What happens when the lease does not include an address?
There are some weird and wonderful things in the Conveyancing Act 1919 (NSW) – what is interesse termini and why is it abolished? What was in sections nine and ten of the Imperial Act Four Anne, and why are they repealed? These old sections seem to be repairs to old conveyancing laws and help support the system we have today. One of my favourite sections is 170: “Service of Notices”. A notice can be valid even if the person affected by the notice is unborn.
The Services of Notices section needed to be carefully read in a recent case because the lease did not contain an address for the Landlord. The question was: did the tenant validly exercise the option.
Papantoniou v Stonewall Hotel Pty Ltd [2018] NSWCA 85
The tenant exercised an option to renew a lease on two occasions, in July 2010 and in July 2015.
The original lease commenced in November 2005 for a term of 5 years. There were 2 five year options. The lease was originally granted by John and Aristotelis Papantoniou to Con Kostakides and Helen El Khouri. The lessee transferred the lease to Stonewall Hotel Pty Ltd during the initial term. The lessors rearranged their ownership to include their wives, Stella and Efthemia, also during the initial term.
In July 2010, the lessee sent its exercise of option notice, addressed to John and Aristotelis Papantoniou, care of a sole practitioner law firm conducted by Stella Papantoniou.
The landlords now claim that the first exercise of option did not comply with the terms of the lease. At the core of the claim is some family tension, such that Panos (son of Aristotelis and Efthemia) did not have compete trust and confidence in Stella as their lawyer. The Court inferred that Stella’s office required instructions to come from John (her husband) and Aristotelis, and would not accept that Panos had authority to give instructions for Aristotelis and Efthemia.
The Court looked at some of the history of correspondence between the law firm conducted by Stella and the landlords. It could only find that at most, Panos was unhappy with some of the legal work. Someone from Stella’s office had, through businesslike correspondence, sought to establish communication with Aristotelis to ensure instructions could be received. The court could not find that this family tension meant that Stella was not acting for the landlords.
To exercise the option, a lessee must strictly comply with the provisions of the lease. The option must be exercised in time and in accordance with the notice provisions. The notice provisions in the lease provided that: “A document under or relating to this lease is served if it is served in any manner provided in section 170 of the Conveyancing Act.”
Section 170 of the Conveyancing Act permits service by personal delivery or post to the last known residential or business address of the person. The lease contained no addresses for the landlords. No notice had been provided by the landlords as to their address.
Service of a notice to the solicitor for the landlord does not strictly comply with section 170 of the Conveyancing Act.
The Court had to ask: is service in accordance with section 170 sufficient or exclusive? That is: is the notice only valid if served in accordance with section 170, or may it also be served in accordance with general law?
The Court decided that service in accordance with section 170 was sufficient, but not exclusive. Part of the reasoning was that with no address, service in accordance with section 170 was not possible. The Court also thought that a reasonable businessperson would read the clause in that way.
The Court identified that under general law notices may be served on an agent of the landlord or tenant. The tenant would need to show that the agent had the authority – however this may express, implied or ostensible. Ostensible authority can be established by conduct that induces a rational belief that the agent has the required authority.
Did Stella have ostensible authority to receive the exercise of option in July 2010?
In this case – the lessee had recently received a letter from Stella’s office regarding a rent review, and the lessee’s solicitor had spoken to Stella before serving the notice and Stella had confirmed that the notice should be sent to her office. The Court also found that from the beginning, the lessee was expected to address all correspondence relating to the lease to Stella’s office. That was enough for ostensible authority.
With ostensible authority, the notice was valid. Both options were correctly exercised, and the tenant can remain operating the business until the end of the lease, in 2020.
Section 170 of the Conveyancing Act is quite limiting – this is why leases usually contain a notices provision as well as an address for each of the parties.
Matthew Rafferty, Partner