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NSW Misrepresentation of Commercial Lease - Claim for Compensation Under Commercial Law?

Discussion in 'Commercial Law Forum' started by KaranM, 2 February 2016.

  1. KaranM

    KaranM Member

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    We have a commercial lease on a property since Sept 2015 advertised as a Restaurant / Cafe business (I've got screen captures of the original online ads). The real estate agents advised similarly during the inspection it was approved for restaurant / cafe and that the place has no reservation on operating house.

    On the section re: usage on the lease, they actually specified it was to be for "restaurant / cafe" use. Due to unforeseen reasons on funding issues, we decided to sell the business in Jan 2016. The potential buyer found out that the DA is for Bakery and cannot be utilised as Restaurant / Cafe. Council gave that in writing, too

    When we did our business registration, the council planner mentioned that there was no need of DA as Bakery and cafe are considered the same. Unfortunately, we don't have that in writing. The business was registered and food inspector came and visited the place and gave us good the go ahead certificate

    As existing tenant, we are trying to get the DA done, however, we found out that DA applied in 2005 for the Bakery does not have an occupation or construction certificate, that means it is invalid

    For some 12 years, this place has been running as Restaurant / cafe after some back and forth with landlord and agent to have documentation related to the property. It seems that there is no proper documentation on DA.

    This is a proper case of misrepresentation with us via agent/ council.

    What are my options?

    1. Can I give notice to the agent and walk out? Agent is threatening us to not return our bond/ bank guarantee.

    2. Can I claim any compensation for all these misrepresentations?

    3. Do I have any legal rights to protect me from this under Commercial Law?
     
  2. Sophea

    Sophea Well-Known Member

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  3. KaranM

    KaranM Member

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    Thanks a lot, Sophea. I will call the NSW fair trading to understand what we can do. However, as per the website and post, they don't deal with the commercial. Do we need to go to NCAT (NSW civil and administrative tribunal).

    Please could you kindly help?

    Thanks a lot
     
  4. James D. Ford - Solicitor

    James D. Ford - Solicitor Well-Known Member

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    Hi Karan

    Can you please advise whether you had a lawyer review your commercial lease before you signed in Sept 2015?

    As a Restaurant/Cafe - by NSW Law, this Lease is categorised as a Retail Lease and certain legislative protections are provided to tenants.

    Was a Retail Shop Lease Disclosure provided with the Lease?

    If not, you have grounds to terminate the Lease (within 6 months of signing.. so until circa March 2016).. and even if one was provided, you may have grounds to terminate based on the misrepresentation (refer below).

    Retail Leases Act 1994 - Sect 11
    Lessor’s disclosure statement
    11 Lessor’s disclosure statement


    (1) At least 7 days before a retail shop lease is entered into, the lessee must be given a disclosure statement for the lease. A disclosure statement is a statement in writing that contains the information, and is accompanied by the material, that is contained in or required to complete or accompany the form of disclosure statement set out in the prescribed form (but only to the extent that is relevant to the lease concerned). The layout of the disclosure statement need not comply with that of the prescribed form. However, a lessor’s disclosure statement is complete for the purposes of this section only if it has attached to it a form to be completed by the lessee in the form prescribed for the purposes of section 11

    A.Note : Because the disclosure statement need only include information relevant to the lease, if the retail shop is not in a retail shopping centre the disclosure statement need not include information that is relevant only to shops in retail shopping centres.

    (2) If a lessee was

    (3) The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if:
    (a) the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
    (b) the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred.

    (4) If a lease is entered into by way of the renewal of a lease, a written statement (a "lessor’s disclosure update" ) that updates the provisions of an earlier disclosure statement given to the lessee is, in conjunction with that earlier disclosure statement, considered to be a disclosure statement given for the purposes of this section at the time the lessor’s disclosure update is given.

    (5) The termination of a lease under this section does not affect any right, privilege, obligation or liability acquired, accrued or incurred under the lease in respect of any period before its termination.

    (6) A lessor under a retail shop lease is guilty of an offence if subsection (1) is not complied with in relation to the lease.
    Maximum penalty: 50 penalty units.

    Note: Clause 20 of Schedule 3 provides that the forms set out in Schedule 2 are taken to be prescribed for the purposes of sections 11 and 11A until regulations prescribing the forms and repealing Schedule 2 are made.

    You also need to be aware of the following:

    Retail Leases Act 1994 - Sect 10
    Right to compensation for pre-lease misrepresentations
    10 Right to compensation for pre-lease misrepresentations


    (1) A party to a retail shop lease is liable to pay another party to the lease ( "the injured party" ) reasonable compensation for damage suffered by the injured party that is attributable to the injured party’s entering into the lease as a result of a false or misleading statement or representation made by the party, or any person acting under the party’s authority, with knowledge that it was false or misleading.

    (2) The giving of a lessor’s disclosure statement to a prospective lessee under a retail shop lease is considered to be the making of a representation by the lessor to the lessee as to the information in the disclosure statement.(2A) The making of a representation by a prospective lessee in a lessee’s disclosure statement given to a prospective lessor under a retail shop lease that the prospective lessee has sought independent advice, or as to statements or representations relied on by the prospective lessee in entering the lease, is considered to be the making of a representation by a lessee to the lessor.

    (3) This section extends to apply to a statement or representation made before the commencement of this section.

    Kind regards
     
  5. James D. Ford - Solicitor

    James D. Ford - Solicitor Well-Known Member

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    Hi Karan, if you can reach a settlement with the owner then you have 3 years to make a claim with the Tribunal ("Tribunal" means the Civil and Administrative Tribunal).

    Retail Leases Act 1994 - Sect 71
    Lodging of retail tenancy claims with Tribunal
    71 Lodging of retail tenancy claims with Tribunal


    (1) A party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim.

    (2) A claim may not be lodged more than 3 years after the liability or obligation that is the subject of the claim arose.

    Kind regards
     
  6. KaranM

    KaranM Member

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    Hi James, great information.

    Thanks a lot for the assistance!

    Lessors disclosure statement mentions permitted use as Rest/ Cafe and we have been provided with the Lessee and Lessor disclosure statement however no additonal documents like approved previous DA, Section 149 and other property related details. I am not able to decode legally the disclosure statements

    Your assistance is appreciated
     
  7. James D. Ford - Solicitor

    James D. Ford - Solicitor Well-Known Member

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    Hi Karan

    In addition to what I have advised above, please read the following additional protections that could apply in your situation (if the LL attempts to say they did not know the representation was false or misleading):

    62D Misleading or deceptive conduct in connection with retail leases A party to a retail shop lease must not, in connection with the lease, engage in conduct that is misleading or deceptive to another party to the lease or that is likely to mislead or deceive another party to the lease.

    62E Right to compensation A party or former party to a retail shop lease who suffers loss or damage by reason of misleading or deceptive conduct of another party may recover the amount of the loss or damage by lodging a claim against the other party under section 71.

    The new provisions enable the Administrative Decisions Tribunal (“ADT”) to effectively deal with claims in the nature of a s52 Trade Practices Act breach for misleading or deceptive conduct. Whilst s10 of the Act to be effective required the injured party to prove that the statement or representation was known to be false or misleading, there is no such qualification in s62D and the conduct complained of is not restricted to the circumstances that existed when the injured party entered into the lease (as it is in Section 10). The monetary limit of the Tribunal’s jurisdiction has been increased to $400,000 to deal with claims which may arise from unconscionable conduct (s62B) or misleading or deceptive conduct (s62C-s62E).

    Kind regards
     

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