Member Article

Read the small print on leases - beware of breach!

Leases are not just pieces of paper. It’s always wise for a potential tenant to seek legal advice so that you are “in the know” and understand the implications of the words that are written in the document that they are asked to sign before they take occupation of their property warns Shilpa Unarkat, Associate Solicitor at Sydney Mitchell LLP.

Heads of Terms (covering the main points such as the length of term, rental, any rent free period, break right, the repairing obligation, rent deposit requirement etc.) will usually be drawn up by a Landlord or its agent and will be put to the Tenant. There may be little or no negotiation and these Heads of Terms (together with other terms which weren’t necessarily discussed or agreed at the time) will then find their way into a Lease, a legally binding 30-40 page contract between the Landlord and the Tenant.

The importance of “knowing your Lease” has been highlighted by a case which involved a residential property tenant. The flat tenant’s 99 year Lease included a covenant that it must not cut, maim, alter or injure any of the property’s principal walls without the Landlord’s prior consent.

When the boiler in the flat broke down, the Tenant employed a plumber to install a new condensing unit which involved cutting at least one new hole into a flank wall to make way for an exhaust vent and waste pipe.

The Landlord sought to forfeit the Lease on the basis that the Tenant had breached the covenant of the Lease as it had not obtained its consent to the works.

Forfeiture was not granted on this occasion as the breach was described as modest and if the Landlord was successful, it would obtain only nominal damages.

The parties were advised to reach a sensible compromise rather than continue with the court proceedings.

The point however is that had the Tenant known about his obligation to seek his Landlord’s consent before carrying out the works and made application to obtain it, he would not have ended up defending a claim for forfeiture of his Lease.

If you are an existing Tenant or you are proposing to enter into a Lease it pays to get advice at the start rather than the risk of getting in wrong.

This was posted in Bdaily's Members' News section by Sydney Mitchell LLP .