Written by The recent case of Markham Real Estate Partners (KSW) Pty Limited v Misan [2022] NSWSC 733 considered whether a landlord unlawfully re-entered into possession of a retail tenancy after a tenants alleged repudiation of a lease.
The proceedings in question concerned a 10-year sub-lease at King St Wharf in Sydney, that was granted to Wayl Pty Ltd. The applicant, Markham Real Estate Partner (KSW) Pty Ltd (Markham), was the head-lessee of the King St wharf and head-lessor under the sub-lease. The respondent was the sole director of Wayl and the guarantor under the sub-lease.
Markham sought to recover from the respondent under guarantee and indemnity provisions of the sub-lease and damage which they claimed they had suffered following the company’s repudiation and their purported lawful termination of the sub-lease. Generally, repudiation arises where a party to a contract evinces an intention no longer to be bound by the contract, or to fulfill it in a manner substantially inconsistent with obligations. Such behaviour is consequently grounds for termination of contract. As the lessee failed to pay rent, which was an essential term of the contract, it was argued that this constituted reputation, entitling the lessor to re-enter the premise and terminate the lease. Ordinarily, s 129 of the Conveyancing Act requires notice to be given by a lessor before seeking to re-enter, but it does not apply in the case of re-entry or forfeiture for non-payment of rent.
The Court found that the Applicant was legally entitled to terminate the sub-lease on account of the company’s repudiating conduct in failing to pay rent. Moreover, changing of the locks of the premise did not constitute unlawful re-entry and taking of possession of premised or repudiation of sub-lease by the applicant because Wayl had already ceased trading and was not using the Premises for its business and at that time Wayl was not in a position to pay the outstanding rental arrears, make future payments or meet other essential obligations under the sub-lease.
Pursuant to the guarantee, the Respondent was liable to pay the Applicant $532,313.59 on the basis of loss suffered due to Wayl’s failure to pay rent arrears up to the date of termination and Markham was also entitled to recover the costs of loss of bargain damages, re-letting costs, make good costs, legal costs on an indemnity basis and interest at a rate of 11.31% pursuant to the Sub-Lease.