Australian Property Law and Lease Contracts - Essay Example

Australian Property Law and Lease Contracts Background This memorandum is an attempt to identify issues surrounding Australian property laws and the legal aspects of these issues. The memorandum looks at the various ways in which owners of property and lessees are affected by the transfer of a property from one individual to the other. Larry: property Owner seeking to litigate for damages and breach of contract The law, under section 112 of the Property Law Act 1974 (Qld) deems that the tenant shall not carry out any repairs to the premises without the permission of the owner and that in cases where such repairers are done, such repairs must not reduce the value of the leased premise. In Larry’s case, it is evident that the repair done by the lessee led to a reduction of the property by $50,000. At the same time, the agreement between Larry and Tom stipulated in writing that Tom will not conduct any substantial alterations to the property without the permission of the owner. One thing to note is that the word substantial can be subjective because there is no clear way to measure whether or not something is substantial or how substantial it is. With regard to this, Larry can still litigate against Larry because the changes done can still be seen as substantial. While the realtor consulted for the purposes of estimating the extent to which the repairs done affected the value of the building says that the changes were NOT substantial, it is good to know that valuation of real estate can change dramatically depending on the nature of the purpose why the property is being valued. In the case for Larry’s property, other considerations that would make the case a little different would be the fact that the repairs done will also cost the property due to the time it will take the repairs to be completed since the property will not be able to get any rent paid on it for this period. In this regard, what Larry will be banking on is his ability to convince a court of law that Tom acted either against the law or against the agreement. In terms of the agreement between Larry and Tom, it can be proven, albeit not beyond doubt, that Tom knew all too well that he was breaching the contract. This can be evidenced by the fact that he had tried to ask Larry to allow him to change the property before altering its look. Tom acted in a way that is less than legally acceptable by setting up the meeting to discuss the matter and then choosing to go on with the repair work even before actually meeting with Larry. For this reason, Tom is in breach of the agreement between him and Larry and that shows that he had motive and intension to ignore the agreement. Apart from ignoring the agreement of the lease, Tom is also in contempt of law for the law does outlines clearly that such repairs to a leased property must not reduce the value of the property. While the law does protect the lessee from being forced to pay for any damages caused by such repairs, this must only happen within the provision of the law, which clearly stipulates that such repairs are not to be carried out, unless with an express permission by and from the owner of the property. Does Larry have the right to be compensated for the financial loss? The damages would not be limited by section 112 of the constitution unless Tom can prove himself not guilty of the breaching the contract. Because the lessee did not act in accordance with the same section of property law by making repairs that were, against the spirit and letter of section 112, bound to not only significantly change the leased property but also to reduce its value, regardless of how much the reduction was, this means that therefore any further damages that can be directly associated by this act can be said to have been caused by Tom. This means that the lessee will not and must not be protected by section 112 with regard to the damages caused such as the rent payments that the leaser will have to miss during the time the property is being restored to its original condition as well as the cost to do the restoration1. On the other hand, this strictly depends on the conclusion of the court since if the lessee can prove to the court that he acted within the provisions of the agreement between him and the leaser as well as in accordance to law, and especially section 112, the court would then have to free him from any further obligations related to the case. Is Liam bound by former contracts? Liam will have to carry the obligation of paying the bond to Therese because the contract is between the lessee and the leaser. In this case, the lessee and the leaser are the ones in contract and this contract does not change whether the entity of the leaser changes or not. If the contract was that the lessee was to get his or her bond-fee back at the end of the lease, then the owner of the freehold of the property will be the one to bear the burden to refund the bond. Land ownership laws recognizes that land is a long term property and that the owner will continue to change either forced by the passing of time (through younger generations inheriting from the older generations) or from economic events (such as one owner selling to the other). For this reason, the entity of the owner of a property is not attached to the person owning it currently and the property. However, in cases like this, the person affected can always seek redress either within land and property law or even from the other types of law. In the event that there are no legislations that will solve the problem at hand, the person affected can choose to redress the issue in other ways2. For instance, if a person conceals certain information during a major transaction such as sale of property, this can be addressed through a civil or criminal case as long as the person can prove his or her point in court. So while the leaser is obligated to take up the legal obligation of the former owner of the property, the new owner of the property can seek for an intervention of the law to force the former owner to compensate for the losses so incurred. Concealing certain facts by one party in such a transaction can be litigated under criminal law because this is an act of deception that is intended by the perpetrator to deceive the other party and thus make him enter into a deceptive contract and rip him off. The law of contracts will however stand in order to protect the lessee and make sure that he or she does not get affected in the system as land ownership changes from one individual to the other. On the other hand, the new owner had the responsibility to carry put a proper due diligence on the property in order to avoid such as situation. While this cannot be used against him, it is important to note that in this case, the new owner was at a much better position to avoid the situation as opposed to the lessee whose contract is only bound by the past event at the time it happened and not by the new situation caused by the transfer of the property from one had to the other. Buying or inheriting a real property goes with all the obligations as well as the benefits attached to that property. For instance, if the property at hand was gaining some form or rent payments by a lessee who was signed in even before the new owner, the new owner is supposed to take the rent paid thereof. In the same way, the new owner must also take the responsibilities and obligations of the property which includes any money owed etc. This is why it is important for such a new or aspiring owner to be able to make sure that they have done the needed due diligence process on a property before accepting such a deal. As a result, if a new owner of a property has acquired a piece of property which had direct obligations such as refunding any bond fees to lessees, the new owner has no option but to meet these obligation3. The new owner will however, have the opportunity to seek justice in other channels but only with the former owner rather than the person to whom the obligations are owed. Is Liam bound by former contract? In the need to protect the lessee, the law provides that the leaser will have an obligation to the lessee with regard to such an option to continue the lease as well as other obligations related to a short term lease such as doing repairs in case of a residential property. With respect to this, Liam stands to have an obligation to the lessee with regard to the lease agreement. The law does provide that when a person needs to buy a new property, that they are at liberty to ask for a due diligence as long as they pay for the costs associated with this. The law is also clear with regard to the contract between the lessee and the leaser that the requirements of the contract will be respect, whether these requiems are written, explicit or just implied. With regard to the obligations of a new owner of a real property, the new owner will be needed to meet the obligations of the property, those inherited as well as those that will come as a result of him or her getting into contract with new lessees. This means that all older contracts that the previous owner had are to be respected. The fact that the previous owner did conceal certain information from the new owner prior to the transfer should not affect the lessees who were in contract with the previous owner. Since the new owner would also be entitled to take any benefits of the property such as rent paid, insurance premiums if any etc, it would also only make sense that the same new owner takes responsibility of the obligation of the property. Again the issue here is on whether existing lessees would be affected by a transfer of property from one party to the other. The law suggests that any binding contract between the lessee and the leaser that takes place before a transfer will have to be respected by both the new leaser and the existing lessee4. This is a fact of law and should be honored by both parties. In this respect therefore, if the new owner comes to be in possession of a property which has a lessee, who by way of agreement with the previous owner, gains the advantage of an option, the lessee will have the legal right to practice his or her option. For instance, such a lessee will be able to legally either choose to continue with the lease or choose to quit the lease, in accordance to his or her will. The leaser will have to respect this in the same way the lessee will have to respect any binding contract for instance to pay rent, pay for any damages and repairs that the lessee may have done to the property etc. Following this, the new owner of such a property will therefore not be legally able to evict the lessee at will unless there is enough proof that the lessee does not have any legal binding that enables him or her to have the right to continue with the lease. Any contract that predates the transfer of the property will have to be honored as if the transfer did not happen and the new owner of the property will assume all responsibilities, legal and otherwise, of the previous owner. The advantage of this is that it will make it possible for the lessee to be protected from any shockwaves that may be caused by such a transfer and also make sure that the owners of such a property will not use the transfer as a means to override the rights of the lessee. Can Liam litigate for compensation and payments that are bound by former contracts? Just in the same way that a new owner will assume all the obligations of the previous owner, the new owner is also protected by the law with regard to the rights and benefits that the previous owner had. This means that since all the contracts that predate the transfer will have to be honored by both parties, that is, the lessee and the leaser, the new owner will have the right to claim any benefits arising from such a contract. The new owner will therefore have full legal right and authority to claim any such payments from the lessee as long as there is a contract binding the lessee, albeit this contract being between the lessee and the former owner. The law here also follows the same spirit it follows in trying to protect the lessee from being taken advantage of by the property owner through a transfer. The law also recognizes and respects the fact that such a lessee will not have to be affected by the transfer and that, as long as the terms of the contract are followed and that the lessee cannot prove that the change of ownership has changed the utility of the property to him or her, the lessee will therefore have to honor the contract as though there has not been any changes to the ownership if the property5. A new property owner is therefore able to litigate against such a lessee in the case of the lessee being unable, or fails to honor his or her contract. This is without respect of the nature of the lessee in terms of whether it is an individual person, a firm or a government agency. As such, if the new owner of a property feels that a lessee whose contract for the property was between him (the lessee) and the earlier owner of the property, is not meeting his contractual duties such as paying rent, observing the terms of use of the property as per the lease contract, or making the necessary repairs to the property such as those caused by the lessee, the new owner will be at liberty to litigate. Conclusion In respect to the land and property law, it is clear that the law recognizes two things. One, the fact that the contract between two parties with regard to the use of a property should be tied to the property itself and not the parties, and two, that the parties will change over time and therefore it’s only logical that the binding of any contracts between the parties must and should be continued regardless of the change of ownership. This is very important to protect parties, that is, the lessee and the leaser from being affected in the case where a change of ownership has changed. The effect of this is however more likely to be negative to a new owner of a property because if he or she fails to carry out the right and comprehensive due diligence on the property, the new owner can unknowingly inherit a lot of responsibilities, financial and otherwise, from the former owner. Part II: relevance of sources Topic analysis The topic regards the guidelines found in the Australian property law and the legal and financial obligations that are outlined by the law. The issues that are imminent in this particular case are how the transfer of a property from one owner to another affects the parties involved with regard to their legal and financial obligations. In particular, the issue of how the new owner will be affected by the contracts that the former owner had between him and other parties if the former owner does not disclose the contracts or discloses the contract but fails to disclose all terms of the contract is a major issue here. Search terms used: Freehold, Australia property law Section 112 Property Law Act 1974 (Qld) Lease, property law Australia Research plan and strategy / Effective research and evaluation To achieve the best results, the research terms that were used were more directly related to the Australian property law under section 112 of the Queensland property law. Once this search has landed on an authoritative online source, it is then good to use search terms within the website. Most websites offer users with a way to search within the website. This is usually so with large website that may have too much content that may be too much for the user to navigate. For instance, the research done for this study was done by first going to the following site; http://www.austlii.edu.au/au/legis/qld/consol_act/pla1974179/s112.html Because this site is authoritative source and has all the land and property laws of Australia, it can then be used to search the information on the same. The following issues must be considered; Relevance- does the source provide useful information to take care of the direct issues in the case? The source should be dealing directly to the issues by identifying the laws and rules that surround the issues as well as clearly identifying how these laws are applied. Authority The authority of the source is also important. The authority of a source can be determined by the following; The author and his or her credentials -does the author have any authority in the subject with regard to the education and professional qualifications on the matter for instance? Nature of the source – for instance, is the source an individual, an institution or government agency? Reliability – reliable sources are those sources that either do not change easily over time. Online sources must be reviewed for this. Secondary sources This research used three secondary sources which included two textbooks and a journal article. The decision to use more secondary sources is the fact that it needed more analysis and interpretation of law rather than just the structural aspects of law. Using secondary sources helped in understanding the law and the interpretation of the law with regard to how this law applies in real life. One such source that was used in this research was Duncan’s book titled Commercial leases in Australia, 6th edition. This book is written by an authoritative author who has a very deep understanding of Australian property law. Source two: search terms: Australian property freehold law Buck, A. R., 2006. The Making of Australian Property Law. Annandale: Federation Press. This book provides not only the aspects of Australian property law but also provides the history of the property law as far back as a few hundred years. This history is useful in this study to understand the foundation of the Australian property law such as the issues with or about free hold and leasehold. Source 3: search terms: Australia property law, litigation Watson, U. D., 2001. Litigation: Australia Land law. New York: Pearson Education. Source four: search terms: Australian property freehold law journal article Jared, P. D., and Fredrick, K. P., 2005. Understanding Australian Property Lease laws. Journal of Australian Legal Studies, 45(12), pp. 23-34. This journal article provides a clear analysis of the things that the Australian property laws regard especially with a bias for the litigation process and the rights or lessees as well as leasers. Read More