In the recent case of Kavia Holdings Pty Limited v Suntrack
Holdings Pty Limited  NSWSC 716, the NSW Supreme Court
considered the validity of an email purporting to exercise an
option to renew a lease for a further term.
The Court ultimately found that an email can, in certain
circumstances, satisfy the formalities required of an option notice
and can be a valid medium to serve a notice.
The tenant held a 10 year lease to operate Jordons Restaurant at
Darling Harbour. The lease contained an option to renew for a
further term of 20 years which had to be exercised between six to
twelve months before the expiry of the lease. To exercise the
option, the tenant was required to notify the landlord of its
desire to take a further 20 year lease within the stipulated
Within the time specified to exercise the option, the tenant
sent an email to the landlord stating (among other things):
"I would like to have at least another 20 years with
Jordons lease and tie that in with Cohibar and Watershed so that
they are a composite asset in the books of Kavia".
The email did not expressly make reference to exercising the
option under the lease.
The tenant asserted that the email represented a notice
exercising the option. This was disputed by the landlord.
Was the option validly exercised?
To determine whether the option was validly exercised by email,
the Court considered what a reasonable person in the landlord's
position would have understood the email to mean by considering the
language of the email, its context, and the circumstances of its
receipt. The primary question was whether, in the context, a
reasonable person in the landlord's position would have
understood that the tenant was giving a notice exercising the
option to renew the lease for a further term.
The Court held that, at a minimum, a notice to exercise an
satisfy the contractual requirements of the notice as set out
in the lease
be clear and unequivocal
not indicate any qualification or ambiguity.
The Court ultimately found that the email did not satisfy the
minimum requirements and therefore would not have been understood
as being an unqualified statement of a desire to take a further
lease of the premises for a further term. The Court found that the
email did not clearly communicate the tenant's intention to
exercise the option because it:
contemplated further negotiation
stated that the tenant wished to have "at least another 20
years" and "tie in" leases of different premises,
both of which would have involved alteration of the current
This was not consistent with exercising an option to renew the
lease for a further term.
Is an email a valid medium to serve a
The Court also considered whether an email was a valid medium to
serve a notice under the lease.
The lease required the notice to be in writing and stated that
it may be given or served by being left at the address specified by
a party in the lease.
The Court held that an email was a valid medium for the notice
under the lease. The email satisfied the primary contractual
formality required by the lease, which was that the notice be in
writing. In considering service of the notice, the Court found that
the words "may be given or served" indicated that there
was no mandatory requirement for actual physical delivery of the
As to the requirement for signing, the Court held that the
inclusion of the sender's name on the email amounted to
"signing" for the purposes of the lease. The Court found
that the purpose of signing was to identify the sender and
authenticate communication, and this was sufficiently achieved in
the email by setting out the sender's name together with the
Of course, this does not mean that all options under all leases
can be exercised by email. The decision in this case rested on the
particular wording in the lease.
What you should take away from this decision
This case is a warning that to effectively exercise an option to
renew under a lease, an option notice must clearly and
unequivocally state the tenant's intention to exercise the
option to renew.
The requirements which must be satisfied will depend (in part)
on the particular wording used in each lease. Tenants must take
care to ensure that the words used in the notice of exercise of
option and the method of giving the notice of exercise of option
satisfy the requirements of the lease and amount to a valid
exercise of the option.
Middletons acted on behalf of the landlord, Suntrack Holdings
Pty Limited, in these proceedings.
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.
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