Which part of Commercial Lease takes priority in rent increase

[nnights]

Hi,
I have had a lease in a warehouse since 2006. The warehouse and adjoining apartment has just been sold. A new 6 month lease was given to me in Nov 2011,by the former landlords, expiring on 2 May 2012. The new landlord wants to increase the rent drammatically when this lease expires. I was wondering though whether the terms of my lease regarding the rent are in conflict: this is what is written, it states that the Landlord can review the rent after 12 months- which part takes priority? Thanks

Rent – The rent shall be $700.00 per calendar month commencing on 3rd day of November 2011 and payable in advance by the tenant on the 3rd day of every month to the landlord. The landlord can review the rent after 12 months.

Term – The term of the lease shall be 6 months commencing on 3rd November 2011 and ending on the 2 May 2012.

Option – Subject to condition 31 of this lease the landlord offers a renewal of this lease for a further term of 1 year.
Renewal
1.(a) The tenant shall give to the landlord not more than 6 months and not less than 3 months prior to the expiration of the term granted in this notice in writing if they wish to take a renewal of the lease for the further term offered. Provided the tenant has duly and punctually paid the rent and shall have duly performed and observed on their part all the conditions and agreements contained in this lease up to the expiration of the term granted, then the landlord will at the cost of the tenant, grant the further term at a rent which would at such time be current market rental of the premises.
(b) In the event of any dispute between the landlord and the tenant as to such rent the rent shall be determined by the President of the Real Estate Institute of New South Wales or his appointee. The total rent is not to be less than the total rent payable just prior to the expiration of this lease and the lease shall be subject to all other conditions as are contained in this lease with the exception of the Option condition. The costs of such rental determination shall be borne in equal shares by the parties unless otherwise agreed.

 

[Terryw]

Did you give notice, as per the contract, of taking up the option? If so then I think the rent would continue at $700 until the 12 months is up.

 

[Aaron_C]

Is the warehouse used for retail purposes? It sounds like you have a ratchet clause in that contract which can be void under the Retail Leases Act if it is a retail lease.

 

[nnights]

reply

The warehouse is used for my business which is making knitwear. I let the previous owners know a long time in advance of the sale that I wanted to stay in the workshop unit for as long as possible.

 

[jrc77]

The warehouse is used for my business which is making knitwear. I let the previous owners know a long time in advance of the sale that I wanted to stay in the workshop unit for as long as possible.

I don't think that answers the question.

Did you in the period 2nd Nov 2011 to 2nd Feb 2012 provide in writing a notice that you wished to take up the option offered?

Regards,

Jason

 

[Dazz]

I let the previous owners know a long time in advance of the sale that I wanted to stay in the workshop unit for as long as possible.

Hi nnights,

Couple of points ;

1. What you've written above doesn't constitute notice. Keep reading your Lease, further down it will describe exactly what constitutes due notice. Effective Notice needs to be in writing, needs to be signed by the party giving notice, and it needs to be delivered in the prescribed form (hand delivered, post or fax).

I've been bitten harshly before on this, so I do all three.


2. Whomever wrote that Lease did a really bad joke on the cut'n'paste side of things. The rent clause clashes with the Term. IMO, the Term is more important and should over-ride everything before you start to discuss rents.


3. It looks like the 2nd of February was the cut-off deadline for you giving proper Notice. The Landlord does not need to grant you the option if you missed the deadline.


4. Of course, it also depends on you performing all of your other obligations (these are sometimes more important than paying the rent). You haven't mentioned if there is anything outstanding....like disputed repairs, contamination, nuisance noises to other Tenants, etc etc etc.


By the smell of it, the Landlord wants to get the rent right up - sounds good to me - and he's pretty sick of someone in there paying bugger all rent. Tenants like that always mention that they want to stay for a really long time.

 

[nnights]

My communication with my previous landlords was always by email. I had let them know by email on 19 October 2011 prior to the lease being renewed on Nov 2 that I wished for the lease to be renewed for at least another year. Because they were in the process of selling the unit they wanted a month by month lease, and finally compromised on a new 6- month lease, at the new rent of $700 a month which had commenced on 1 August 2011. The new 6 month lease was dated from 2 November but not given to me until 27 Dec 2011.

The sale took place at some stage over January (I thought) but on the 6 Feb 2012 I was notified by the previous landlords that settlement had not taken place yet and could I please pay the rent to the previous landlords' usual account, which I duly did.
On 6 March the new owner introduced himself to me, said he didnt even know there was a lease and mentioned we will have to organise the rent payments. A week later he had still not sent me bank details for me to pay the rent, so I emailed again and then was told that he would be putting the rent up when the lease expires in May

Although one can be pedantic about the cut off date for notification of lease extension being 2 Feb 2012 my issue is that I was not in communication with the new owner until 6 March. At that point he said settlement had taken place only the week before and he didnt want to introduce himself until that had happened.

I dont consider that I am paying bugger- all rent at all, it is a very spartan colorbond warehouse with unpainted walls, no windows, and only a toilet and sink. There is a warehouse a few doors up advertised this week at $90 sq metre. I am now paying $84 a sq metre, so even to argue I am not paying market value seems incorrect.

 

[Terryw]

It doesn't matter if the new owner introduced himself to you or not, what matters is that you gave notice in the way described in the lease and in the method described in the lease and by the time stipulated.

Have a look at the interesting case below regarding giving notice to take up an option to extend a lease. The tenant just completed a $2mil fit out too...
It was a prminant restaurant in Darling Harbour SYdney.

Kavia Holdings Pty Limited v Suntrack Holdings Pty Limited [2011] NSWSC 716 http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/716.html

 

[Dazz]

Hi again,

Unfortunately, being pedantic is all there is when it comes to such a fundamental piece of paperwork....without which you don't have a business.

In future, I'm sure you'll make 100% sure that the paperwork side of things is spick and span.

Although one can be pedantic about the cut off date for notification of lease extension being 2 Feb 2012 my issue is that I was not in communication with the new owner until 6 March.

Unfortunately for you, no. Your issue is that of not being pedantic and following the date of notification in the form required.

I gather you are like most Tenants and think some sideways chat with the Landlord or their agent is all that you need to do...and after the chat....all is "sorted". Not so.

I had let them know by email on 19 October 2011 prior to the lease being renewed on Nov 2 that I wished for the lease to be renewed for at least another year.

There's a classic example right there. Email is no good for official notices. OK for the day to day stuff....but when you start talking about important stuff like renewing Leases, go the hand delivered signed letter.

Email requests 14 days prior to the end of the Lease is far too little, far too late. You would have needed to give at least 3 months notice of your intention.

Tiny little Tenants in tiny little Leases like 6 months in length typically get themselves in trouble, as the Notice normally needs to go out just after they get in.

on the 6 Feb 2012 I was notified by the previous landlords that settlement had not taken place yet and could I please pay the rent to the previous landlords' usual account, which I duly did.

So....the whole 'selling the unit' drama is a complete and utter red herring, as 4 days after the expiry of the latest Notice period for you to take up your option, you were notified that the Landlord hadn't changed at all.

There really is no excuse.

If I was you, I'd be quickly doing one of two things ;

1. Sit down with the new landlord and negotiate and beg to stay longer.
2. Start planning to pack all my stuff up, under the very strong assumption that come 02 May you'll be required to give vacant possession and the keys over.


Either way, you've only 6 weeks.

 

[Scott No Mates]

Pretty much as Dazz sees it. Start negotiating a) with the new owner and b) with the owner a couple of doors away - you may be able to get a real good deal with them (or use it as leverage). Your option has lapsed however the terms of the lease, even in holdover, will prevail and a rent review may not be enforceable until 12 months - the owner may still seek vacant possession on one month's notice or as per the lease.

 

[nnights]

Thank you

Thank you for all of your replies.

 

[TheDoctor]

It doesn't matter if the new owner introduced himself to you or not, what matters is that you gave notice in the way described in the lease and in the method described in the lease and by the time stipulated.

Have a look at the interesting case below regarding giving notice to take up an option to extend a lease. The tenant just completed a $2mil fit out too...
It was a prminant restaurant in Darling Harbour SYdney.

Kavia Holdings Pty Limited v Suntrack Holdings Pty Limited [2011] NSWSC 716 http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/716.html

It's interesting that in the particular case above, an email would meet the definition of "in writing" (of course other leases would be worded differently). My take on it is that they lost because all of their communication prior to the cut-off date was very unclear and not because it was via email.

 

[Terryw]

Yes email would be fine if it is specified in the contract as a way of communication.