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Australian Lawyers and Consultants

Traps in Lease Options

October 1999

Baldwins recently acted in an interesting landlord/tenant dispute over whether an option to renew had been validly exercised.

Both landlords and tenants should be aware of a potential trap involved in exercising an option to renew a lease. The authority in this area was an unreported judgment of Justice O’Bryan of the Supreme Court of Victoria. As in the Alroth case, the wording was quite typical of many leases:

“The lessor shall upon the written request of the lessee delivered to the lessor not less than three months prior to the expiration of the term hereby created…”

In the normal course of events, one might have expected that written notice to the property manager would suffice as a valid exercise of the option to renew the lease.

However, O’Bryan J stated that the option to renew would not be validly exercised if the notice of exercise is delivered to the lessor’s agent where there is no express authority conferred by the lessor upon its agent to accept its delivery. Thus, delivery of a notice of exercise to renew a lease to a real estate agent may not satisfy the requirement that such notice be delivered to the lessor, regardless of the fact that the agent has implied or ostensible authority to act on the lessor’s behalf in other respects.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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