When a Tenant enters into a commercial lease, an issue that does require consideration is whether the lease needs to be registered on title to the land.
Lease registration in the land titles registry is a formal process administered in Queensland by the Department of Natural Resources, Mines and Energy (DNRME). The DNRME have prescribed forms and requirements which must be met in order for a lease to be registered.
The Land Title Act 1994 (Qld) and Property Law Act 1974 (Qld) have different provisions relating to registration depending on whether the lease is:
(a) for a term of 3 year or more (including options to renew); or
(b) for a term less than 3 years (called short-term-leases or short leases).
For a lease with a term of 3 year or more, the legislation requires such a lease to be registered in the land registry.
Whereas, for leases less than 3 years, the legislation does not require those leases to be registered.
Registration provides the Tenant with indefeasible title. That is, once the lease is registered on title to the land/property of the Landlord, the Landlord holds its interest in the land/property subject to the registered lease. In practice, this means for example:
(a) the Tenant’s interest in the lease is protected in the event of the sale of the land/property to a 3rd party buyer;
(b) any buyer of the land/property must purchase the land/property subject to the Tenant’s lease. The buyer could not, for example, evict the Tenant.
The legislation provides automatic indefeasibility protection for Tenants with short-term leases.
However, for Tenants with a lease term of 3 year or more, in order to obtain the same indefeasibility protection as is statutorily provided for in short-term-leases, those Tenants must ensure the lease is registered.
If a Tenant has a lease for a term of 3 year or more and does not have that lease registered:
(a) unless there is a specific provision in the lease obliging the Landlord, upon sale of the land/property, to obtain a covenant from the buyer that the buyer will purchase the land/property subject to the Tenant’s interest in the lease and land/property;
(b) the buyer does not have to recognise the Tenant’s right to occupy the land/property, and can potentially evict the Tenant.
There are a number of costs involved in registering a lease, including:
Solicitor’s costs;
Surveyor’s costs of drawing up plans (if the premises is only a part of a lot);
DNRME lodgement fees; and
Mortgagee consent fees (if applicable).
Although a Tenant with a lease term of 3 years or more may decide not to seek to register a lease to avoid paying these costs, apart from any specific covenants in the lease, the Tenant should weigh up the risks of losing the benefit of indefeasibility.
Contact Greyson Legal for further information or help with your leasing matter: mail@greysonlegal.com