In the recent case of ACME Properties Pty Ltd v Perpetual Corporate Trust Limited as Trustee for Braeside Trust [2019] 1189 the Federal Court highlighted the need for agents, landlords and tenants to take caution during lease negotiations. The case involved a tenant (ACME Properties) who brought proceedings against their landlord (Braeside) in an attempt to enforce a deed of variation to extend the lease of their property. Over a period of 6 months the landlord’s agent and the tenant negotiated the commercial terms of an offer to lease (Offer) on which the deed of variation would be based. The offer was executed in early April 2019. The offer however contained conditions, including that it was subject to approval of the landlord which could be given or withheld at its discretion. Later that month, the agent informed the tenant that no legally binding contract existed and that the landlord would not be proceeding with the deed as proposed in the offer, and that the landlord has accepted an offer from  3rd party.

In bringing proceedings the tenant argued that it was the intention of the parties to be bound by the offer. Ultimately, the Federal Court held that the intention of the parties as evinced in the offer, did not constitute a binding agreement as it was subject to entering into alternate legal documentation. In its decision the Federal Court noted that although the offer covered the majority of the commercial terms and used appropriate wording, such was outweighed by the terms. The Court also noted that despite the fact the tenant necessitated commercial certainty, the Offer was not legally binding. This case acts a reminder to agents, landlords and tenants to communicate their clear intention throughout the process of negotiation.

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