Agreements for Lease

Question 1

Does a lessee who has entered into an AFL have an equitable interest in the Property?

Answer 1

Yes. An intended lessee, who has entered into an enforceable agreement for lease, has an equitable interest in the property.

Question 2

What are the minimum requirements of an AFL?

Answer 2

• that the parties have reached concluded agreement on the essential terms of the agreement for lease. These are the parties to the agreement, the leased premises, the rent (and variations in rent), the commencement and duration of the lease term (and the duration of any options for renewal), and on all other terms considered by the parties to be material or essential terms,
• that there is an adequate written note or memorandum of the agreement, signed by the party to be charged or by its authorised agent (s 59 PLA)

Question 3

When would you use an AFL?

Answer 3

A formal agreement for lease is required when the parties are either unable to enter into a lease immediately or it is not practicable to do so. That may occur in any of the following situations:
• the lessor is purchasing the property or is acquiring an interest as headlessee and has not yet acquired title;
• the building or the premises have not yet been fully erected or refurbished or are not ready for immediate occupation;
• the existing tenant is still in occupation;
• entry into the lease is subject to any one of several conditions or approvals, which cannot be satisfied within the immediate future, and may involve expense and delay, eg development, building or subdivision approval, strata subdivision, consolidation of title, consent of a third party to the transaction (such as ministerial approval of Crown land dealing).

Question 4

Why is an AFL usually in the form of a deed?

Answer 4

It is in the form of a deed, because:

(1) that overcomes questions relating to consideration, if the agreement contains a guarantee;
(2) the use of a deed enables recitals contained in it to be relied on;
(3) there is a longer limitation period for institution of proceedings than for agreements, in each jurisdiction.

Question 5

What 2 pre-cautions should be considered before using a deed?

Answer 5

The use of a deed necessitates some precautions, first, to ensure that the instrument is not binding immediately on execution and before exchange. Secondly, that the parties’ solicitors have authority to deliver the deed when the instruments are exchanged (Beesly v Hallwood Estates Ltd (1961) 1 All ER 90; Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers (1977) 2 NSWLR 109). See cl 2 in ¶1-380.

Question 6

Should a copy of the lease be attached to the AFL?

Answer 6

The only proper and adequate mode of specifying the terms of the intended lease is to attach to the agreement those terms in full. There are some alternatives, none of which is entirely satisfactory:
• by incorporating those terms by reference to some existing, but extraneous document, such as the current lease used by the lessor, or the lease used for the particular property;
• to define the lease terms according to what is ``usual’’ or according to good conveyancing practice (Tourella Nominees Pty Ltd v Begg Dow Priday Pty Ltd (1984) ANZ ConvR 703) in a particular jurisdiction or district;
• to contain such lease covenants as the lessor (or some nominated third party) shall [reasonably] require (Sweet & Maxwell Ltd v Universal News Services Ltd (1964) 2 QB 699).