There is no denying that entering in to a new commercial or retail lease can be a costly and time consuming exercise for both the tenant and landlord. Once negotiations and signing of the lease are out of the way, further costs may arise in order to register a lease over the title of the property. As an example, a landlord may be required to prepare and register a subleasing plan or a deposited plan in order to adequately define the part of the land that is being leased, and the tenant is liable for the Land Titles Office fees for lodgement and registration of the lease.
A common question we are asked is “Do I need to register my lease?”. Our answer is more often than not “yes, you should register your lease” and here is why.
- Generally speaking, a tenant has the most to gain from Lease registration. By registering their lease a tenant gains a registered interest over the title of the property, which they can claim on if necessary.
- If the lease is properly made and executed, the lease will be binding on both parties regardless of whether it is registered. However, in ACT and NSW only leases with a term of 3 years or less are automatically afforded statutory protection under the relevant Land Titles legislation without being registered on the title (note that the length of short term leases that are provided statutory protection may differ depending on which state or territory legislation applies to your lease). This means that a lease of a term greater than 3 years (including any options to renew) should be registered in order to gain statutory protection and a registered interest on the title.
- If a lease for a term greater than 3 years is unregistered and a bank holds a registered interest over the title, the bank or mortgagee is not obligated to recognise the tenant’s right to occupy the property unless they have consented to the lease. The process of registering a lease includes contacting the mortgagee for consent and requesting production of the title, meaning a record of consent is obtained. Mortgagees will often pass on their costs for consenting.
- If a lease is not registered, any competing interest that is registered over the title will take preference to the unregistered lease.
- For a landlord, allowing a lease to be registered on their title is of no detriment and has little effect. Having said that, it may add value to their property, for instance in the event that a landlord was attempting to sell their property, prospective buyers will want to be aware of all potential interests over the property. If applicable, the land may also be of more value if it has already been surveyed or identified using a subleasing plan or deposited plan, allowing a prospective buyer to enter into multiple leases over the premises.
It is important for landlords to keep in mind that if a tenant requires the lease to be registered, the landlord has an obligation to attend to registration of the lease. Tenants should also be aware that they will be required to pay the costs of registration of the Lease, currently $135.00 in the ACT and $136.30 in NSW, and factor this in to their costs for entering into a new lease. Both parties should ensure that, when signing a lease, it is in a form that will be acceptable to the relevant Land Titles Office when it is sent for registration.
Please contact our office if you require assistance or advice in relation to your existing or proposed commercial or retail lease.