When you register a commercial lease, land title is recorded on a publicly accessible state register for the purposes of protecting proprietary interests. For legal advice relating to retail or commercial leasing, speak with an experienced leasing lawyer.
Lease registration varies across jurisdictions and is regulated by different sets of state legislation. In Western Australia, registration of leases is not as common as it is in the other states. A lease of less than 3 years cannot be registered, while a lease of between 3 and 5 years may be registered, but this is not compulsory. Leases may be registered with the Western Australia titles office, Landgate, when the term, excluding options to renew, exceeds 3 years.
Section 7 of the Property Law Act 1969 (WA) supplies the following definition of registration in WA: “Registered or duly registered means registered in the manner provided by the Transfer of Lands Act 1893 where the land affected is under that Act, and otherwise means registered in the manner provided by the Registration of Deeds Act 1856.”
The Transfer of Land Act 1893 (WA) (“TLA”) provides for the registration of a lease exceeding three years for freehold land. Tenants may rely upon the protection afforded to a tenant in actual possession by section 68 of the TLA where the term does not exceed 5 years. However, that section does not protect a tenant’s option to renew or extend the lease unless the lease is registered or protected by a caveat (document preventing the party that is registered on the title of that property from dealing with the property in a way that is adverse to your own interests).
Since there are no mandatory requirements in Western Australia regarding the registration of leases, whether or not you should register depends on who you are and what your interests are in terms of the property in question.
From a landlord’s perspective, having the lease registered on their title appears to have minimal effect and serves little immediate purpose. However, it can have some benefit in the long term, as it adds value to the property when potential investors are looking to buy your property and wish to see a history of title. If the landlord wishes to sell a leased property, a buyer may seek evidence of a warranty in the contract of sale proving that existing leases are valid and enforceable.
Registering the lease with land title offices allows you to effectively register your interest in the property and to have indefeasibility of title. Indefeasibility of title simply means that there is documented legal recognition of your interest in the property being leased to you (the tenant).
While it is common practice for tenants to lodge a caveat to protect their leasehold interest, a caveat can only be lodged by a tenant and may be unilaterally withdrawn by the tenant at any time (potentially before the transfer of the land to the new owner).
It is recommended that a lease which exceeds 5 years be registered in order to:
- Avoid uncertainty about the validity of an unregistered lease; and
- Avoid claims for damages (whether by a buyer against a seller or by a tenant against a seller) arising as a consequence of an unregistered lease being held to be unenforceable following the registration of a transfer of the freehold title of the leased property.
The transfer of property following a sale brings any leases attached to that property in question, and it is here where, as a tenant, registration gives you indefeasibility of title and protects your interests in that property.
Buyers who wish to retain a particular tenant will need to ensure that the relevant lease is registered so that the lease survives the transfer. A purchaser should therefore not rely on caveats lodged by existing tenants to save leases from the prospect of annulment upon transfer. Registration is thus advisable. If this is impossible prior to transfer of the land, you may alternatively procure a deed from each tenant affirming that the lease will continue after the transfer is registered.
Registration of commercial or retail leases is not compulsory in Western Australia where your lease exceeds 3 years, although it is prudent to register such a lease in order to protect your proprietary interests and alleviate any potential disputes. If you are confused about whether or not you should be registering your lease, or are worried about your claims to the title of the property, speak with one of our leasing lawyers who will be happy to advise you on your options.