You've been served! (Or have you?)

What Happened?

In a recent Supreme Court case, a Tenant needed to issue legal proceedings to avoid being evicted by the Landlord. The Tenant had a 5-year lease due to expire on 30 September 2008 and the Lease required the Tenant to exercise its option prior to 30 March 2008. However, the tenant didn't do so until 19 June 2008. So how was the Tenant able to enforce the option?

The Retail Leases Act requires a Landlord to give notice to the Tenant of the need to exercise the option. The Landlord must provide this notice between 6 and 12 months prior to the last date for exercising the option. Otherwise, the tenant is entitled to exercise its option at any time within 6 months of whenever the Landlord eventually does give the notice.

In this case, the Landlord needed to do so between 30 March 2007 and 30 September 2007. Unfortunately for the Landlord, its agent didn't send the notice until 4 December 2007. Even then, the Tenant didn't collect the registered mail until 31 December 2007.

The Court found that the Landlord's obligation to notify the Tenant meant that the Tenant had to actually receive the information. Because this Tenant received the notice on 31 December 2007 that's when the 6 month period commenced for the Tenant to exercise its option. As a result, exercising the option on 19 June 2008 was valid and enforceable!

Practical Tip:

When a Lease provides an option for a further term, always ensure that the requirements for exercising the option are properly complied with. All parties, including the agent, should diarise the important dates to make sure messy situations like this one don't happen to your clients!