Australia: Oral Leases And Agreements To Lease: The ADT Sidelines The Statute Of Frauds

Last Updated: 14 January 2008

It is almost trite to say that contracts disposing of an interest in land, including leases and agreements to lease, are required to be in writing and if not, without acts of "part performance", they are unenforceable. This principle, embodied in section 54A of the Conveyancing Act 1919 (Conveyancing Act), is over three centuries old. It stems from the Statute of Frauds 1677 and is generally referred to by reference to that Act.

So, can a binding agreement for the lease of a retail shop premises be concluded by word of mouth alone? If no written agreement, is part performance (such as the occupation of the premises or payment of rent) needed at all? The Administrative Decisions Tribunal's (Tribunal) decision in Perhauz1 sidelined the Statute of Frauds by enforcing a wholly oral agreement to lease where there had been no part performance. The recent decision in Thai Star2 has cemented the Tribunal's view that the Retail Leases Act 1994 (Act) overrides conflicting provisions of the Conveyancing Act.

Facts Of Perhauz

Mr Perhauz and Ms Taylor (Applicants) alleged that an agreement to lease for a restaurant known as "Poets Corner" (Premises) had been concluded orally with Mr Felsch, a real estate agent (Agent) acting for the owners of the Premises (Respondents), and sought among other things, a declaration that an enforceable agreement existed.

The Applicants had leased other restaurant premises from the Respondents and had been approached by an agent of the Respondents in 2005 as potential purchasers of the restaurant business then operating from the Premises. The Applicants had declined, as the lease of the Premises was for too short a term. The conversations alleged to have given rise to the agreement to lease took place almost a year later, in June 2006. In summary:

  • the Agent had informed the Applicants that the tenants of the Premises would soon be leaving and that the Premises would be available for lease and then asked if the Applicants would be interested in leasing the Premises
  • the parties discussed terms of the lease being offered for the Premises, being the rental, the term of the lease, a demolition clause, the use of the Premises (as a café) and a possible rent free period
  • Mr Perhauz had said that he would "take the lease"
  • the Agent said he would have a lease drawn up and sent to the Applicants.

The main issue for the Tribunal was whether, at law, a binding agreement for the lease of a retail shop premises can be concluded by word of mouth only. The Tribunal had, in a handful of earlier decisions3, suggested that purely oral leases and agreements to lease may be valid, but these decisions had all dealt with agreements or leases which were outside the ambit of the Act as it then applied because they were for terms of less than six months.

The Tribunal determined that a binding agreement for the lease of a retail shop premises can be concluded by word of mouth only on the basis that:

  • section 3 of the Act (which sets out the definition of a "retail shop lease") creates a statutory legal interest irrespective of the requirement under section 23B of the Conveyancing Act that interests in land are not to be passed otherwise than by a written deed
  • the definition of a "retail shop lease" in section 3 of the Act includes agreements under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop, whether the agreement is oral or in writing, or partly both
  • section 8 of the Act (which provides that a retail shop lease is "entered into" when a person either enters possession, pays rent or upon both parties "executing" the lease) does not operate to render wholly oral agreements to lease (as opposed to oral leases) unenforceable because:
  • the words "entered into" indicate that the real function of section 8 is defining when an agreement to lease "ripens into a fully established lease transferring a legal interest in the land to the lessee"

  • the concept of "executing" the lease refers to the act of signing a lease rather than a written agreement for a future lease, which in practice are often unsigned, but still potentially enforceable under section 54A of the Conveyancing Act .
  • it was consistent with the Tribunal's function of protecting "the legitimate interests and expectations of lessees and would-be lessees".
Thai Star

In Thai Star, the Tribunal determined that an oral lease was enforceable in circumstances where there had been part performance (ie the tenant occupied the premises and paid rent. The question arose whether the oral lease could be terminated immediately under section 23D of the Conveyancing Act. Section 23D provides that all interests in land not put in writing and signed can be terminated at will, excepting oral leases for the 'best rent' reasonably obtainable with terms less than three years4. The Tribunal referred to and approved its reasoning in Perhauz in determining that the lease could not be terminated under section 23D, because the Act creates a "statutory legal interest" in land "irrespective" of the bar against oral leases set by section 23D.

Lessons For Retail Landlords And Their Agents

The Perhauz and Thai Star decisions as significant in that they confirm that, in the Tribunal at least, the bars to enforcing oral leases and agreements to lease in the Conveyancing Act do not operate in respect of retail shop leases. They are also perhaps further examples of the quantum shift in the landlord/tenant relationship brought about by the Act as applied by the Tribunal that has resulted in the scuttling of undertakings as to damages, implied leases and many of the other devices once available to answer or discourage claims by retail tenants.

There is little doubt that the pendulum is swinging in the retail tenant's favour. That said, it is not all gloom for retail landlords, as the Tribunal did confirm that a note to the effect that any set of terms to which the parties or their agents give their provisional consent to is not binding until a formal lease is prepared and executed is enough to refute any claim for a wholly oral agreement to lease. Making such notes is a simple practice which all agents and retail landlords should adopt.

As a final note, the importance of contemporaneous notes was again emphasised in Perhauz. The Agent had not kept contemporaneous notes, and the Applicants' evidence was preferred to his for the reason that the Applicants' recall would be better as the deal was presumed to be of greater importance to them and because the Agent was presumed to have been involved in a large number of similar deals at the time. Retail landlords and their agents must take the warning that without contemporaneous notes supporting their version of critical discussions they will be exposed to a significant risk that the Tribunal will prefer the tenant's evidence as to what was said.


1 Perhauz & Anor v SAF Properties Pty Ltd & Ors [2007] NSWADT 122

2 Thai Star Video Pty Limited v Walpole [2007] NSWADT 193

3 eg Four Seasons International Agriculture Pty Ltd v Iacullo [2002] NSWADT 91, Rolet v Baron [2002] NSWADT 316

4 Section 23D(2) Conveyancing Act 1919 [NSW]


Robert Riddell

t (02) 9931 4940


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

Click to Login as an existing user or Register so you can print this article.

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”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions