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Week 8 Leases Part B - Coggle Diagram
Week 8 Leases Part B
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Assignment / Sub-leases
Normally there is a restriction in a lease on the ability of a tenant to assign and/or sub-lease the premises
In most cases the landlord is concerned with the assignment not the sub-lease as the head lessee/tenant is still bound to the original lease in a sub-lease arrangement.
What if the original tenant sells the business and assigns the lease and the next tenant does not pay the rent. Can the landlord sue the original tenant?
Yes, this is because there is privity of contract between the Lessor and the Lessee, just because, the Lessee has assigned the lease to another party it does not mean the contractual relationship is severed
So what happens in practice? Parties agree to discharge obligations when assigned and/or there is a term in the lease dealing with this situation it cannot be implied in silence.
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Where there is no express clause on this issue then the law presumes in favour of the tenant that they can assign/sub-lease without permission of the landlord.
This applies only to retail/commercial not to residential. See ss 237-240 Residential Tenancies & Rooming Accommodation Act 2008 (Qld)
Covenants restricting the right of the lessee to assign/sub-let is strictly construed in favour of the lessee. This is because if these clauses are breached a landlord has a right to forfeit and re-enter.
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Sub-leases occur if the tenant does not need to use all of the premises so they sub-lease a portion of the premises to a sub-lessee
The clause/covenant must expressly refer to either or both of assignment and sub-letting, the law does not fill in the gaps.
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Most common type of clause is that the lessee cannot assign/sub-lease without consent of the landlord:
s 121 – PLA will apply
S 121 implies into all such clauses that the consent of the landlord will not unreasonably be withheld: s121(1)(a)(i)
Normally leases replicate this provision in the terms of the lease itself especially in commercial/retail leases
This section applies irrespective of any clauses in the lease implying the contrary. It cannot be contracted out of.
BUT it can be avoided by redrafting the clause in the lease as an absolute prohibition. There are other ways too. A good lawyer working on behalf of tenant will look at this clause carefully to ensure the tenant is still protected by s 121
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Residential Lease
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See s 12 RT&RAAct definition of “residential tenancy agreement”. It includes situations where exclusive possession is not granted so there is no need to distinguish between lease or licence
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Renewal of Leases
It is a covenant which touches and concerns the land and therefore can be enforced by subsequent RP.
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Where lease is registered (long-leases) the option to renew is also protected by registration. It has priority over subsequent mortgagees registered on title.
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