances under which your landlord may refuse the assignment of the lease to another party, what to consider when your initial lease term is nearing its expiry date, and how to respond to the landlord’s misleading and deceptive conduct.
Refusal to assign the retail lease
Landlords may, in constructing the terms of the retail lease agreement, insert a term that requires their prior consent and approval for you to be able to assign the lease to another prospective tenant. That said, landlords must not unreasonably deny such a request for assignment on any grounds. The grounds on which assignment may be refused are narrow provided the tenant complies with the procedural requirements of applying for the landlord’s consent. The grounds on which a landlord may deny consent to assign a retail lease include the following:
- If the prospective assignee is proposing to use the premises in a different way to that specified under the original tenant’s permitted use clause;
- If the prospective assignee is not as financially stable or does not have the same retail experience and skill set; and/or
- If the tenant, in applying to the landlord to assign the lease, has failed to adhere to the procedural requirements of making such a request to the landlord.
It is important that the procedures for making such a request are strictly followed. If they are followed, the landlord must either deny or accept the request for assignment within 28 days after receiving the request and can only deny the application for the above reasons.
Another reason why following the assignment procedure in the Act is important is that it gives the tenant/ guarantor a right to get statutory releases after the assignment has occurred. Without these statutory releases, you and any guarantor may still be liable for the remaining term of the assigned retail lease if the assignee fails to uphold its obligations to the landlord.
Will I be offered a new lease at the end of my initial term?
Do you have an option to renew your retail shop lease? If so, you will normally be offered a new lease on the terms set out in the option clause of your original lease. If the landlord offers no option, then there is no obligation on the landlord to offer a new retail shop lease and similarly no obligation on the tenant to agree to enter a new retail shop lease.
Under the Act, the landlord must, within 6-12 months of the expiry date, either:
- Make an offer to renew or extend the term of the retail shop lease under the specific terms identified in the notification, such as rent; or
- Notify the tenant that no extension or renewal will be offered at the end of the lease.
Once a landlord has formally offered to extend or renew a lease, this offer will stand for at least one month before the landlord can revoke the offer. Additionally, the landlord can extend the period of time that the offer is available to the tenant if more time is necessary for negotiations of the new terms to take place.
Failure of the landlord to notify the tenant of his or her intentions will give the tenant a right to request an extension of the initial term before it expires. Provided this request happens in accordance with the procedural requirements of the Act, the initial lease term will normally be extended under the provisions of the Act for a further period of 6 months from the date on which the landlord gives his or her required notification under the Act.
Landlord’s Misleading and Deceptive Conduct
If you believe that your landlord has engaged in misleading or deceptive conduct, then he or she may be liable under the provisions of the Act. Neither party that comes under the Act is permitted to ‘engage in conduct which is, in all the circumstances, unconscionable’. In addition, the Act demands that parties to a retail shop lease avoid engaging in conduct that is, or could be, misleading or deceptive to another party to the retail lease agreement.
If you believe your landlord has engaged in unconscionable conduct during your time as tenant to the retail lease, the right thing to do is to seek legal advice about your concerns. At LegalVision, our team of leasing lawyers have experience both in drafting/ reviewing commercial and retail leases, as well as practical know-how with respect to disputes and litigation.
For an obligation-free fixed-fee quote for advice, contact LegalVision on 1300 544 755.