Where a landlord seeks to terminate a head lease, section 125 of
the Property Law Act 1974 (Qld) (Act)
provides the court with the power to protect sub-tenants.
On 5 August 2011, the Supreme Court of Queensland (Court of
Appeal) ordered that a landlord grant a new lease to the sub-tenant
after the tenant went into liquidation (Leahy v Fimiston
Investments Pty Ltd & Anor  QSC 22).
The case involved land on which a service station and
mechanic's workshop was operating. The land was inherited by
the landlord, Ms Leahy, from her mother. At the time, the service
station was leased for 20 years to Mr Winner – who
notably, was also appointed trustee of the landlord's
mother's estate (and later removed from the role at Ms
Leahy's request). Mr Winner in his role as trustee consented to
an assignment of the lease to Fimiston Investments Pty Ltd and to
part of the premises (the mechanic's workshop) being sub-leased
back to Austwin Management Services Pty Ltd (of which Mr Winner was
sole director and shareholder).
As Fimiston Investments went into liquidation and owed money
under the lease to the landlord, Austwin and Mr Winner were
contractually obliged to indemnify the landlord in respect of
Fimiston Investments' breach. The landlord eventually
terminated the lease and sought to repossess the whole of the
service station. Part of Austwin's response to this was to make
an application under section 125 of the Act for relief against
forfeiture in respect of the mechanic's workshop.
The court ultimately upheld the trial judge's decision that
the sub-tenant was entitled to relief and the landlord was
therefore obliged to enter into a lease with the sub-tenant for the
remaining term for just the mechanic's workshop.
In reaching its decision, the court agreed with the major
factors considered by the trial judge:
the likelihood of the sub-tenant suffering significant loss as
a result of the sudden forfeiture (as it had conducted a business
from the premises for some 25 years) together with the impact upon
the two employees if the business was forced to close;
the difficulty of finding similar premises in the area
available for rent within a short period of time; and
even though affording relief to the sub-tenant would restrict
the landlord's capacity to deal with the whole of the premises,
the imposition on the landlord would not be as great, as the term
of the sublease was due to expire in July 2012.
The result of this appeal serves as a good reminder that
landlords need to be cautious when consenting to sub-leases as, in
certain circumstances, the sub-tenant may instead become the
tenant. Therefore, landlords should ensure that sub-tenants are
thoroughly investigated and deemed as suitable as if they were a
tenant under the lease.
If you would like to discuss this legal alert in more detail,
please contact a member of our Property, Planning and Environment
team on 07 3231 2444.
Cooper Grace Ward was named Best Australian Law Firm in the BRW
Client Choice Awards 2010 - Revenue < $50m. Joint Best
Australian Law Firm in the BRW Client Choice Awards 2009 - Revenue
The firm has also been named as the fastest growing law firm in
Australia for 2009 by The Australian.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).