Ensuring that both parties are fully aware of Lease conditions is essential to good relations; otherwise there can be some unwelcome surprises. This matter concerned a 2 level commercial business premises at Newmarket leased for 8 years from Sept2007, for a gross rental of $872,025pa (as was later determined by the Court).
A dispute arose when after the parties entered into a Refurbishment Deed and a Lease, it was found that the premises had a larger floor area (2,265sqm) than that used in earlier negotiations (2,013sqm). The 12.5% variation was significant (over $100K pa) with a compounding effect over the life of the Lease.
The rent was to be calculated as a fixed sum multiplied by the leased area (by square metre) and the contract provided for a method of calculating the leased area. After the contract was signed, the Lessee’s solicitors advised the Lessor’s solicitors that they had misunderstood the method of calculation and disputed the amount of rent payable. The Lessee continued to pay rental based on the lesser area.
The Lessor applied for an order that the shortfall in rent be paid to it and the Lessee conceded that the Lessor’s construction of the lease is correct though the Lessee filed a claim seeking final relief, contending it entered into the lease under a mistake (either a unilateral or common mistake), or in reliance on misleading or deceptive conduct.
The Court did not accept this, and ruled in the Lessor’s favour ordering that unpaid rent and interest be paid by the Lessee.
Paulyn Investments P/L v Collins Foods Group P/L [2008] QSC 014
Conclusions
A happy or at least mutually respectful relationship concerning a lease arrangement is an asset to both parties. This case underlines the importance of ensuring both parties are well informed during the negotiation, documentation process and each fully understands possible future ramifications.