Retail Leases Act Problem Question

On 25 June 2014, Dum Dum Pty Limited & Cohen Bros Limited trading as Inland Commercial Properties (hereafter the "Lessor") purchased a shopping centre at Mittagong, NSW, known as Esperanto Square with a number of tenancies, including a monthly tenancy to Fresh Bounty Pty Ltd ("Fresh Bounty") of Shops 2, 3 and 4 of Esperanto Square ("the Premises"). The permitted use of the Premises under the Fresh Bounty lease was 'retail sale of fruit and vegetables'. Fresh Bounty carried on business under the name of 'Mittagong's Fresh Fruit World".

The registered lease to Fresh Bounty from the previous owners of the shopping centre had expired on 5 October 2013. The lease, however, continued as a monthly tenancy at a rental of $5,830.00 when the new operators of the business, Dario Simpson, Walter Cameron and Iona Cameron (hereafter the "Lessees") purchased the business and took possession of the shops on 18 September 2014.

The Lessor held negotiations with the new operators of the business, which confirmed:

1. the continuance of the monthly rental ($5830);
2. the Lessor's intention to enlarge the shopping centre through a Development Application (DA) already lodged with the Council;
3. the necessity for the Lessees to vacate the Premises during the construction period; and
4. grant of a new lease subject to DA approval

After the DA was approved on 25 November 2014, the parties resumed negotiations over a new lease. On 22 February 2015, the Lessor's agent delivered a five-page letter of that date to the Lessees. The letter formally set out terms of an agreement for the future lease. The letter set out that the term of the lease would be 5 years, with an option to renew for a further five years. No commencement date was specified; but instead, the letter stated that the lease would commence 'at handover, estimated to be in the last three months of 2015'. The letter also asked for a "security deposit" of $5,000 to be "credited to your rental account".

The Lessor's letter of 22 February 2015 also contained two separate clauses apparently designed to defer the creation of legal obligations between the parties until formal lease documents had been prepared and signed. One of them, which appeared beside the subheading 'Documentation' read: -

"The lessor's acceptance of this offer will not under any circumstances create a legally enforceable lease between the parties. The lessor's solicitors will prepare the lease, incorporating the above terms and conditions and no agreement shall be deemed to legally enforceable until it is accepted and executed by both parties."

A further clause, appearing under the heading 'Acknowledgement', stated:

"Occupation of the premises will not be granted until the lease documentation has been completed to the satisfaction of the lessor's solicitors, and subject to the provision of bank guarantee, public risk insurance and payment of all fees by the lessees."

Finally, another clause under the same heading purported to preclude the lessees from relying on any promise or representation by the lessor that was not recorded in 'this application to lease'.

On 8 March 2015 at a meeting between the parties, the Lessees signed the letter of 22 3

February 2015 after the Lessor agreed to and initialled an amendment (to lower the annual rent review percentage from 4% to 3%). The Lessees also handed to the Lessor the security deposit of $5,000 in the form of a cheque.

By about the middle of March 2015, the Lessor decided to defer plans for the redevelopment of the centre and they re-credited the Lessee's rental account with $5,000. Ultimately, the Lessor served a Notice to Quit on the Lessees dated 31 August 2015 on the basis that the Lessees were still in possession on a monthly tenancy. The Lessees filed an application with the New South Wales Civil and Administrative Tribunal (NCAT) claiming that they had a lease for a term of 5 years from 8 March 2015.

Answer the following questions:

a) The Retail Leases Act 1994 (NSW) was amended on 1 July 2017. Provide a brief outline of the key changes made to the Act that affect both landlords and tenants in NSW.

Advise the Lessees as to the following issues, with reference to specific relevant provisions of the Retail Leases Act 1994 (NSW) and case law:

b)Was a new lease granted in September 2014 when the Lessees (as the new operator of the business) took possession of the monthly tenancy held by Fresh Bounty Pty Ltd by assignment with the consent of the Lessor?

c)Was a binding contract created when the Lessees signed the Lessor's 22 February 2015 letter?

d)Should the term of the lease be for a period of 5 years commencing 8 March 2015?