FOXLAW on QLD Property Law

QLD: Is your business' lease registered?

A lease which is in a registrable form (a Titles Office Form 7 in Queensland), can be registered on the title for the property. Once registered, the lease is shown as an interest on title, noting the name of the tenant and the commencement and expiry dates, along with the next option term (if there is one). Registration has potential benefits for both the Tenant and Landlord.

Tenant:

If the landlord sells/transfers the property, the new owner/landlord may not be aware of a tenant’s lease. Any lease which is longer than 3 years (including the option periods) is not protected unless it is registered. If registered, the lease interest is said to be “indefeasible” (think… “undefeatable”). For short leases (3 years or less, including the option periods), there is automatic protection (under legislation).

A tenant’s interest can be defeated if it is not protected (either by automatic ‘short lease’ protection or by registration on title), for example, by a new owner (who doesn’t have notice of the tenant’s interest) or by a mortgagee bank who repossesses the property.

If a tenant’s interest is defeated, the tenant may look around for someone to blame, like the original landlord who made contractual promises (which is one reason why registration is potentially beneficial for the landlord too).

Landlord:

Firstly, having all leases registered on title can be attractive to a potential buyer. Property investors (and their financiers) tend to like seeing everything is in order and having a complete record of all leases in existence on title is nice and neat. 

Secondly, if a landlord sells/transfers the property, with an unprotected lease, and the new owner/landlord refuses to honour the tenant's lease and/or option period(s), the original landlord risks being in breach of contract. The breach is that the original landlord promised to provide a lease and/or an option period to a tenant and failed to deliver on that promise.

Ideally, when a landlord sells/transfers, all of their obligations to a tenant are transferred over to the new landlord, but this can depend on the wording of contracts and notices given, and is a messy and uncertain way to deal with the issue. 

Instead, registration of a lease on title serves as a notice to everyone (including, for example, a buyer of the property) that there is a lease interest in existence. The buyer cannot then claim not to have had notice of it. This protects the original landlord from the risk of contractual breach by ensuring the new landlord is aware of, and must honour, the tenant’s lease.

Registration is usually at the cost of the tenant (most lease precedents provide this).

Something to think about! 

As always, you should always seek advice specific to your particular lease/property and your individual circumstances.