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Renewing a lease – another option, another missed opportunity

Warren Wackerling and Luke Bull – 6 February 2015

Introduction

A lease often includes an ‘option’ to renew the term.  Such ‘options’ can be confusing for both tenants and landlords (see for example our news article Renewing your lease – option?  What option?’).

In December, an interim application before Queensland’s Civil and Administrative Tribunal (‘QCAT’) reinforced this point.  The decision emphasises the importance that tenants not wait for a landlord to remind them of their option to renew a lease.  Doing so can prove disastrous.

Facts

The applicant, by a retail shop lease tenant, sought relief from a landlord’s notice to deliver up possession.  The applicant had sought to exercise its ‘option’ to renew contained within the lease, however the tenant did not exercise the option within the time required under the lease.  The tenant argued this was the landlords fault and therefore they should remain in possession.  According to the tenant, the landlord never sent them a notice to renew the lease under by section 46 of the Retail Shop Leases Act 1994. The main issue for the Tribunal was whether the landlord failure to do so entitled the tenant to relief.

The Tribunal held the landlord’s failure to send the notice did not affect the tenant’s failure to exercise their option. Under the common law, if a party fails to exercise its option by the required date, the option simply lapses. The Tribunal found that tenant here was therefore required to vacate the premises.

What do I need to be careful about?

If you are a tenant, it is important that you know your strict timeframes for giving notice to exercise your option to renew.  Do not rely on your landlord to remind you of you of critical dates by when you must exercise the option to renew.  The decision in this case highlights again just how fickle ‘options’ in leases can be and how easy it is to miss an opportunity. 

Download the decision here. 

This article is for general information only and should not be relied upon as a substitute for specific legal advice.