Australia: Case update: Tripple A decision - exercising options in commercial leases in Queensland

Last Updated: 6 April 2019
Article by Ash Rihak

In the recent decision of the Queensland Court of Appeal in Tripple A Pty Ltd v WIN Television Queensland Pty Ltd [2018] QCA 246 (Tripple A Case), Justice Bowskill delivered the leading judgment that reviewed the legal rules applicable to the exercise of an option to renew a lease, in the context of a rent dispute between the parties.

This article will look at the facts in the Tripple A decision, the court's conclusions, and some takeaway messages for commercial landlords and tenants.

What were the facts in this case?

Tripple A Pty Limited (Tripple A) and WIN Television Qld Pty Ltd (WIN) entered into a 5-year lease of premises in Rockhampton in Queensland. The lease commenced on 1 November 2012, and included two options to renew, each for a further period of 5 years.

The lease included a provision that stated that in order for WIN to exercise the option to renew the lease, WIN must give a written notice of its intention to exercise the option to the Landlord at least 3 months before the expiry date of the lease (i.e. on or before 31 July 2017).

WIN did not give a notice to exercise the option before 31 July 2017. Instead, the following occurred:

  1. on 8 August 2017, Tripple A's agent sent a reminder letter to WIN asking them if they wished to exercise the option to renew;
  2. on 10 August 2017, WIN replied saying that they wished to remain in the premises for 5 more years, and asking Tripple A to confirm the new lease terms;
  3. on 28 August 2017, Tripple A's agent sent a letter to WIN acknowledging that WIN wished to exercise the option, and stating that Tripple A would offer a new 5-year term at the current rent with no increase or decrease; and
  4. on 29 August 2017, WIN replied confirming that WIN accepted Tripple A's terms.

Having reached this agreement, when it came time to sign the lease documents the parties disputed what rent was payable under the new lease.

WIN argued that the rent for the new lease should be the market rent for the premises, because the parties had proceeded on the basis that the option to renew had been validly exercised and the original lease stated that the rent at the beginning of each option lease was to be reviewed based on current market rent. WIN believed that the current market rent would be substantially lower than the existing rent for the premises, based on the rent of other premises on offer in the area.

Tripple A argued that the rent that should apply was the current rent under the original lease as at 31 October 2017, because this was what Tripple A had proposed on 28 August 2017 and WIN had accepted in their letter of 29 August 2017.

What did the Court decide?

To reach a conclusion on the question of which rent applied, the Court needed to answer three questions:

  1. Can an option to renew be validly exercised out of time or otherwise inconsistently with the requirements in the lease?
  2. Can a landlord waive strict compliance with the requirements to exercise the option?
  3. On the facts of this case, what amount of rent was payable by WIN?

Justice Bowskill answered these questions as follows:

Can an option to renew be validly exercised out of time or otherwise inconsistently with the requirements in the lease?

No, an option to renew cannot be validly exercised out of time or otherwise inconsistently with the terms of the lease. This is because an option to renew is characterised at law as either:

  1. a conditional contract which will only come into force if the tenant meets the landlord's strict requirements; or
  2. an irrevocable offer by the landlord to the tenant that the tenant can accept only by complying strictly with the requirements to exercise the option.

Accordingly, any conduct by the tenant that does not comply with the requirements in the lease is a counter offer to the landlord, which means that any new terms subsequently entered into form a new lease. This meant that the lease in the Tripple A Case for the further 5-year term was a brand new lease, even though the parties proceeded as if the option had been exercised.

Can a landlord waive strict compliance with the requirements to exercise the option?

A landlord may be able to waive the requirements for the exercise of an option before the time to exercise the option has passed, although this is uncertain at law because a landlord is not entitled to have the tenant fulfil the requirements. The landlord cannot waive the requirements for the exercise of an option once the time in which the option can be exercised has passed. In the Tripple A Case, Tripple A could not waive the requirements for the exercise of the option because the first correspondence in relation to option was on 8 August 2017, 8 days after the time limit expired.

On the facts of this case, what amount of rent was payable by WIN?

Even though, due to the answers to questions 1 and 2, the option was not and could not have been validly exercised, the rent that applied was the current market rent. This was because:

  1. the parties had proceeded on the basis that the option had been validly exercised. This meant that the parties had agreed that the new lease would include the same provisions as the original lease with respect to a market rent review, because these provisions would have applied if the option had been validly exercised; and
  2. Tripple A's written statement on 28 August 2017 that the rent would be the current rent with no increase was not a valid notice of the applicable market rent in accordance with the market rent review provisions of the original lease. Accordingly, WIN was entitled to have the rent reviewed.

Implications of the Tripple A Case

The Tripple A Case highlights the importance for a tenant of exercising an option within time, and for both parties of ensuring that where an option is exercised, it is clear that the option has been exercised, and where a new lease is entered into, it is clear that it is a new lease and what terms will apply to that lease.

If a tenant does not exercise an option within time, they risk being left without a lease if the landlord will not agree to enter into a new lease.

If the parties proceed with a new lease without making the terms of that lease clear from the outset, they are likely to end up in dispute as to the key terms of that lease further down the track. The terms that a court will consider are contained in the lease may not be what the parties expect.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
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
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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