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In our blog "
Consent to Assignment: necessary and may be withheld"
of 4 July 2012, we discussed a Supreme Court of NSW decision
dealing with the transfer of a lease which was caught by the
provisions of the Retail Leases Act 1994 (NSW)
("Act").
Some aspects of the decision of the Supreme Court were appealed
by the proposed assignee. The Court of Appeal
("COA") allowed the appeal.
There are a number of points to note from the COA decision which
should be kept in mind by landlords and tenants under leases caught
by the Act when dealing with assignment of the lease.
No requirement of reasonableness - The
provisions of the Act do not refer to the reasonableness or
unreasonableness of the withholding of consent to assignment by a
landlord. If one or more of the circumstances specified in the Act
entitling a landlord to withhold consent exist then the landlord is
entitled to withhold consent.
Request for Information should be specific
– Pursuant to Section 41(a) of the Act the tenant
requesting consent to assignment must provide the landlord with
such information as the landlord may reasonably require concerning
the financial standing and business experience of the proposed
assignee.The COA decision confirms that it is for the landlord to
specify the information it requires. A tenant is entitled to
specificity from the landlord as to the information required.
Descriptions such as "verifiable information regarding"
the tenant's financial standing do not satisfy the level of
specificity required.
Must concern the financial standing - The
information requested must concern the proposed assignee's
financial standing which is noted by the COA as the state of the
assignee's ability to meet financial commitments. Requests for
information such as:
how the assignee proposes to clear current indebtedness;
and
the assignee's proposed strategies to avoid future
indebtedness, would generally not be requests for information
concerning an assignee's financial standing for the purpose of
the Act.
Note Section 41(d) of the Act - Landlord's
and tenants need to keep in mind Section 41(d) of the Act which
notes the landlord is deemed to have consented to an assignment if
the tenant has complied with Sections 41(a) and 41(b) and the
landlord has not within 28 days of the later of the request being
made and the date by which the tenant complied with Sections 41(a)
and 41(b), given notice in writing to the tenant either consenting
or withholding consent. It should be noted that a request for
consent can be made more than once and that the landlord needs to
act within the 28 day period in respect of each request.
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