Should I register my Lease?

A dilemma which often faces commercial and retail shop tenants in Queensland is whether or not they should register their Lease with the titles office.

It is common in practice for the Tenant to bear the costs of and incidental to the registration of the Lease. This can include the costs of having a Premises surveyed and plans prepared, lodgement fees and requisitions. This can all be a very costly process.

The question that often confronts a Tenant is: do the risks associated with not registering the Lease justify the initial costs of registration?

So what are the risks?

First we should look at the basic rule regarding registered and unregistered interests. Section 184(2)(a) of the Land Title Act 1994 (the ‘Act’) provides:

“the registered proprietor of a lot will not be affected by the actual or constructive notice of an unregistered interest affecting the lot.”

There are exceptions to this rule as we will see below but, disregarding the exceptions, the effect is that, if the Landlord should decide to sell the Premises at any time during the Lease, a buyer of the property is not be obliged to honour any unregistered Lease. It is worthwhile to note that this rule applies even if the buyer has actual notice of your Lease.

There are exceptions to this rule. One such exception, perhaps the most commonly occurring exception, is provided for in Section 185(1)(b) Act:

“A registered proprietor…does not obtain the benefit of Section 184…for the interest of a Lessee under a short Lease.”

A short lease is a lease for a term of three (3) years or less. Therefore, your interest under a short Lease will be protected (in part) even if it is not registered. The buyer of the Premises will be forced to honour your interest in the Premises as if your Lease were registered, but any options for a further period need not be honoured.

The Act expressly provides that, even if the initial term of the Lease is three years or less, any options to extend the lease and any rights to purchase the premises which are contained in the Lease will not receive the benefit of Section 185(1)(b).

If you want to ensure that your Lease options are protected then you must register your Lease regardless of the initial term of the Lease.

There are other, less commonly occurring, exceptions provided for in the Act, however, what is clear is that if you want to secure your tenancy for any period beyond three (3) years then registration of your Lease is essential.

If an option to purchase the leased property is included in the lease then registration is essential regardless of the term of the lease.

The process of registration requires strict compliance with the titles office requirements.

You should always obtain advice and assistance from your lawyer when entering into a commercial Lease.

Advertisements

About jjriba

Joseph Riba is an Australian Business lawyer. Joseph Riba has worked for more than a decade in the franchising industry. He was admitted as a lawyer in Queensland Australia in 1993 and commenced J J Riba and Company Commercial Lawyers in 1998. Between 1999 and 2010 Joseph Riba worked for a National Franchise System known as Bright Eyes. J J Riba and Company have developed structures and systems to help small business owners carry out their plans to expand their business interests using franchising. J J RIba and Company are developing new systems to assist their clients avoid risk and achieve results for small business owners without the expense associated with large firm advice. J J Riba and Company aim to use their knowledge of franchising and business law to provide high level advice at an affordable cost. View all posts by jjriba

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: