Question 4

Hugo Long rented ground floor shop premises for his takeaway store from Sunlight Pty Ltd. He lived in a unit on the second floor of the property. When the lease expired and a new lease was being negotiated, Sunlight sought to include a condition that the premises could only be used for business purposes. Hugo explained that he wanted to continue living in the second floor unit since it was convenient for him and he would not renew the lease if this was refused. Sunlight advised that if Hugo signs a new lease, which includes the condition regarding its exclusive business use, they would allow him to live in the unit. Assured by this promise, Hugo signed a 2-year lease extension. He would never have signed the extension if he was not allowed to live in the unit and would have rented elsewhere.

After eight months, Sunlight Pty Ltd got a call from a local developer about buying the entire property (shop and unit) but required it to be vacant. Sunlight looked to terminate the lease because Hugo had broken the condition by living in the second floor unit. Is Sunlight Pty Ltd correct? Explain your answer with proper legal basis and authorities.