Leasing

When entering into a lease, often the lessor’s real estate agent will prepare a Heads of Agreement executed by both parties confirming the agreement between the Lessor and Lessee so as the Lessors solicitor can prepare a lease.

You should have these heads reviewed by your lawyer prior to execution to ensure that you understand the commercial terms as documented.

Often these Heads of Agreement or Terms will include the agreed terms as to the lease but most importantly the lease period and rent and outgoings. More detailed heads can go for several pages long and contain many of the commercial agreements between the parties.

Whilst these terms are often marked ‘non binding’ or ‘subject to finalisation of lease documents’ there have been instances where the lessor and its agent have not kept to instrinsic and agreed terms of the Heads of Agreement particularly as to incidences where the rent has increased from what was advertised or the outgoings are charged in addition to the rent rather than as part of the rent.

In these circumstances, it may be appropriate for the agent or the proposed lessee to consider Section 51 of the Property, Stock and Business Agents Act 2002 where it details that an agent must not publish or cause others to publish any statement that:

  • is intended or apparently intended to promote the lease of any property, and
  • is materially false, misleading or deceptive (whether to the licensee’s knowledge or not).

A statement is published if it is:

  • in any newspaper, periodical publication or other publication, or
  • publicly displayed in, on, over or under any building, vehicle or place (land or water), or in the air in view of persons on any street or public place, or
  • in any document sent or delivered to any person or thrown or left at premises occupied by a person, or
  • broadcast by radio or television, or
  • circulated on an internet website or by electronic mail.

If an agent therefore advertises a property on behalf of the Landlord that misquotes the rent or outgoings then the agent may find itself in breach of section 51 of the Property, Stock and Business Agents Act 2002. The maximum penalty that can be imposed is 200 penalty units – presently $22,000.

A landlord or its leasing agent must also consider the penalties under Section 30 Australian Consumer Law (Cth), False or misleading representations about leasing of land in that it must not make a false or misleading representations concerning the price payable for the land.

This would include any representation as to whether the rent is a gross rent and inclusive of outgoings, or if a net rent, the amount of outgoings is not fully disclosed.

It is therefore important in lease negotiations that Landlords and prospective lessees ensure that any terms on the Heads of Agreement are reviewed properly by their legal representatives prior to execution as there may be significant pecunary penalties to the Landlord should it be found that the Landlord or its agent has falsely misrepresented the lease or outgoings costs on a property for lease and the lessee has relied on such representation.

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