• March 17th, 2016

Leases

Paper, Order, or Assignment Requirements

HYPOTHETICAL PROBLEM LEASES

AIMS & OBJECTIVES

This hypothetical aims to provide you with an opportunity to demonstrate your understanding of a doctrinal area of property law. On completing this hypothetical, you should have:
• read thoroughly in the particular area relevant to the question.
• written a well-structured, clearly expressed response to the question.
• identified key issues and provided a coherent resolution of each issue.
• used proper referencing.

GENERAL INSTRUCTIONS

Length: Maximum of 1000 words. Matters of substance must be included in the body of the text, not in footnotes. Please use a font of not less than 12-point type and margins not less than those on this document. Where an answer exceeds the word limit by more than 15%, a line shall be drawn at that point and the remainder of the answer shall not be taken into account in marking the answer.

Research: You are expected to use information from essential reading listed in the topic study guides and may use information listed in further reading in the topic study guides. There is no need to research any further than these sources.

Plagiarism Warning & Referencing: When using published sources (eg statutes, case law and secondary materials) you must cite them in a footnote. To fail to do so is plagiarism. It is also poor legal argumentation: your argument will be stronger if you can give external authority for ideas or propositions, and then build on those authorities with your own, clearly expressed, reasoning.

Note the following simple conventions for referencing primary legal materials:

• the short title of the Act, followed by ‘s’ or ‘ss’, for a particular section or sections.

• similarly for cases, use the short version of the case name + citation, and page reference if any (eg Applicant v Respondent (1904) 1 CLR 154 at 155.) For subsequent references it is okay to use part of the case name (eg Bahr or Smith case).

• for other sources, refer to the Australian Guide to Legal Citation (3rd edition). The Guide is downloadable via http://law.unimelb.edu.au/__data/assets/pdf_file/0007/1586203/FinalOnlinePDF-2012Reprint.pdf.

ASSESSMENT CRITERIA

The assessment criteria for the hypothetical are as follows:

• issue identification.
• identifying relevant legal provisions/principles.
• quality/coherence of analysis and argument in applying relevant legal provisions/principles.
• quality of written expression (effectiveness of headings; style/clarity; expression/grammar; spelling; punctuation and referencing).

Hypothetical Problem

Arnaud is an aspiring real estate agent who needs a small premise to launch his business. He follows up a property advertised by Dominque, which looks to be suitable for his purposes. After viewing the premises, Arnaud decided the space was ideally suited to his new business venture. In January 2014 Dominique and Arnaud agreed on terms for the lease, including:

• commencement on completion of fit-out of premises.
• term of four years.
• rent of $2,000 per month, payable in advance.
• option to renew for one year.
• no assignment without the prior written consent of the lessor.
• lessee to finance 80% of the shop fit-out, lessor to finance 20% (lessor’s contribution capped at $5,000).

The terms of the lease were reduced to writing, and signed by the parties. However, due to a misunderstanding over who would be responsible for organising lodgement, the lease was never registered.

After completion of the shop fit-out on 4 April 2014, Arnaud entered into possession and opened the doors, quickly building a small but profitable agency.

Having achieved his goal of establishing a thriving business, Arnaud decided in late 2015 to sell the agency at a premium price. He found a willing purchaser in Bertrand. Arnaud requested the consent of Dominique to transfer the remainder of the lease to Bertrand. There was no evidence of any credit problems or other blemishes in Bertrand’s history of renting properties. Dominique advised Arnaud that she would not consent to the change. Arnaud was furious and went ahead anyway with the transfer to Bertrand, who took up the premises.

Three months after the transfer Bertrand has missed a rental payment and damaged the walls and floors of the premises.

Advise Dominique. [Please note: there is no need to consider retail shop leases legislation for the purposes of this problem.]

In addition to complete footnotes, with correct format included at the bottom of the page. It is essential that references to applicable sources is included consistently throughout, (please refer to Australian Guide to Legal Citation (3rd edition), when answering the hypothetical problem.

Note. After the first full reference to a statute or case name, in your answer you may subsequently use abbreviations (eg PLA for Property Law Act 1974 (Qld); Chan v Cresdon for Chan v Cresdon Pty Ltd (1989) 168 CLR 242 etc). But please make sure the full cited reference is included in the footnote.

It is fundamental that a logical answer structure approach is used throughout. Please refer below to:

– [ ] Suggested hypothetical structure:

For most problems (but by no means all) a good structure will canvas some or all of the following areas:

1. Nature of Interest (Nb interest = mortgage, lease, easement or restrictive covenant)

This will usually be clear when dealing with a mortgage, but, as we’ll see, may be less so for other interests (eg may need to establish you have a lease not a license (including the type of lease), or that the four key requirements for an easement are satisfied).

2. Compliance with Formalities

You need to establish whether you’re dealing with a legal or equitable interest.  As a general rule a legal interest requires writing (to satisfy ss 10-12 of the PLA) and registration (to satisfy LTA).  If writing/registration requirements are not satisfied need to consider consequences (ie existence of equitable interest).

3. Key Provisions/Enforceability of the Interest

What are the key terms/clauses of the interest relevant to the problem (eg obligation to repay mortgage; obligation to pay rent).  What is the source of these obligations (eg express term, implied by statute)?  Who is entitled to enforce (eg for a lease, has there been an effective assignment)?

4. Has there been a Breach of Key Provisions

Often there will be a breach of a provision(s) (eg for a lease, failure to pay rent; for a mortgage, failure to repay).

5. Consequences of Breach

Where there is a breach, need to state the consequences (eg for a lease, termination or just damages; for a mortgage, exercise of a power of sale).  What is the source of this right to enforce (eg express term, implied by statute)?  Often there will be procedural steps to comply with before a breach can be enforced (eg for a mortgage, exercise of a power of sale must be preceded by notice of default).

– [ ] Additional notes:

Emphasis on the importance of a couple of issues to address when answering hypothetical problem:

* it is important to recognise that a ‘lease’ can entail different sources of obligations at once.  First, a lease is a contract between the parties, so you may need to consider obligations there (eg even if a landlord or tenant validly terminates a lease they may still be in breach of contract).  Second, where the parties have not complied with formalities (ie have not created a legal, registered lease) then two consequences may follow.  There may a lease in equity (so long as specific performance would be available).  As well, there may be a s 129 PLA lease (ie a tenancy-at-will created, overriding what, once upon a time, would have given rise to a yearly tenancy).  Both the equitable lease and the s 129 PLA tenancy-at-will lease may be a source of obligations.

* it is always important to distinguish between a lease of more than 3 years and a lease of 3 years or less.  Even if the formalities (ie writing and registration) are not complied with for a lease of 3 years or less it will still operate as a valid, formal lease. This is because such a lease operates as an exception to indefeasibility.

* make sure you understand how a “section 129 PLA, tenancy-at-will” arises.

* make sure you understand the difference between an assignment of a lease and sub-letting of a lease.  These two processes create distinct legal relationships, with associated implications for obligations and their enforceability.

* perhaps repeating the lectures, remember that a lease creates two sets of obligations – in contract (ie privity of contract) and in property (ie privity of estate).  As between a lessor and an original lessee there will be both privity of contract and privity of estate where there is a valid, legal lease in place.  When a valid legal lease is transferred to a third party, the relationship between the lessor and original lessee is contractual only.  The relationship between the lessor and the new tenant (ie assignee of the lease) is grounded in privity of estate (so that obligations will only be enforceable against the assignee if they touch and concern the property).  However, matters get more complicated when the assigned lease is not a legal lease or a legal lease is assigned but the assignment is not registered.  In either case the lease will only be recognised in equity, and the better view appears to be that the doctrine of privity of estate is a common law doctrine only.  This can create difficulties in enforcement against the assignee in equity. (the summary is provided in the Dropbox titled “contract and privity reading” )

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