As a lessee or lessor, you should be aware of your contractual
obligations under a lease, but you should also be aware that
misinterpretation over these obligations can sour the relationship
you have with your other party. A recent decision in the New South
Wales Supreme Court (Allsvelte Pty Ltd v Cassegrain Wines Pty
Limited  NSWSC 1370) highlights the dangers of poor conduct
and "wilful" breaches under a lease term. In this case,
the Court didn't allow the tenant (Allsvelte) to exercise its
option to renew because of poor conduct for the duration of the
original lease, and a series of "wilful" breaches of
their responsibilities and obligations.
Allsvelte leased restaurant premises for an initial three year
term from Cassegrain with an option for Allsvelte to extend for a
further period if they wished to do so. It also included a term
that only allowed Allsvelte the ability to exercise this option if,
at the time of service of this notice to exercise, there were no
rent or outgoings overdue and all of Allsvelte's other
obligations had been met.
When Allsvelte eventually served the notice to exercise their
option, Cassegrain responded by serving a notice under section 133E
of the Conveyancing Act 1919 (NSW), referring to nine breaches to
the lease that Allsvelte had made, and preventing their option to
Allsvelte tried to dispute this and find protection under
section 133F of the Conveyancing Act 1919 (NSW).
The Court found that only one of the nine breaches was
sufficient, however considered it too minor to work in
Cassegrain's favour. However, the Court still held that
Allsvelte couldn't renew its option or find relief in section
The relationship between the two had deteriorated and was
unlikely to improve
Allsvelte had "wilfully" failed to provide sales
records to Cassegrain that would have eluded that the lessee was
required to pay additional rent
Allsvelte had "wilfully" failed to follow the rules
the landlord wished to enforce under the terms of the lease.
Be aware that leases often include options to renew and extend
beyond the initial period of leasing. However, this option often
depends on whether or not a lessee adheres to their obligations and
responsibilities under a lease. Know what your contractual
liability is under the terms of your lease, and make sure that you
don't bring about any "wilful" breaches. As
demonstrates, breaches can harm your relationship with your Lessor
and prevent you from renewing at the end of the original lease
If you're a Lessor who has been served with a notice to
exercise an option to renew in your lease, consider the
relationship with your Lessee and whether they have conducted any
"wilful" breaches that would allow you to prevent them
from exercising this option. You, like Cassegrain, could act under
section 133E of the Conveyancing Act 1919 (NSW) and explain the
breaches of your lessee.
The Court will consider the nature of the breaches complained
about as well as the behaviour and relationship between the two of
you. In this case, Justice Ball said that the behaviour of the
lessee "appears to have been unreasonable."
Before a negative relationship or misunderstandings over
obligations under a lease occurs, it's important that you both
fully understand the clauses involved in the lease. In addition,
it's essential that the lease is appropriately and formally
drafted to prevent miscommunication or misinterpretation over
phrases or language. This case demonstrates what avenues parties
may take if they arrive at this situation, but it also illustrates
the consequences of parties that do not fully understand their
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.
Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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).