Diligence required on lease contracts

A recent case highlights the need for caution and diligence when entering into a lease or sublease.

"Puddle Jumpers" is an Adelaide charity which had been leasing a portion of land next to the old Le Cornu site on Anzac Highway to use as its premises. 

The site was owned by Le Cornu Transport Pty Ltd, which leased the site to Fantastic Holdings. Through one of its subsidiaries, Fantastic Holdings subleased the property to Puddle Jumpers.

When Le Cornu decided to sell the land, an issue arose as to whether Puddle Jumpers had a valid sublease. 

The Supreme Court determined it was invalid.

The entity named as subleasing the land to Puddle Jumpers was a different subsidiary of Fantastic Holdings, and this subsidiary was not entitled to grant a leasehold interest to the charity, as it was not the entity which had the benefit of the lease. 

This highlights the importance of ensuring that all parties are entitled to enter into an agreement when entering into a lease, sublease or any other contractual arrangement. 

In the case of a lease or sublease, it is necessary to ensure that you have documentation showing that the party is legally able to lease or sublease the land.

Also consider whether consent of anyone else is required.

In the end, the saga cost Puddle Jumpers more than its premises, as it was also ordered to pay costs to Le Cornu.

By Anthony Kelly, Partner

This article first appeared in The Stock Journal on Thursday 17 August 2017. 

Practice Area: Property, Leasing & Conveyancing

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