Signing a commercial lease is a huge undertaking. Much time and energy is spent securing the right location. Once a property is identified, then starts the important — and complex — process of negotiating the contract terms and coming to a final agreement. There are search fees, legal fees, improvements and costs that add up quickly and substantially. Considering the huge investment in both resources and capital, it is important to protect yourself in the event that the property changes hands.

That is where registration comes in. In New South Wales, there may be a need to register a lease exceeding 3 years in respect of commercial property to protect the interests of the tenant. When the lease has not been registered there is a risk that the tenant may suffer prejudice if the property is sold by the original landlord to a new owner. The reason is that the new owner may acquire an indefeasible interest that is free from the leases leaving the tenant in the position of facing possible possession proceedings.

Basically, registration ensures continuity of the lease terms because it records the tenant's interest in the property, which generally cannot then be denied unless there are grounds under the lease for doing so. This means that if the property is sold, the new owner is bound by law to honor the existing contract and its terms and won’t be able to evict the tenant, assuming there is no breach on the tenant’s part. It can also protect the tenant in the event that the landlord fails to pay their mortgage. In some cases, the mortgagee will not be able to call for a sale of the property in a manner that would deprive the tenant of possession as long as the registered lease is on title.

So, what happens if the lease exceeding 3 years, for commercial property, has not been registered and the property is sold? It is possible that you, as a tenant under the original unregistered “lease”, may face possession proceedings by the new owner and would need to commence proceedings against the original landlord for damages. There may also be an action against your solicitor if there has been negligence in not registering the lease (if that was a requirement). To get more information on your specific situation, simply call our litigation lawyers in Sydney at +61 2 8644 0663 to book a consultation.

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