We draw your attention to the findings of a recent case. The
case has important ramifications for all shop centre owners and
managers and should be kept in mind when negotiating leases.
The two main warnings from this decision are
1. Space Licences (eg storage or car park) may be deemed to be
retail shop leases.
2. These licenses may be separately assigned independently of
the primary lease.
A Retail Shop Leases and Licences
A recent decision in the ADT reinforces earlier NSW court
decisions that a licence granted for use of space by a retail shop
business will itself be a retail shop lease and will be
subject to all the provisions of the Retail Leases Act 1994 (NSW)
– including the minimum five year term and the
lessee's rights to assign (as examples).
Global Hospitality Acquisitions v Owners Corporation
The case, Global Hospitality Acquisitions Pty Ltd v Owners
Corporation SP31748  NSWADT 130 illustrates how a short
term lease and a car park/ storage licence can be deemed a
retail shop lease. In addition to its primary lease, the
tenant, a restauranteur, had a short-term lease over common
property (owned by the body corporate) for use as a kitchen and
food preparation area, and also had a licence over two car spaces
in separate lots to the premises which were used as storage space
for the business.
Both the kitchen area and the car spaces were deemed to be
retail shop leases because they were "wholly or
predominantly" used for the carrying on of the business of the
primary lease and were an integral rather than ancillary part of
that business. The tribunal was not swayed by the possibility that
the car spaces were capable of non-business uses because the
evidence showed they were only used for business purposes. Nor was
the tribunal concerned that the licence deed didn't contemplate
using the parking spaces for storage space because that had always
been the parties' actual intention.
Implications of the Case.
Lessor's should ensure that section 16(3) certificates are
obtained for short term licences and be aware that the tenant may
assign a license following the procedure outlined in the Act,
without assigning its lease. A Lessor may not prevent an
independent assignment of a licence even if the licence prohibits
assignment - the Retail Leases Act would override such a
prohibition. It would be best for the Lessor to ensure that all
area licenses are contained in the primary lease and not granted
separately.(The earlier NSW court decisions referred to were
Manly Council v Malouf  61 NSWLR 394 and Moweno
Pty Ltd v Stratis Promotions Pty Ltd  NSWSC1151.)
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.
If an owner wants to remove a caveat, issuing a lapsing notice is a quick and easy way to shift the problem to the caveator.
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).