If you rent a commercial property best practice is to ensure that your Lease is registered on title.
This is because registering a Lease creates a legal interest in the relevant property in your favour meaning that your interest will take priority or be protected from other dealings that affect the title of the land that occur after registration.
For example, if your landlord sells the property then any potential purchaser is on notice of and is bound by the terms of your Lease subject to any specific provisions in the Lease that might afford a right on the part of the landlord to terminate your Lease in certain circumstances.
An example of this might be a demolition clause pursuant to which a landlord can terminate your Lease with notice if it is intended that the property you are renting is to be demolished for the purposes of improvement/redevelopment.
Your Lease is still binding if it is not registered on title however nobody knows it’s there other than you and the landlord (for example a potential buyer or mortgagee proposing to take the property as security).
Legislation also requires that Leases of real property with a term exceeding three years (including the initial term and any auction terms) must be prepared in an approved form and registered on title in order for the Lease to pass with the property if the property is sold.
It is therefore critically important if you are a tenant of a commercial property with a term exceeding three years that the Lease is registered so as to protect your security of tenure.
Leases with terms not exceeding three years are provided separate protection under legislation and are therefore not required to be registered however it is often best practice to do so anyway.
In relation to a retail Lease, which is different to a commercial Lease, section 16 of the Retail Leases Act 1994 (NSW) requires that any Lease that falls within the scope of that Act and has a term exceeding three years must be registered.
Far and away the biggest consequence for not registering a Lease is that if the landlord sells the property and your Lease is not registered on title, the purchaser of the property is unlikely to be bound by the unregistered Lease and so you might be forced to find an alternate premises at your own cost and inconvenience.
Daniel McKinnon
Since graduating with two degrees in Law and Commerce from the University of Wollongong, Daniel’s spent over ten years solving a wide range of legal problems for the people of Western Sydney.