Line of Sight and Kiosk Tenancies

The recent case of Spuds Surf Chatswood Pty Ltd v PT Ltd (No 4) [2015] NSWCATAP 11 (the Spuds Surf Case) demonstrates that landlords should be aware of their conduct and the impact of new tenancies on existing tenancies when making a new deal.

Lease documents will not always refer to sightlines or guaranteed views, contain height restrictions or refer to a proposed new tenancy that was not considered at the time of entering into the Lease.

The relevant facts of the Spuds Surf Case are:

  1. The Tenant let 3 shop spaces from the Landlord from 1999.
  2. The Landlord allowed the installation of three kiosks outside the Tenant’s premises from 2002. Sightlines to the Tenant’s premises were partially obstructed.
  3. The kiosks were in breach of the Landlord’s fitout requirements on height restrictions. The Landlord changed the height restrictions in 2005.
  4. The Tenant commenced proceedings against the Landlord on various grounds, including for unconscionable conduct.

The relevant findings from the Spuds Surf Case are:

  1. The Landlord acted unconscionably by:
    • refusing to acknowledge or address the Tenant’s concerns regarding the height of the kiosks;
    • relying on new height restrictions which were self-serving to allow the new tenancy; and
    • refusing a rent abatement despite several requests.
  2. The Tenant was awarded an 80% rent reduction as an equitable remedy due to the Landlord’s unconscionable conduct, not because of loss of profits as claimed by the Tenant (they were unable to prove that point).

In ordering the rent relief, the NSW Civil and Administrative Tribunal noted the “ongoing nature” of the Landlord’s unconscionable conduct “may well” have contributed to the tenant’s reduced turnover and subsequent financial difficulties.[1]

The emphasis of the decision in the Spuds Surf Case focused on the actions of the Landlord and whether the Landlord acted unconscionably.

When considering new tenancies which may affect current tenants’ sightlines or views, irrespective of what is contained in the lease documents, it is recommended that landlord’s maintain an open dialogue with tenants.  There are also notification requirements within the Leases (Commercial and Retail) Act 2001 (ACT) which may apply.

It is important to remember that not all leases will be drafted in the same manner and that conduct can be unconscionable in certain circumstances. If you require advice and assistance in a matter involving a new kiosk tenant, please contact a member of our experienced Leasing Team.

Changes to mandatory energy efficiency disclosure for office premises:

From 1 July 2017 premises capable of being used as an office which are offered for lease will require a Building Energy Efficiency Certificate (BEEC) in accordance with the Building Energy Efficiency Disclosure Act 2010 if the area of the premises is greater than 1000m2 (this reduces the threshold from 2000m2). After 1 July 2017 owners of premises with a lettable area over 1000m2 but under 2000m2 must ensure compliance with the obligation to have a BEEC before offering to lease the premises. Significant financial penalties may be imposed for noncompliance.

[1] Spuds Surf Case, paragraph [235].