A dilemma which often faces commercial and retail
shop tenants in Queensland is whether or not they should register
their Lease with the titles office.
It is common in practice for the Tenant to bear the
costs of and incidental to the registration of the Lease. This can
include the costs of having a Premises surveyed and plans prepared,
lodgement fees and requisitions. This can all be a very costly
process.
The question that often confronts a Tenant is: do
the risks associated with not registering the Lease justify the
initial costs of registration?
So what are the risks?
First we should look at the basic rule regarding
registered and unregistered interests. Section 184(2)(a) of the Land
Title Act 1994 (the ‘Act’) provides:
“the registered proprietor of a lot will not be
affected by the actual or constructive notice of an unregistered
interest affecting the lot.”
There are exceptions to this rule as we will see
below but, disregarding the exceptions, the effect is that, if the
Landlord should decide to sell the Premises at any time during the
Lease, a buyer of the property is not be obliged to honour any
unregistered Lease. It is worthwhile to note that this rule applies
even if the buyer has actual notice of your Lease.
There are exceptions to this rule. One such
exception, perhaps the most commonly occurring exception, is provided
for in Section 185(1)(b) Act:
“A registered proprietor…does not obtain the
benefit of Section 184…for the interest of a Lessee under a short
Lease.”
A short lease is a lease for a term of three (3)
years or less. Therefore, your interest under a short Lease will be
protected (in part) even if it is not registered. The buyer of the
Premises will be forced to honour your interest in the Premises as if
your Lease were registered, but any options for a further period need
not be honoured.
The Act expressly provides that, even if the initial
term of the Lease is three years or less, any options to extend the
lease and any rights to purchase the premises which are contained in
the Lease will not receive the benefit of Section 185(1)(b).
If you want to ensure that your Lease options are
protected then you must register your Lease regardless of the initial
term of the Lease.
There are other, less commonly occurring, exceptions
provided for in the Act, however, what is clear is that if you want
to secure your tenancy for any period beyond three (3) years,
registration of your Lease is essential.
If an option to purchase the leased property is
included in the lease then registration is essential regardless of
the term of the lease.
The process of registration requires strict
compliance with the titles office requirements.
You should always obtain advice and assistance from
your lawyer when entering into a commercial Lease.
Riba Business Lawyers work in the areas of
Franchising, Leasing, Business purchases, Business sales, and
business
lawyer. Joseph Riba has worked for more than a
decade in the franchising industry. Joe was admitted as a lawyer in
Queensland Australia in 1993 and commenced J J Riba and Company
business
solicitor in 1998.
Article Source: http://www.compensationsecrets.co.uk/