Written by David McDonald
I’m often asked, should I register the lease or lodge a caveat to protect the lease? The answer is yes. The reasons why a landlord should register a lease is different from why a tenant should register a lease or lodge a caveat.
From a Landlord’s Perspective
In Western Australia it has been unusual, until recently, to register a lease but this has changed due to the Supreme Court of Western Australia decisions:
(a) Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd; and
(b) Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd.
In the Lighting, By Design decision, the court has held that an unregistered lease for a term exceeding five years which is not protected by a caveat or registered, was “destroyed” upon the registration of transfer to the buyer of the land. This is the effect of Section 68 of the Transfer of Land Act which provides that a lease for a term of greater than five years, or any option within a lease, is unenforceable against the buyer of the land following the grant of the lease unless the lease is registered or a caveat is lodged to protect the term and the option.
The Primewest decision concerned a particular special condition in a contract for the purchase of land which required the seller to provide evidence that the leases were registered prior to settlement and the Court held that the buyer’s refusal to settle because a lease wasn’t registered was reasonable on the basis of the Lighting By Design decision.
Currently, there is no legal decision that determines whether a lease for a term of greater than five years that is an unregistered lease and not protected by a caveat is binding upon the Tenant following registration of the transfer to a buyer.
As a result of these decisions, buyers and their financiers and any potential new financiers of the property are now likely to require that leases for a term of greater than five years are registered prior to settlement of the purchase of the property.
For this reason, MP Commercial Lawyers are preparing leases for terms of greater than five years in the registrable form so that the leases can be registered either immediately following the execution of the lease or at a later date if required by a purchaser of the property or a financier of the property.
A word of warning to Landlords:
As a lease is a contract between the original parties to it, if a Landlord sells the property and the purchaser terminates the lease pursuant to Section 68 of the Transfer of Land Act then the Tenant may sue the previous Landlord for damages for breach of contract with respect to not being able to remain in the leased premises or exercise its option.
From a Tenant’s Perspective
The Lighting By Design decision clearly reiterates the importance of protecting the leasehold rights against the rights of future purchasers of the leased property under Section 68 of the Transfer of Land Act. If your lease is for a term of greater than five years and/or the lease grants you an option either to renew the lease or to purchase the property then unless the lease is either:
(a) registered; or
(b) a caveat is lodged referring to the term and the options,
the purchaser of the property may terminate the lease by notice in writing to the Tenant. MP Commercial Lawyers can register caveats on behalf of Tenants.
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