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Lease document tells only part

OVER the past two years there has been a fundamental shift in the landlord-tenant relationship in commercial leasing.

No longer can the lease document be regarded as the entire agreement.

Recent changes in both Federal and State law have brought firmly into play the old equitable concepts of fairness and justice, which are much broader in their application than the Lease and Disclosure statement.

Thus the limits of liability between the parties are now more blurred than ever.

“Misleading and deceptive” and “unconscionable” are the fashionable catchcries heard today when the relationship between the parties starts to break down.

The stiffness of competition on the shop floor for the retail dollar, the abundance of retail space and the growing awareness of the law by the tenant add up to new challenges for the property owner-manager.

Common situations faced by the lessor today include:

• Silent and/or innocent misrepresentation in leasing negotiations

• Enthusiastic selling changing from ‘puffery’ to hard representations when viewed objectively and taking all the circumstances into account

• Where the commercial realities faced by the sitting tenant are translated into an accusation of ‘wrongful pressure’ being applied by a lessor who may be legitimately trying to maximise his return on the tenancy within the limits of the prevailing current market rental

• The fallout from introducing a ‘category killer’ into a mall regardless of correct-handling Disclosure Statements and knowledge available at time of leasing.

• The perils for the lessor when a requested assignment is uncommercial in nature eg a ridiculously high price for the business and/or a brief time to run on the lease with no option to renew.

And so on...

For best practice in property management, there is now no option but to achieve and maintain the required level of competence in the law relating to all such issues.

Property owners and managers must ensure they are fully conversant, not only with the rules and regulations presented in legislation, but also the general intent that led to the implementation of specific pieces of legislation.

The Property Council continues to hold regular forums to assist property professionals gain this essential knowledge.

• Joe Lenzo is executive director of the WA Branch of the Property Council of Australia.

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