Property Law Act 2023 (Qld) – Changes to leasing
The Property Law Act 2023 (Qld) (PLA) was passed on 25 October 2023 and will commence on a date set by proclamation (to be announced soon) with changes set to impact both lessors and lessees. Many of the changes cannot be contracted out of and will apply regardless of when the lease was entered into. These important changes include:
New lessor’s consent procedure
- The introduction of a procedure for obtaining lessor’s consent that requires:
- the lessee to give the lessor a proposal notice; and
- the lessor to:
- make a decision within one month (unless an extension is agreed within that time) of receiving all relevant information;
- if consent is given, state any conditions and the reason for them, or if consent is refused, give reasons for its refusal, in a decision notice; and
- not unreasonably withhold its consent.
- A mechanism is now included to allow the lessee to apply to the court if the lessor fails to make a decision or if the lessee believes that the lessor has acted unreasonably or has imposed a condition that is unreasonable, unnecessary or onerous.
- There is a mandatory requirement that this procedure be followed if the lessor’s consent is required to:
- assign, sublease, part with or share the premises;
- change the permitted use;
- mortgage the lessee’s interest; or
- make alterations or carry out work.
Release of lessee and any guarantor on a subsequent assignment
- One key change relates to the liability of a lessee once the lease is assigned. A new provision inclusion releases the original lessee and its guarantor on a subsequent assignment (i.e. if Lessee A assigns the lease to Lessee B, and then Lessee B subsequently assigns it to Lessee C, Lessee A and its guarantor (if any) will be released from any liability to the lessor for a breach of the lease by Lessee C).
Assignment of leases – enforceability of covenants
- The PLA clarifies that the rights and obligations of parties are enforceable after an assignment or transfer, regardless of whether or not they touch and concern the land, unless:
- the term is expressed to be personal;
- the term is expressly excluded from the assignment or transfer;
- in the case of an assignment, the current lessee and the new lessee agree that the term should remain with the current lessee; or
- in the case of a transfer, the current lessor and the new lessor agree that term should remain with the current lessor.
Lessee’s right to apply for relief against lessor’s refusal to renew or sell
- If a lease contains an option or a right to purchase the land and the lessor does not intend to give the lessee that right because the lessee failed to comply with a condition in the lease, then the lessor is required to first give the lessee a breach notice within 10 business days after:
- the notice exercising an option to renew (or extend), or to purchase the reversion of, the lease is given; or
- the breach, if a breach occurs after that option notice is given, if the lessor intends to refuse to renew or sell. The lessee will have one month after the breach notice is given to apply to the court for relief.
- A new provision is included which allows the lessee to apply to the court for relief against the lessor’s refusal because of one or more of a:
- failure to fulfill a condition precedent;
- breach of the lease; or
- non-compliance with a formal requirement (e.g. when notice has been given on time, but other formal requirements under the lease have not been met).
Additional rights for each designated person
- The PLA specifies a list of people, in addition to the lessee, who may apply for relief against forfeiture for breach or relief against refusal to renew or sell (e.g. a mortgagee or receiver of the lessee’s interest, (in the case of relief against forfeiture) a sublessee, etc.).
- There is a new obligation on the lessor to give a copy of any notice to remedy breach or breach notice to each designated person.
As many of the changes introduce new procedures, notice requirements or time frames (or a combination of all of these), it is essential that both lessors and lessees are aware of their rights.
Lessors will also need to update their lease to reflect this legislative change and to ensure its terms are optimal (e.g. to ensure that adequate security exists on a subsequent assignment). Additionally, other documents and leasing practises may need to be updated (e.g. to ensure that rights and obligations of each party are appropriately allocated on assignment or sale).
It is important to understand how these changes can impact your leasing business.
Please contact the McCullough Robertson Real Estate team for details about the changes introduced under the Property Law Act 2023 (Qld) and to find out how they impact you.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.