As a landlord, or a tenant, have you ever wondered how your lease might be affected if a plan was lodged amalgamating the lot containing your leased premises with another lot?
The High Court of Australia recently handed down its decision in the case of Moreton Bay Regional Council v Mekpine Pty Ltd. In the case, the Court considered and provided some useful commentary on how registration of a plan amalgamating two lots would affect a tenant’s interest in a registered lease.
Mekpine Pty Ltd (“Mekpine”) held a registered interest as tenant in a lease of part of a lot (“Lot 6”) on which a shopping centre had been constructed. The landlord subsequently acquired land adjacent to the shopping centre (“former Lot 1”). The landlord then amalgamated Lot 6 with the former Lot 1, to create a new lot (“new Lot 1”). Some time later, Council compulsorily acquired a small section of the new Lot 1.
Mekpine made an application to the Court to obtain compensation from Council for the compulsory acquisition. The section of land that had been compulsorily acquired was wholly contained within the former Lot 1. In other words, the land compulsorily acquired by Council was not part of the original lot upon which the leased premises was situated.
The High Court determined that Mekpine was not entitled to any compensation following the compulsory acquisition. In reaching this decision, the Court considered the effect of registering Leases and the area that is affected by a registered Lease.
They decided that, even though an amalgamation plan had been registered, the leased Premises remained only as that part of Lot 6 which was defined as the Premises in the Lease.
Of course, as the Lease was not of the whole land, Mekpine also had some rights with respect to common areas in other parts of the area of land comprising the former Lot 6. The Court considered how the Lease related to those common areas. In so far as the Lease granted rights in the common areas, the Court said that it only granted rights with respect to those parts of the common areas that were contained in the former Lot 6 prior to the amalgamation. The Tenant did not acquire any rights in the area of land that formerly comprised Lot 1 as a result of the registration of the amalgamation plan.
In making this decision, the Court carefully considered the terms and conditions of both the Lease and the Retail Shop Leases Act. The Court decided determined that no provision in either of those documents would affect the outcome by requiring the lease to be applied to a greater area of land than was defined as the Premises in the Lease or to grant rights to additional parts of the land that were not part of the common areas when the parties entered into the Lease. The reason was that the instrument which created or transferred the interest to the Tenant was the Lease. While the amalgamation plan noted the existing Lease and changed how the Premises would be located, it did not operate to expand the area affected by the Lease. This means that the Lease would not automatically allow the Tenant any interest in the additional land.
Whilst the case did not specifically mention this scenario, this would mean that the tenant would have no interest in, say, additional carparking that might have been constructed on the additional land that comprised the former Lot 1.
Why is this significant?
This decision is significant because it means that merely noting the existence of a Lease or a lot affected by a Lease on a plan, will not change the area affected by the Lease. While the boundaries of a property may change over time, the Lease will remain attached to and affect only the same portion of the land as it applied to when it was originally signed. Registration of a plan will not automatically grant the tenant additional rights in any new common areas acquired as part of the amalgamation unless the Lease states otherwise.
This principle is also likely to be applied to other encumbrances, such as mortgages, covenants, easements or profits-a-prendre.
Following this decision, it is important for lot owners (and tenants, mortgagees or other persons with a registered interest in the lot) to consider how registration of a plan of amalgamation, or subdivision, may affect the interest they have granted or received (eg a Lease) and also the terms of the document granting the interest.
Landlords and tenants alike, where new land is being acquired near the leased premises, should seek advice from an experienced lawyer to ascertain whether a new Lease should be entered into to properly reflect the rights and obligations the parties may have with respect to the additional land.
It may be possible for a properly drafted Lease to anticipate and resolve potential issues created upon registration of the plan. Whether the Lease in fact does so is a question to be answered after a proper review of the terms of the Lease and consideration of the plan proposed to be registered. As such, if you are entering into a new Lease, and think that the issues raised in the Mekpine case may apply to you, ensure you advise your lawyer of your (or your landlord’s) possible future plans so that they can ensure these are taken into account when your lease is drafted.