What is a lease?
A retail or commercial lease in Queensland is a contractual agreement between the registered proprietor of a property as lessor and a lessee whereby the lessor grants to the lessee an estate or interest in the lessor’s property for a specific term in exchange for the lessee paying to the lessor consideration by way of rent.
What is registration?
Registration is the process of recording the lessee’s interest in the property by registering the lease against the title of the land which the lease relates. This is done pursuant to section 64 of the Land Title Act 1994 (Qld) (“the Act”).
Should I register my lease?
We generally recommend that all leases with a term over 3 years (including any options) be registered in order to obtain indefeasibility of title.
Indefeasibility of title essentially means that (subject to statutory exceptions) the Queensland Land Registry is the definitive record of all land interests. If you fail to have indefeasibility of title for a lease, whilst contractually the lease will not be invalid, you will be exposed to any subsequent purchaser of the land which is subject to the lease not being required to honor the terms of your lease, or if a mortgagee of the lessor takes possession of the property they will not be required to honor the terms of your lease. By registering the lease (and obtaining mortgagee consent for any prior registered mortgages) in most cases will mean your lease must be honored.
Short term leases (ie leases with a total term of less than 3 years) are protected as an exception to indefeasibility (see section 185(1)(b) of the Act) and therefore registration is generally not required.
Amendments to lease
It is also important to note the timing requirements for registering any amendments to lease. Section 67 of the Act states as follows:
67 Amending a lease
(1) A registered lease may be amended by registering an instrument of amendment of the lease.
(2) However, the instrument of amendment must not—
(a) increase or decrease the area leased; or
(b) add or remove a party to the lease; or
(c) be lodged after the lease’s term has ended.
(3) The term of a registered lease includes a period of possession under the lease because—
(a) an option to renew in the lease has been exercised, whether or not an instrument of amendment has been registered to extend the term of the lease for the option period; or
(b) otherwise—an instrument of amendment extending the term of the lease has been registered.
(4) However, subsection (3)(a) applies to a second or subsequent option to renew in a lease only if, before the end of the option period for the previous option, an instrument of amendment was registered to extend the term of lease for that previous option period.
(5) The procedure for amendment specified in this section is in addition to other rights that are not inconsistent with this Act.
(6) In this section—
option period, for an option to renew in a lease, means the period for which the term of a lease is, or will be, extended by the exercise of the option.
In order to register an amendment to lease which extends the lease term and obtain indefeasibility of title, it must be registered prior to the expiration date of the initial term.
Requirements for registration
For a lease to registered with the Queensland Land Registry, it must comply with the provisions of the Act. Specifically, it must be:
- In the approved form (ie Form 7 Leases);
- Where it is for part of a property, include a lease plan prepared by a surveyor.
Where the lessor’s property is subject to a mortgage we would recommend that mortgagee consent to the lease and any amendment to the lease also be obtained prior to registration. We do note that such consent is not a precondition to registration and leases and amendments to leases may be registered with the Queensland Land Registry without such consent.
In summary, all leases with a term of 3 years or more should be registered and all amendments to leases should also be registered and if they extend the lease term they must be registered prior to the expiration of the initial expiry date of the lease. For more information, speak to one of our Cairns commercial lawyers today.