Representations to secure a tenant: binding or just a sales pitch?

The Issue

In order to secure a new Tenant, a leasing agent or Landlord may promise favourable treatment or offer attractive terms to a prospective Tenant. Such promises or representations are not always included within the written Lease.

The recent Supreme Court of Appeal decision of Cosmopolitan Hotel (Vic) v Crown Melbourne Limited [2014] VSCA 353 looked at the enforceability of a verbal promise that was contrary to the terms of the written Lease.

What happened?

In this case, the Landlord and Tenant entered into two Leases with five year terms.

The wording of the Leases was clear, namely that any renewal past five years would be purely at the discretion of the Landlord.

However, verbal representations were made to the Tenant on behalf of the Landlord that, if the Tenant refurbished the premises to a high standard (as was required by the Lease), then the Tenant would be "looked after" when it came time to renew the Lease term.

When the Lease was to be renewed, the Landlord elected not to renew the Leases and required the Tenant to vacate at the end of the term.

The matter was originally decided at VCAT in favour of the Tenant, but was appealed to the Supreme Court and again to the Court of Appeal. The Court of Appeal found in favour of the Tenant on the basis of 'estoppel'.

Effectively, the Court considered that the Landlord had made a promise to the Tenant to induce the Tenant to sign the Leases and they were therefore bound to that promise. The Court accepted the Tenant's evidence of the promise that they would be 'looked after' (as demonstrated by the Tenant's notes of conversations with the agent), despite the Landlord's agents denying that any such promise was made.

Practical Tip

There is always a fine line between the expected 'sales pitch' and a genuine representation or promise to get a Tenant over the line. Care needs to be taken when offering incentives to a Tenant and it is in the interests of both parties that all terms that are intended to be binding are included within the written Lease and are clear as to their effect.

How Sharrock Pitman Legal can assist?

For assistance drafting a lease or for advice on a current lease agreement, please contact a member of our Andre Ong, Accredited Specialist (Property Law) or a member of our Property Law team. Contact us on 1300 205 506 or email property@sharrockpitman.com.au.

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The information with contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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