Surrender or Extension were the key arguments when a large Surfers Paradise centre owner was unsuccessful in pursing a former Lessee owner of a newsagency premises that were assigned to a subsequent purchaser of the business.
This matter involved complex legal issues yielding a thorough examination of legislation and case law from both Australia and New Zealand.
It involved three extensions by agreement of the lease term (as opposed to option renewals), two assignments of the lease and one transfer of the centre ownership.
That detail is beyond the scope of this alert. Suffice to say that when the “pass the parcel’ ended on a sour note, the final lessee in occupation (1stDefendant) fell into arrears, consequently the plaintiff terminated the lease and re-possessed the premises.
It is generally held that lessees who assign their interests and sell their business will remain liable to the landlord for their assignee’s defaults during the term, but at the ‘termination date’ that liability also expires.
The centre owner argued that in this case Section 67 of the Land Title Act 1994 (Form 13 Amendment) annuls the common law, and therefore the existing lease was extended rather than surrendered.
The Court found that the common law principle is that, “an alteration of an existing lease, so that it will operate for a term extending beyond the original term, operates as a surrender of the old lease and the grant of a new one”. It held that Section 67 is merely a machinery provision included in the Act to minimise the costs of preparing and registering entirely new lease documents each time they wish to amend an existing lease.
CPT Custodian Pty Ltd v Ironbarkhills Pty Ltd & Ors [2011] QDC 004 highlights that in most circumstances, an assignor of a lease will likely be released from its obligations under the lease if the term of the lease is extended after the assignment. In this matter the 5th & 6th Defendants were successful in having the plaintiff’s claim against them dismissed.
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