Tardy Tenants Getting into Trouble

The Queensland Supreme Court has reaffirmed how crucially important it is for tenants and their lawyers to comply with specified timeframes in their lease, especially when it comes to responding to a landlord’s assessment of new rent on a market review.

The Case

In the case of Sentinel Asset Management Pty Ltd v Primo Moraitis Fresh Pty Ltd [1] , Sentinel Asset Management (the Landlord) and Primo Moraitis Fresh Pty Ltd (the Tenant) had a commercial lease of premises in Morningside, Queensland.

Under the lease, the rent was due for a market review on 7 May 2014. On 21 April 2014, and in compliance of its obligations under the lease, the Landlord sent a letter to the Tenant notifying it of the upcoming market rent review and providing its valuer’s assessment of the current annual market rent (the Landlord’s Notice).

The lease provided that the Tenant had 30 days from the Landlord’s Notice to give the Landlord its own assessment of the current annual market rent. However, the Tenant failed to do so within this timeframe. Almost two months after the Landlord’s Notice was received by the Tenant (being double the specified timeframe), the Tenant notified the Landlord of its assessment of the current annual market rent, providing that the rent should remain as is.

The Decision

In the decision, the Court adopted the principle from GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd [2] , that the nature and effect of a time limit and whether it is imperative, or can be safely ignored by a party, is determined by asking whether the time stipulated is of the ‘essence’ in the lease.

In this case, the lease provided that the Tenant was deemed to agree to the Landlord’s assessment of market rent, if the Tenant did not serve the requisite notice within 30 days. The Court held that, as this clause expressly spelled out the consequences of non-compliance with the time limit, this was indicative of time being an essential consideration in this clause and of the ‘essence’ in the lease.

Ultimately, the Tenant was unsuccessful in its attempts to challenge the market rent assessment and was required to pay the rent provided for in the Landlord’s Notice, which was almost 22% more than what it had been paying prior to the assessment.

Therefore, tenants and their lawyers should ensure that they sufficiently diarise all dates in a lease where time is of the essence, and especially any date requiring a tenant to act within a specified timeframe when responding to a landlord’s assessment of new rent.

 

[1] Sentinel Asset Management Pty Ltd v Primo Moraitis Fresh Pty Ltd [2014] QSC 200.
[2] GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80.

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