Queensland Property Law - Assignment Example

MEMORANDUM TO: FROM: DATE: SUBJECT: INTRODUCTION Leases are agreements that usually refer to a tenancy agreement, where a landlord leases a premise for a given duration which gives rise to contractual obligations. A breach of the contractual agreement does give different parties rights within it as well as a court can give different remedies both at common law and in equity. LARRY V TOM The main subject or issues in contention between Larry and Tom is the lease agreement issued by Tom, registered for a period of 5years that commenced on 1st January. Extensive repairs had been made by Larry to make it beautiful and the lease agreement for the tenant that; no alterations were to be made to the premises, any fixtures or fittings in the leased premises without an approval. These were the contents of the agreement that were not adhered to because Tom went ahead and made alterations and Tom refurbished the entire premises. Leases Agreement Damages A breach of the lease agreement by Tom would warrant the granting of damages as remedy to the lessor. This is based on the general law of contract1; this is premised on the fact that a lease agreement just like an ordinary contractual agreement can be frustrated despite it dealing only with the property. The law as was held in the case of Joyner v Weeks2 provides that a landlord is entitled to recover the costs of repairs concerning the damage that a lessor has made in the premises. The extent of damage done by Tom is quite extensive, and it being a few years before the termination of the agreement has come to an end. It is considered to be a ‘prima facie rule’3 Specific Performance This remedy is usually given by courts when damages are inadequate in relations to the breach of the contractual obligation4 this remedy is available even where the breach has not yet occurred, it is an equitable remedy that acts in personam5 that when given will only act on Tom. The executory nature of this remedy is to compel the execution of specie in a contract which must be done before it is terminated. For instance Tom can be compelled to put the premises in order before the termination of the lease6. This remedy can also be crucial in that it may require the contract to be executed such that the defendant to carry out the obligations in the terms of the agreement7, however when this remedy is not given, it can be substituted with damages. When an order of specific performance cannot be granted, equitable damages can be given8. Rescission This remedy can also be available for Larry, which is the abrogation or revocation of a contract that is the court would cancel the contract, and order that the parties are restored to the position they were in before the breach or prior to the contract. Recison is mainly based on a breach in a condition of the contract; in this case Tom had breached the condition of repairs and alterations given by Larry. Impossibility cannot be used because Tom can be able to replace the panelling’s. Notice to Remedy as per section 112 (4)9 Limitations Section 112 concerns the issues of covenant to repair at section 112(1)10 provides that damages for a breach of a covenant, shall in no case exceed the amount (if any) by which the value of the reversion in the premises is diminished owing to the breach of such covenant, obligation, or agreement. Further that damage shall be recovered for a breach of any such covenant, obligation, or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair the might be, would at or shortly after the termination of the lease have been or be pulled down, or such structural alterations made to the premises as would render valueless the repairs covered by the covenant, obligation, or agreement. LIAM V LARRY Section 182 provides that an owner of a property means any person who is entitled to an estate of freehold in possession whether it is fee simple, whether at law or in equity which is registered11. Liam’s Liability to pay $10,000? It has been stated in the case of Re Teller Home Furnishers Pty Ltd (in liquidation), Electronic Industries v Horsburg12that upon an assignment of a lease by the lessee to the assignee company with the consent of the owners, without more, the liability for the payment of rent would be continued to be imposed on premises, and implied liability would pass by reason of the privity of contract. This provides therefore that the implied liability in the original lease would cease but the express liability would continue to exist13. This has been the law adopted from the Landlord and Tenant (Covenants) Act 199514 This means that the doctrine of privity of contract cannot be exempted in this instance based on the fact that the agreement between Therese and Larry has been fully performed and this does not exempt Larry from fulfilling his obligations to the agreement. With the expiry of the lease, Larry is entitled to pay the $ 10000. This is further demonstrated in the case of Arledford Trading Co. Ltd v Servansingh15 that an original lessor remains liable throughout the full term of the lease. Option to Renew The lease agreement between Larry and Tessa was an unregistered lease for a 3 year term, with an option for further 3 years. This was exercised by Tessa on the 1st of April 2012 and enforceable on 1st June 2012. This is based on the fact that the contractual agreement was more of a contract, oral in nature as opposed to that which is written. It was held in the case of Webb v Pollmount16 that an option to renew overrode the interests at the time of sale or at the time of the registration of the freehold to Liam. Unlike the case17 that was concerned with sale, this can be contrasted to a lease that has an option to renew. The essence of making a statement with an intention to be bound with the words18 gives a party the obligation either to accept or reject the invitation to create the contract. There was no implied or express provision on the lease covenant created by Larry, that Tessa had been given an option to renew the lease. An express or implied view that there existed an option to renew the lease would have been effective had it been reduced to writing. In Wright v Macadam19 the parties knew of the existence of the lease and renewal was also based on the same grounds. The place of Liam is that he knew of this option, and whether he is bound by the new lease that commenced on 1 June 2012. There cannot be said to have been any form of misrepresentation or mistake when Laim entered into the contract, and he is bound in good faith to give Tessa an option to renew under the new contract. Despite contradicting what the court held in Arledford Trading Co. Ltd v Servansingh20 that liability is upon that of the original lease, this would be differentiated on the basis that both the original owner and the new freehold owner, knew of the option and are both bound by their intention to renew the lease for another term of three years. Default Larry granted an 8 year registered lease to Travelcentre Pty Ltd, where it was agreed that the company would perform its obligations under the lease, including payment of rent, and is unable to pay. Can Liam enforce it against Tim and Tracy? Progressive Mailing House Pty Ltd v Tabali Pty Ltd21 provides that a lessee who fails to pay rent under the lease agreement, has contradicted committed a serious crime. This as was held in the case was that a landlord had a right to terminate under the lease or repudiate or rely on both in relation to the rent that was paid. The courts stated in Shevill v The Builders Licensing Board 22 that a default under an express written lease agreement gives a lease holder the right to re-enter the premises. CONCLUSION A lease agreement is entirely a form of a contractual agreement that is considered to fulfil all the essential principles that are needed to form a valid contract. Larry is liable to pay the $10,000 that is considered as security or Tessa. Tom on the other hand has contradicted his obligation on not making alterations to the premises, and this can either give Larry an option to seek remedy in damages, recession, specific performance or a notice to remedy all the damage that has been caused as per the Property Law Act 1974. The defaulting company is to be compelled to pay the rent defaulted to Liam as it had been conveyed to him by virtue of Larry’s transfer. PART B The Law of Property Act 1974, Queensland The Property Law Act 1974 is an Act that aims at consolidating, amending and reforming the law on conveyance, property, contract, and other purposes23. Section 5 of the Act provides that it is to apply to estates, interests and other rights in respect to land created in effect under any Act. Schedule 6 of the Act provides for the dictionary definitions of particular words such as conveyance which is the transfer of an interest in land, and any other assignment, settlement or any other assurance in writing of any property. This is appropriate when giving meaning to the terms used in a lease agreement. Schedule 3 of the Act24 provides for the short forms of covenants in leases as read with section 109 of the Act. The lessee covenants with the lessor to pay rent, relevant to the assignment as the Travelcentre Pty Ltd fails to pay rent for the lease period. The schedule also provides that premises should be in good repair as at the commencement of the lease as well as at its yielding, a fact applicable to Tom and Larry’s leases agreement. A lessor is also entitled to comply with a notice to remedy any default of his part on the lease agreement. The Act at section 112 provides for damages, as a remedy to a breach in the conditions that are stipulated in a lease agreement. It provides for the minimum amount payable for repairs as well as remedies available for any breach in any condition in a lease agreement or covenant. The Act also considers the aspects of good faith in lease agreements25 mainly to protect purchasers from claims that arise out of their contracts. Good faith is considered especially when there arise issues of privy of contracts when third parties are involved. This is usually necessitated by the issues of buyers without notice of fraud or other circumstances that arise for failure of full disclosures or making the necessary inquiries26. The Property Law Act at section 10527provides that a tenant is obligated to keep the premises in good and tenable repairs during the continuance till the yielding of the lease. This should be in regard of the condition at the commencement of the lease with reasonable wear and tear is acceptable. A lessor is usually allowed to enter and view a premise he has leased. Larry is a lessor, as well as his agents can view the premises but with a notice given to the lessee for at least two days28. Duncan, William D. (2005) the continuing liability of original lessees after assignment of lease – time for reconsideration? Australian Property Law Journal, 12(2), pp. 93-103. The main theoretical underpinnings of the assignment brought about by the parties, Laim , Larry and Tessa and that of the Travelcentre Pty Ltd is mainly based on the doctrine of Privity of Contract. Privity of contract seeks to focus mainly on the place of third parties in contractual agreements and whether it can be enforced against them. The law of contract usually involves only the parties consenting to the contractual agreement, but difficulty arises when the agreement has a substantial effect on third parties not privy to the contract. The Journal article establishes that the liability in the original lessee remains for the duration of the lease notwithstanding it may have passed through the hands of several assignees (D. W. Duncun 2005), subject to any express indication to the contrary in the lease itself, even when the assignee has extended the term of the lease through the exercise of an option to renew29. The article also provides the lease agreements in various jurisdictions that of England and Wales as well as gives the Australian legislative Authorities. The English legislations are the Landlord and Tenant (Covenants) Act 1995 (UK) and the Australian Legislation in : Retail Leases Act 2003, s 62 (Vic); Retail Shop Leases Act 1994,(Qld); Commercial Tenancy (Retail Shops) Agreements Act 1985, s 10 (WA); Retail and Commercial Leases Act 1995, s 45A (SA); Leases (Commercial and Retail) Act 2001, s 103 (ACT); Business Tenancies (Fair Dealings) Act 2003, s 58 (NT). The article also focuses on persuasive authorities in case law on the assignment of leases such as the case of Measures v McFayden30, and Consolidated Trust Co v Naylor31, also on the consequences of original lessee losing the estate or interest in the land. The Australian Property Law Journal is known to be amongst the most persuasive authorities on property law, and Duncan, William D being known as a prominent and extensive researcher in property law in Australia. The recent publication of the Duncan, WD, the Principle of Property Law in Australia, and use by undergraduates as reference materials gives it the most persuasive authorities. The article also focuses on the possible areas of reform mainly attributed to the terms of leases and duration. The duration of leases given by Larry to the different parties are for a term of 5 years, 3 years and even 8 years. The article suggests that the longer the duration of the leas the greater the likelihood of multiple assignments as demonstrated in the task32. REFERENCES Christensen, Sharon, and D Willliam Duncun. “Breaches of Lease 'Capable of remedy'.” Australian Property Law Journal (Lexis Nexis) 13, no. 2 (2006): 204. Duncun, D Williams. “The continuing liability of original leases after assignement of lease-time for reconsideration?” Australian Property Law Journal 12, no. 2 (2005): 93-103. Duncun, Williams. “The Implication of a term of good faith in commercial leases.” Australian Property Law Journal 9, no. 3 (2002): 209-227. Hepburn, T. Australain Property Law Cases, Materials and Analysis. 2nd. Sydney: LexisNexis, Butterworths, 2012. Jacobs , Sydney. Damages for Breach of Leases. A paper, WentworthSelbourne Chambers: Thomson Reuters, 2010, 1-25. MacDonald, T, B McCrimmon, A Wallace, and D Weir . Real Property Law in Queensland. Melbourne: Lawbook Co., 2010. McGill, Denise. “Statutory Protections from forfeiture of a leasehold estate following Apriaden Pty Ltd v Seacrest Pty Ltd.” Australian Property Law Journal 14, no. 2 (2007): 126-146. Sexton, Rodger. Land Law. Nottingham: Jordan Publishing Ltd, 2006. Read More