Subject Code PRO 210
Assessment Title CASE STUDY OF A COMMERCIAL LEASE
Learning Outcome/s 1,2,3 and 4
Assessment type (group or individual) INDIVIDUAL
Word count An absolute maximum of 1,500 words
Due date Sunday Week 9, 11:55pm Sydney Time
Class submission Lecture ? Tutorial ?
Submission type Paper copy ? Turnitin ?
Answer the two questions logically and as completely as you can and set out a reference list at the end of your answers
(clear, succinct, without repetition) Obtain a copy of the Real Estate Institute of NSW (REINSW) Commercial Lease suitable for a lease of up to 3 years duration. This can be found on the internet.
Read the case study below and apply your knowledge of the law of leases and licenses to answer the questions at the end of the case study. Answer the questions very carefully ensuring that you have considered every possible legal issue contained within the problem even if the issue does not have any serious consequences for the parties to the lease.
You should answer the questions using New South Wales law..
You must submit your answers to the questions to turnitin by Week 9 Sunday 11:55pm. College policy on plagiarism will, of course, be adhered to in assessing this task.
A printed copy of your answers for marking is to be submitted to the lecturer in the lecture room.
Ensure that your task is fully sourced in accordance with the ICMS Style Guide and has an appropriate reference list in accordance with the ICMS Style Guide.
A guide to referencing law cases and legislation is on Moodle under Assessments.
Readings for the assessment
Material for research:
Real Estate Institute of NSW (REINSW) Commercial Lease suitable for a lease of up to 3 years duration.
ICMS Lecture Notes: Lecture 7: Leases
Tutorial Questions on Leases on Moodle in Week 7
Retail Leases Act, 1994 (NSW) See the definition of a retail shop in Section 5.
Sections 84 and 85 of the Conveyancing Act along with the lecturer’s summary on Moodle.
Available from the ICMS library:
Relevant pages of Duncan, S. and Christensen, S (2014) Commercial leases in Australia, 7th edition, Thomson Reuters/Law Book Co, Pyrmont
Note that only one copy is available and you should not leave gaining access until just before the task is due as other students will be using the text. This is a detailed text which references a wide range of cases.
Grading Criteria / Rubric See below
The lease which the the lessor (landlord) and lessee (tenant) have entered into is in the form of the REINSW Commercial Lease suitable for a lease of up to 3 years duration. An uncompleted copy of this lease can easily be located on the internet. You may choose to fill in the details below on the front page if this helps you understand the lease but this is not part of your task and the lease does not have to be submitted. Only details relevant to answering the question set are included.
FACTS RELEVANT TO THE COMPLETION OF THE LEASE:
Lessor: Weilu Warehouse Holdings Pty Ltd
Lessee: Best Luxury Hire Cars Pty Ltd
Premises at : 13 Gormenghast Avenue close to the city centre. The premises are a total of 2,000 square metres and are heritage listed with substantial timberwork included in the structure. The premises are zoned for light industrial use.
The premises are only permitted to be used as a luxury hire car facility with annual rent of $700 per square metre per month.
Best Luxury Hire Cars Pty Ltd (Best Luxury) entered into a lease in the form of the Real Estate Institute of New South Wales lease for properties leased for 3 years or less with the lessor Weilu Warehouse Holdings Pty Ltd (Weilu) on 2 February 2016.
The warehouse is as shown on the attached diagram. It is a lease for a term of 3 years with an option to lease for a further 3 years at the end of the current lease.
Immediately after signing the lease Best Luxury moved its fleet of vehicles into the warehouse and occupied the office on the premises (see plan). In view of the value of the vehicles it was decided to employ Graydon Savage as a caretaker. He was a qualified mechanic and would have a dual role in carrying out minor maintenance on the vehicles in the area set aside for that purpose. He entered into a sub lease with Best Luxury for the flat in the north east corner of the premises. He the moved in.
In May 2016 Pieck’s Groceries entered into an agreement with Best Luxury to store groceries and drinks in the area labelled C on the plan of the warehouse. The agreement was in simple terms as follows:
‘ Pieck’s Groceries Pty Ltd is given license to store groceries and drinks in the area designated on the plan at C.
1. This area will be partitioned with temporary materials with staff of Pieck’s Groceries permitted to use the small roller door in the north west of the warehouse for access to area C.
2. The license may be terminated at any time on one week’s notice by Best Luxury.
3. A license fee of $700 is to payable weekly in advance to the account nominated by Best Luxury.’
Best Luxury partitioned an area of about 100 square metres in the north east of the building for the use of Pieck’s Groceries.
From the beginning of the lease and the license everybody’s businesses prospers. However, a number of problems arise.
Weilu sends a representative, Mr Jones, to inspect the premises on 8 October 2016.
The representative becomes aware that groceries are being stored in part of the premises and he says that the groceries are to be removed forthwith as their storage constitutes a breach of the lease. Mr Smith, the manager of Best Luxury discusses this with Mr Jones and they both inspect the storage area of Pieck’s Groceries. The premises are neat and clean and Mr Jones contacts the general manager of Weilu. After some negotiation it is agreed that Pieck’s Groceries will be allowed to remain on the premises in accordance with its license agreement with Best Luxury.
Some time in November there is heavy rain and there are problems with the electrical services which affect computers and lighting. On several occasions the computers are not able to function and inadequate lighting impedes work of the business. Weilu send electricians to investigate and work on these problems. Everything is fine for a while but there are periodic problems with power and periodically computers and lights break down causing some loss of business to Best Luxury.
Some time early in March 2017 Best Luxury becomes aware that rats and cockroaches are invading the warehouse. Mr Smith considers the area licensed to Mr Pieck to be responsible and gives one week’s notice to Mr Pieck to vacate the premises. Mr Pieck refuses. Best Luxury is also made aware that there is some termite activity in a small area of structural timber in the building.
Weilu is informed of the infestation of rats and cockroaches and supports the termination of the license of Mr Pieck.
The infestation of termites is not notified to Weilu until a further inspection by them of the premises when the lease is about to end by which time significant damage has taken place to the premises and significant preventative work is required. Best Luxury has not sought an extension of the lease having discovered more convenient premises at a slightly lower rate of rent.
PLAN OF WAREHOUSE AT 13 GORMENGHAST AVE , SYDNEY
SEE QUESTIONS WHICH YOU MUST ANSWER ON THE NEXT PAGE
QUESTIONS: All of the questions below should be answered as fully as possible referring to specific relevant legislation, common law principles and specific cases. In addition you must consider specific clauses of the REINSW lease which have been breached or may have been breached. Explain the legal remedies for relevant breaches or possible breaches. Deal with each breach or possible breach in the order in which it occurs in the outline of the facts in the case.
1. What breaches of the lease or possible breaches of the lease and the general law have been made by Best Luxury and Wei Lu and what legal action could each take against the other? Also comment on legal rights which parties may have lost because of their conduct. (20 marks)
2. Analyse the nature of the ‘license’ held by Wilhelm Pieck over the area occupied by his company. Consider whether the interest held is a license, sub lease or lease. Explain your conclusions. Can Wilhelm Pieck be legally required to vacate his occupancy on one week’s notice? Explain.
Grading criteria Question 1
1. Identify and explains the key issues relating to the commercial lease set out in the case study.
2. Explains legal actions which a party could take or which could not pursue given the nature of the breach of the law
3. Evidence of reading and research
HD 9-10 D – 8 CR – 7 P 5-6 F 1-4
Explanation of breaches of the lease and general law explained with support from relevant sources All breaches of the lease and the general law are explained with appropriate support from relevant sources. Most breaches of the lease and the general law are explained with appropriate support from relevant sources. Some breaches of the lease and the general law are explained with support from some relevant sources. Some breaches of the lease explained but limited if any support from relevant sources. Makes one or more relevant points in relation to the breaches. May use the law to a limited extent in support or may incorrectly state the law
HD 9-10 D – 8 CR – 7 P 5-6 F 1-4
Explanation of legal actions which parties could take along with actions which could not be pursued. All legal actions which the parties could take are fully explained along with actions parties could not pursue. Most legal actions which party could take are explained along with actions party could not pursue. Some explanation of legal actions which a party could take are explaned along with actions a party could not pursue. Some explanation of legal actions which a party could take are explained along with actions which l= Refers to one or two legal actions which could be taken by a relevant party and may or may not provide an explanation
SEE NEXT PAGE FOR CRITERIA FOR ASSESSMENT OF QUESTION 2
Grading criteria Question 2
1. Analyses fact situation in case study as including a license/lease or sub-lease.
2. Supports analysis by reference to relevant sources
HD 5 D 4 CR 3.5 P 2.5- 3 F 2 or less
Analysis of the nature of the interest held by Wilhlem Pieck supported by Thorough and fully considered analysis of the nature of the interest held by Wilhelm Pieck supported by reference to relevant sources 4 or more significant points made in relation to the question supported by reference to relevant sources 3 or more significant points made in response to the question supported by reference to relevant sources, 2 significant points made in response to the question which may or may not be supported by reference to relevant sources A single relevant point made
SEE NEXT PAGE FOR A SUMMARY OF S.84 AND S.85 OF THE CONVEYANCING ACT
Summary of s 84 and s85 of the Conveyancing Act, 1919 (NSW)
s.84 Covenants by Lessees
s 84(1) In every lease the following covenants are implied:
• The lessee is to pay the rent payable under the lease;
• If during the period of a lease the premises are destroyed or damaged by fire, flood, lightning, storm or tempest or shall suffer war damage which leaves the premises unfit for occupation or use rent is to abate or a proportion to be suspended until the premises are rebuilt or made fit for occupation and use by the lessee. (s 84(1)(a)
• At all times during the lease and at the termination of the lease the premises are to be given up in ‘good and tenantable repair having regard to their condition at the commencement ‘ of the lease ‘Accidents war damage and damage from fire, flood, lightning, storm and tempest and reasonable wear and tear excepted.’ S84 (1)(b)
• If there is any dispute arising under s84 (1) this dispute is to be referred to arbitration under the Commercial Arbitration Act, 2010.
s 85 Powers in lessor
s85(1) In every lease the following covenants are implied:
• The lessor ‘may twice in every year during the term at a reasonable time of day upon giving two days notice enter upon the demised premises and view the state of repair thereof’.
• The lessor ‘may serve a notice in writing of any defect, requiring the lessee . . . within a reasonable time to repair same in accordance with any covenant express or implied in the lease.’ s 85 (1) (a)
• If the lessor fails to repair any defect referred to in the notice the lessor ‘may from time to time enter the premises and execute the required repairs.’ S 85(1)(b)
• The lessor may ‘at all reasonable times during the term with workers and others and all necessary materials and appliances’ enter the premises’ to comply with the terms of any legislation affecting the premises by ‘any notices served upon the lessor or lessee by the Secretary of the Department of Health, licensing municipal or other competent authority’ in order to control ‘noxious weeds, destroy noxious animals’ or the ‘carrying out of any repairs, alterations, or works of a structural’ which the lessor may be bound to do ‘ and may neglect to do. These powers and authorities under the lease are to be carried out ‘by the lessor under the lease’ and is to be carried out ‘by the lessor without undue interference with the occupation and use of the demised premises by the lessee’. S85 (1)(c)
• If rent is in arrears for one month or if there is a default in an express or implied covenant in the lease and the default continues for two months or if repairs are not completed the lessor may re enter the premises and terminate the estate of the lessee. S85 (1) (d)