Week 10- Q2 - Week 10 - Q2 Question and Answers PDF

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Question 22. Simone wants to start a business as a wedding co-ordinator. She negotiates a lease of a large ( square metres) area of Torrens title commercial space in Ryde, New South Wales. The owner of the premises, Thomas agrees to lease the space to Simone on the following terms:1. The term of the...

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Question 2 2. Simone wants to start a business as a wedding co-ordinator. She negotiates a lease of a large (2000 square metres) area of Torrens title commercial space in Ryde, New South Wales. The owner of the premises, Thomas agrees to lease the space to Simone on the following terms: 1.

The term of the lease is to commence “tomorrow” and will last for 3 years, excluding the first Sunday of every month as Thomas holds a market on those days and wants to continue to do so during the term of the lease. On market days Simone may not enter the premises to hold weddings although she is welcome to attend the market as a member of the public.

2.

The Lease agreement states that the premises must only be used as a wedding and wedding reception venue.

3.

The issues of whether Simone can assign her rights under the Lease or sublet the premises are not covered in the agreement.

The Lease is registered on the Torrens title register and it appears in the second schedule notification of encumbrances as a “Lease for 3 years”. She takes possession and starts her business. It is going well but after 1 year she wants to concentrate on other business interests. She assigns her leasehold interest to Uri. Uri has now changed the business from a wedding reception venue to a wholesale fruit and vegetable market. The parties are in dispute and are seeking your advice. Thomas wants to know whether he can compel Uri to continue to use the premises as wedding reception venue. Uri wants to know whether he can continue to use the space as a wholesale outlet. Advise Uri and Thomas.

Issue: 1. What law will the lease be dealt under? 2. Is the lease between Simone and Thomas valid? Law/Application: 1. The lease is for non-retail commercial activities and thus will be dealt with under General Law (its not a retail or residential lease) 2. Even if it registered on the Torrens register, if it is not a transaction incorporating the 2 substantive requirements, it is not a leasehold interest. For that reason, the requirements must be examined. The first being you must be able to say with certainty when the lease comments and its duration; the original lease with Simone was stipulated to start ‘tomorrow’ (assuming from the day after the agreement was made) and for the duration of 3 years. The second requirement being it must amount to a grant of exclusive possession; the clauses stipulate that

the large area is available for exclusive use at the specified times. Thus, both requirements are satisfied, and it is not disputed that this is a registered Torrens title lease. -----------The relevant laws to the issue of the case is Gumland Property Holdings v Duffy Brothers Fruit Market (Campbelltown), Spencers case and the Conveyancing Act. The case of Gumland Property Holdings states that there are 3 conditions that must exist for a covenant to touch and concern the land. The 3 conditions are: the covenant benefits the lessor or the reversioner for the time being; it affects the nature, quality, user or value of the land; and it is not of a personal nature. In Spencer’s case, the assignee of the tenant in a legal lease or assignment has both the benefit and burden of covenants that touch and concern the land based on the privity of estate. And according to the CA s 70A, this will still apply even if it is not expressed. Thomas’ covenant arguably will be not be considered to touch and concern the lease as it does not satisfy the 3 conditions set in Gumland Property Holdings. Thomas does not benefit from restricting the land only for weddings and weddings receptions as the land’s value or Thomas personal enjoyment of the land is diminished by the requirement. Arguably, his covenant does satisfy the other 2 requirements because his covenant with Simone does affect the use of the land as it is being used for weddings and wedding reception, it would be proprietary in nature since it’s a covenant on how to use the land. Different Source: Uri → Since the terms do not cover assigning leasehold interests, it is assumed that the assignment to Uri is legal under an implication by statute. S 84 and 85 of the Conveyancing Act 1919 NSW will also imply covenants into leases. Relevant to this case being that; an assignment is a transfer of the whole of the tenant’s interest in the lease, and a sublease is the transfer of less than the whole of the tenants interest in the lease, a shorter term. It is shown that Simone assigned her whole interest remaining in the lease to Uri. However, s133B(1)(a) of the Conveyancing Act imposes a test of reasonableness on the landlord’s consent. A prohibition on assigning or subletting may be; absolute or qualified. Neither are discussed within the lease so it may be assumed that the assignment of the transfer is valid. However, the terms of the lease are in dispute, particularly the fact that the lease agreement states that the premises must only be used as a wedding and wedding

reception venue. The presence of terms expressly agreed upon by the parties precludes the operation of an implied covenant on the same topic. As such, while Uri is able to validly hold onto the assigned interest, he is unable to continue to use the space as a wholesale outlet as this would be a clear breach of the expressly agreed upon terms specified within the lease. Conclusion: As discussed above, the terms of the lease were expressly agreed upon and the assignment of the interest does not modify these terms. If Uri continues to use the space, Thomas can legally enforce the terms of the contract to compel him to use the premises as a wedding reception venue....