Assignment of a Lease by Conduct - Landlords Beware

The recent case of Chamberlain Group Pty Ltd v Kids for Life Academy Pty Ltd [2015] NSWCA 241 (Chamberlain Group) demonstrates that landlords should tread carefully when requests for consent to assignment of leases are made by tenants. Lease documents will generally set out the requirements necessary for consent to assignment of a lease, however the conduct of the parties may also be taken into account when determining whether or not consent to assignment of a lease has been obtained.

In Chamberlain Group, the Court ruled that the landlord’s conduct supported a conclusion that ‘consent’ had been provided to the request for assignment of the lease regardless of the fact that no formal documentation had been executed by the parties.[1] The following factors were relevant to this determination:

  1. the landlord was aware that the assignee (a childcare operator) was already in possession of the Premises and was operating the business and held the relevant business licence;[2]
  2. the landlord had continued to collect rent from the assignee;[3]
  3. the landlord had allowed the assignee to remain in the Premises at a time when the previous tenant was deregistered as a company and ceased to exist;[4] and
  4. there was a handwritten note signed by the landlord and the assignee whereby the landlord agreed to attend to registration of the transfer of the lease.[5]

The Court held that the conduct of the landlord in this case amounted to the landlord providing the necessary ‘consent’ set out in the lease and this was despite the fact that no assignment documentation had been formalised and no transfer of lease had ever been registered.[6]

The terms of the lease in this case stated simply that landlord ‘consent’ was the necessary pre-condition to assignment, not that an agreement regarding landlord ‘consent’ be obtained first.[7]

The Court confirmed that whilst there was no registered lease to the assignee on the title to the land, there was nonetheless an enforceable unregistered leasehold interest in the Premises and the caveats lodged on the title to the land by the assignee to protect its interests were upheld.[8]

It is important to remember that not all leases will be drafted in the same manner and that conduct can amount to consent in certain circumstances. If you require advice and assistance in a matter involving an assignment of lease, 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] Chamberlain Group [2015] NSWCA 241 paragraph [24].

[2] Chamberlain Group [2015] NSWCA 241 paragraph [28].

[3] Chamberlain Group [2015] NSWCA 241 paragraph [27].

[4] Chamberlain Group [2015] NSWCA 241 paragraph [30].

[5] Chamberlain Group [2015] NSWCA 241 paragraph [40].

[6] Chamberlain Group [2015] NSWCA 241 paragraph [51].

[7] Chamberlain Group [2015] NSWCA 241 paragraph [22].

[8] Chamberlain Group [2015] NSWCA 241 paragraph [51].