Retail Leases Case Law Update – Landlord withholding consent of assignment.
Section 61 of the Retail Leases Act 2003 deals with when a landlord can withhold consent of a proposed transfer of lease by the tenant.
We acted for the successful landlord party in a Victorian Civil and Administrative Tribunal decision just released in which the landlord refused consent to an assignment of lease on the basis that the proposed tenant lacked sufficient business experience and financial resources. The case involved a sushi and noodle bar which was licenced.
The proposed tenant had no experience in the restaurant business or in any business but relied on a un-official business partner who did have some limited business experience to manage the business. The landlord withheld consent and the tenant issued proceedings at VCAT seeking an order that the transfer be permitted.
VCAT confirmed that the landlord had not been unreasonable in withholding consent and dismissed the tenant’s application. VCAT stated that whilst a tenant might be able to meet the obligations of operating such a café without extensive experience, a tenant without any experience in running a food business may not be able to meet the obligations under the lease. Further, VCAT determined that in order for a landlord to be able to properly assess a tenant’s financial position, the prospective tenant must provide sufficient and substantiated documents to show the prospective tenant’s financial resources.
Lessons to be learned:
Tenants –Treat the request to the landlord for assignment of the lease seriously and not as a mere formality. Provide comprehensive and detailed information on the proposed tenant’s business experience and financial resources.
Landlords –Assess the information provided by the proposed assignee and withhold consent if necessary (you are deemed to consent if you do not withhold consent formally within 28 days of a request).
