Queensland’s property law landscape is poised for a significant transformation with the imminent realisation of the Property Law Act 2023 (Qld) (the Act). While the Act brings wide-ranging reforms across all aspects of property law, commercial leasing will see several key changes impacting both landlords and tenants. At Rouse Lawyers, we are committed to staying informed about these upcoming changes so we can provide our clients with advice that is tailored to the new legal landscape.

 

Increased Transparency and Fairness in Lease Assignments

One of the most significant changes concerns lease assignments. Historically, obtaining a landlord’s consent for assigning a lease was often a point of contention due to delays which consequently could lead to a business sale collapsing. The Act introduces a more defined process, requiring landlords to respond to requests for consent within one (1) month after receiving full particulars of the lessee’s proposal.

The new provisions also allow tenants to bring an application to Court about their assignment request if:

(a) The tenant believes the landlord has unreasonable withheld consent; or
(b) The tenant believes a condition attached to the landlord’s consent is unreasonable, unnecessary or onerous; or
(c) The landlord fails to give the tenant a decision notice within 1 month of receiving full particulars from the tenant.

This aligns with similar reforms implemented in other states, promoting greater transparency and fairness in the leasing process.

Focus on Reasonableness in Obtaining Lessor’s Consent

The Act emphasises the concept of “reasonableness” when seeking a landlord’s consent for various actions, including subletting, changing the use of premises, or making alterations. Landlords will no longer be able to withhold consent arbitrarily. If a landlord refuses consent or imposes unreasonable conditions, tenants can apply to the Court for a determination. This empowers tenants to challenge arbitrary decisions and encourages a more collaborative approach between landlords and tenants.

Release from Ongoing Liability for Subsequent Assignees

Currently, a tenant can be held accountable for breaches of a lease by any subsequent tenant of their lease. For example, if Tenant A assigns its lease to Tenant B, and Tenant B assigns the lease to Tenant C, Tenant A (and its guarantor/s if applicable) could still be liable for any breach of the Lease by Tenant C, depending on the terms of the Lease.

Using the above example, the Act now imposes a full release of release Tenant A from any breaches of the lease by Tenant C. It’s important to note, however, that Tenant A and their guarantors can still be held accountable for breaches by the immediate assignee (i.e. Tenant B) unless explicitly released.

Tenants Relief against Forfeiture

The Act will introduce systematic changes to a landlord’s ability to refuse a tenant’s right to renew or extend their lease or to purchase the land on which the premises is located. Currently, landlords have the discretion to deny a tenant’s option to renew their lease if the tenant is in breach regardless of then the breach occurred. The Act will instead provide that, if a landlord intends to refuse a tenant the right to renew due to a breach of the lease, they must provide a written “breach notice” to the tenant within 10 business days of either:

(a) the tenant exercising the option (e.g. notifying the landlord they want to renew); or
(b) the breach occurring (if it happens after the option is exercised).

The notice must detail the specific breach and the tenant will have one month to address the breach or seek relief from the Court. Relief can be granted if the breach is considered minor or the landlord themself failed to fulfill a condition required before the option could be exercised.

This represents a significant break from the Courts’ longstanding practice of enforcing strict compliance with any notice provision for option exercise, even in extenuating circumstances.

Notices Required for Other Parties

The Act also expands the notice requirements to include to other “interested persons” (e.g. Mortgagees and subtenants) that may be impacted by a tenant’s breach of the lease. Landlords will now have an obligation to provide notice to these interested persons, in addition to the tenant. This includes copies of any “notice to remedy breach” or the aforementioned “breach notice” related to a refusal to renew or sell.

Currently, landlords only need to provide notice directly to the tenant. Now, they must ensure proper notification procedures are followed to include any interested persons. This might involve updating their leasing practices and ensuring they have accurate contact information for mortgage lenders and subtenants.

By understanding these new requirements, landlords can avoid complications and ensure all parties involved are kept informed and have the opportunity to respond accordingly.

Conclusion

The Act represents a significant shift in Queensland’s commercial leasing landscape. The increased focus on transparency and reasonableness creates a more balanced and efficient system for both landlords and tenants.

However, navigating these upcoming changes requires a thorough understanding of the Act’s provisions. Consulting with a qualified property lawyer at Rouse Lawyers is recommended to ensure your lease agreements and future transactions comply with the new legal framework. We can help you understand how these changes might impact your specific situation and advise you on the best course of action.

 

 

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Disclaimer

The information contained on this website is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved.

Accordingly, the information on this site is provided with the understanding that the authors and publishers are not providing legal advice. As such, it should not be used as a substitute for consultation with professional legal advisers. Before making any decision or taking any action, you should consult with a professional lawyer from Rouse Lawyers.

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