Recently I wrote about a Queensland Supreme Court decision which protected a tenant from losing its lease for a further option term of five years.

On 24 April, the Court of Appeal overturned that decision. The Albert Street NightOwl lease no longer exists, and Replay (the landlord) can move them out if it wants to.

In the sleepy world of Queensland leasing law, this is an interesting and important case.

As usual, there was a fine line between success and failure. 

The appeal court went back to the exact wording of the lease and decided that the trial judge had been too adventurous and had created an interest in land which did not exist.

In NightOwl’s initial win, the judge decided that NightOwl had an “interest” in the property because of the existence of an option in the lease, which NightOwl had exercised by the due date. This “interest” was sufficient to be the basis for the law of equity to apply to order “specific performance” of the Lease by Replay.

Here, the lease stated that the option could only be validly exercised where the tenant was in compliance with all terms of the lease as at the expiry date of the lease. 

NightOwl had given notice exercising the option by the due date, but when the end of the Lease ticked over, NightOwl was not in compliance because it had still not paid the outstanding rent.

The appeal court found that this meant that the exercise of the option to renew was not valid, and because the lease had expired, NightOwl no longer had an “interest” in land.

It followed that equity and specific performance were not available to come to the rescue.

The lesson from this case is to show the importance of the wording in an option clause. It is important that both landlord and tenant are crystal clear on the wording which governs the circumstances in which an option is validly exercised.

FC Lawyers are experts in drafting and advising on leases, and can advise landlords or tenants on the practical effect of the specific wording used in any commercial lease terms. It is important to get legal advice early. Contact our team today to discuss your leasing options.