In our article “Consent to Assignment: necessary and may be withheld” of 4 July 2012, we discussed a Supreme Court of NSW decision dealing with the transfer of a lease which was caught by the provisions of the Retail Leases Act 1994 (NSW) (“Act”).
Some aspects of the decision of the Supreme Court were appealed by the proposed assignee. The Court of Appeal (“COA”) allowed the appeal.
There are a number of points to note from the COA decision which should be kept in mind by landlords and tenants under leases caught by the Act when dealing with assignment of the lease.
- No requirement of reasonableness – The provisions of the Act do not refer to the reasonableness or unreasonableness of the withholding of consent to assignment by a landlord. If one or more of the circumstances specified in the Act entitling a landlord to withhold consent exist then the landlord is entitled to withhold consent.
- Request for Information should be specific – Pursuant to Section 41(a) of the Act the tenant requesting consent to assignment must provide the landlord with such information as the landlord may reasonably require concerning the financial standing and business experience of the proposed assignee. The COA decision confirms that it is for the landlord to specify the information it requires. A tenant is entitled to specificity from the landlord as to the information required. Descriptions such as “verifiable information regarding” the tenant’s financial standing do not satisfy the level of specificity required.
- Must concern the financial standing – The information requested must concern the proposed assignee’s financial standing which is noted by the COA as the state of the assignee’s ability to meet financial commitments. Requests for information such as: (a) how the assignee proposes to clear current indebtedness; and(b) the assignee’s proposed strategies to avoid future indebtedness,would generally not be requests for information concerning an assignee’s financial standing for the purpose of the Act.
- Note Section 41(d) of the Act – Landlord’s and tenants need to keep in mind Section 41(d) of the Act which notes the landlord is deemed to have consented to an assignment if the tenant has complied with Sections 41(a) and 41(b) and the landlord has not within 28 days of the later of the request being made and the date by which the tenant complied with Sections 41(a) and 41(b), given notice in writing to the tenant either consenting or withholding consent. It should be noted that a request for consent can be made more than once and that the landlord needs to act within the 28 day period in respect of each request.
Please contact us if you have any queries in relation to retail leases or assignment of leases.