DEBSAN PTY LTD and UNSWORTH
[2012] WASAT 216
•30 OCTOBER 2012
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: DEBSAN PTY LTD and UNSWORTH [2012] WASAT 216
MEMBER: MS NATASHA OWEN-CONWAY (MEMBER)
HEARD: 21 MAY 2012
DELIVERED : 30 OCTOBER 2012
FILE NO/S: CC 1761 of 2011
BETWEEN: DEBSAN PTY LTD
Applicant
AND
JILLIAN UNSWORTH
ANDREW DUAN HUI LOI
Respondents
Catchwords:
Rent review Market rent for lease of retail shop only Lease conferred right to occupy residential accommodation 'rent free' on original lessee only Personal licence to occupy residential accommodation Not transferrable Deed of assignment of lease did not assign right to occupy the residential accommodation in terms Assignment of lease terminated right to occupy residential accommodation - Turns on own facts
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 11(3), s 11(5), s 11(5)(b)
Property Law Act 1969 (WA), s 80, s 82
Result:
Leave granted and reviewed rent determined
Summary of Tribunal's decision:
Ms Unsworth was the original lessee of a lease of a retail shop owned by Debsan Pty Ltd, situated in Derby, from which she carried on business as the sole trader, as 'Boab Pharmacy & Photographics'. The deed of lease provided Ms Unsworth with the right to occupy certain nearby residential units 'rent free' as the lessee of the retail shop and while she conducted the aforesaid business from that retail shop. Ms Unsworth sold an interest in the business to Mr Loi and she assigned the lease of the retail shop to herself jointly with Mr Loi. Upon a review of the rent payable for the lease of the retail shop under the terms of the deed of lease, a dispute arose between the parties as to whether Ms Unsworth's entitlement to occupy the residential units 'rent free' was a relevant factor in assessing the market rental value for the retail shop. The Tribunal granted the applicant leave to refer to the Tribunal for determination, the question of the rent payable on review, pursuant to s 11(5)(b) of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA). The Tribunal concluded that, as a matter of construction of the terms of the deed of lease, Ms Unsworth's entitlement to occupy the residential units 'rent free', or at all, came to an end upon the execution of the assignment of the lease of the retail shop by her to herself jointly with Mr Loi. Further, the Tribunal concluded that that right came to an end at the time Ms Unsworth ceased as the sole trader of the 'Boab Pharmacy & Photographics' business. As the right had come to an end, it was irrelevant to the determination of the market rental value of the retail shop. On the evidence, the Tribunal concluded that the market rent for the retail shop as at the date of the review was $60,960, plus GST.
Category: B
Representation:
Counsel:
Applicant: Dr E Heenan
Respondents : Mr M Holler
Solicitors:
Applicant: Lawfield Legal Practice
Respondents : AustAsia Legal Pty Ltd
Case(s) referred to in decision(s):
Khayat Investments Pty Ltd v Winston Holdings Pty Ltd [No 2] [2011] WASCA 196
Radaich v Smith (1959) 101 CLR 209
Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2011] WASCA 49
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
On 1 September 2006, the first respondent, Ms J Unsworth and the applicant, executed of a Deed of Lease (Deed of Lease), whereby Ms Unsworth took a leasehold interest in premises described in the Deed of Lease as the 'Leased Premises' which comprised:
… the pharmacy and photographics business trading under the style of Boab Pharmacy at 2/48 Clarendon Street, Derby as demarcated on the Plan annexed [hereto] and marked 'A' and having an approximate area of 381 [square metres].
The Leased Premises is a retail shop for the purposes of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act). The sole director of the applicant had been the operator of the business styled 'Boab Pharmacy and Photographics' (business), which he had conducted from the Leased Premises. By way of background, and it was not a contentious fact, the applicant's sole director sold the business to Ms Unsworth, and the lease of the Leased Premises enabled Ms Unsworth to operate the business with continuity of location.
The term of the lease is expressed to be a period of five years from 1 August 2006, subject to any extensions to that term following the exercise of the options to extend the term of the lease, as provided for in the Deed of Lease. The Deed of Lease confers on Ms Unsworth two successive options to renew the lease, each for a period of five years.
The parties agree that the terms of the Deed of Lease also conferred on Ms Unsworth a right to occupy two residential units, located nearby to the Leased Premises and part of the same strata complex (units). A special condition contained in the schedule to the Deed of Lease provides that the 'Lessee' is entitled to occupy the units 'rent free', and that 'only the Lessee and not any Assignee of the Lessee' is entitled to occupy the units. The nature and terms of the right to occupy the units are issues before the Tribunal.
It is not disputed that sometime after 1 September 2006 and before 22 June 2009, Ms Unsworth agreed that the second respondent, Mr A Loi, should acquire from her a half share interest in the business. It was also intended that Mr Loi was to acquire an interest in Ms Unsworth's leasehold interest in the Leased Premises. On or about 22 June 2009, Ms Unsworth and Mr Loi executed a Deed of Assignment of Lease (Assignment). The assignor is expressed to be Ms Unsworth, and the assignee is expressed to be Ms Unsworth and Mr Loi, trading as 'Boab Pharmacy and Photographics'. The applicant is a party to the Assignment and is described as the landlord. Upon execution of the Assignment, Ms Unsworth and Mr Loi, as the joint assignees, became the joint and several 'Lessees' of the Leased Premises, as provided for by the definition of that term expressed in the Deed of Lease.
It appears that Ms Unsworth and Mr Loi operated the business from the Leased Premises thereafter. It also appears that from about 22 June 2009, Ms Unsworth did not reside at the units but Mr Loi did. It is also common cause that at no time did Ms Unsworth, alone or with Mr Loi, pay to the applicant any money by way of rent for the occupancy of the units, and none was demanded or sought by the applicant. It is also common cause that, with the agreement of the applicant, the units were structurally modified by Ms Unsworth into one single larger residential unit.
It is not in contention that the first option to extend the lease was validly exercised by Ms Unsworth and Mr Loi as the Lessees of the Leased Premises (by way of assignment) in about June 2011.
On 1 July 2011, the applicant proposed a reviewed rent for the Leased Premises payable under the Deed of Lease. That sum comprised two components:
a)the rental for the Leased Premises; and
b)the rental for the units.
The applicant's contention, in short, is that the market rental value of the Leased Premises on the terms that the units may be occupied 'rent free' equates to the combined rental value of the Leased Premises and the units. In the course of the proceedings, the means by which that outcome was advanced changed. The respondents disagreed with the applicant's contended outcome, no matter what construction of the terms of the Deed of Lease was advanced by the applicant.
The parties did not agree, and could not agree, on a reviewed rental value for the Leased Premises, because they were in dispute about the construction of the terms of the Deed of Lease as assigned to Ms Unsworth and Mr Loi, the nature of the right to occupy the units and, in particular, the effect of the Assignment on the right to occupy the units as provided for in the schedule to the Deed of Lease.
The issues for determination
1)Whether the parties require leave of the Tribunal, pursuant to s 11(5)(b) of the CTRSA Act, to refer for determination the question as to the rent payable to the Tribunal.
2)The nature of the right to occupy the units conferred on the 'Lessee' by the terms of the Deed of Lease and, in particular:
a)Is the right to occupy the units 'rent free', conferred upon Ms Unsworth, affected by the assignment of the lease of the Leased Premises by her to herself and Mr Loi?
b)Is the right to occupy the units 'rent free' a factor that is to be taken into account upon a review of the rent of the Leased Premises and, if so, to what extent?
The application and the response
The application was filed in the Tribunal on 11 November 2011. The applicant sought an order:
… to carry out a market review by a licensed valuer for the retail premises known as Unit 2, 48 Clarendon Street, Derby WA (the Premises). Order to include the accommodation units in the market rent review of the Premises.
The grounds are expressed as follows:
Dispute as to whether an agreement has been made as to the market rent review. Dispute as to the method of rent review. Dispute as to whether accommodation units should be included in the market rent review.
On 27 January 2012, the applicant filed an amended application pursuant to an order by the Tribunal made on 23 January 2012. The amended application identified the order sought as:
1.Leave be granted under s 11(5)(b) [of the CTRSA Act].
2.An order determining the rent payable from 1 August 2011.
The grounds of the application assert that the rent payable on the review due on 1 August 2011 had not been agreed, and had not been resolved by a determination by a licensed valuer or two licensed valuers, one appointed by the applicant and one appointed by the respondents.
On 13 February 2012, the applicant filed a further amended application in the Tribunal pursuant to an order made by the Tribunal on 2 February 2012, wherein the applicant sought the following orders:
1.A declaration that from 1 August 2011 the Respondents do not have the right under the lease to occupy rent free the accommodation units referred to in the lease.
2.Leave be granted under s 11(5)(b) [of the CTRSA Act].
3.An order determining the rent payable under the lease from 1 August 2011.
4.The rent so determined to be payable forthwith and the difference payable in 3 equal monthly instalments due on [the] 30th of each month over the next 3 months.
The grounds of the further amended application are as follows:
1.The Respondent[s] [do] not have the right from 1 August 2011 to occupy rent free the Accommodation units referred to in the lease by reason of the assignment of lease to the Respondents on or about 22 June 2009.
2.The rent payable on the review due on 1 August 2011 has not been agreed.
3.The question of the rent payable on the review due on 1 August 2011 has not been resolved by either a person licensed under the Land Valuers Licensing Act 1978 to determine the rent, or 2 persons licensed under that Act[,] one of whom is appointed by the landlord and one by the tenant.
On 13 February 2012, the applicant also filed its statement of issues, facts and contentions and seven documents, including the Deed of Lease and the Assignment. On 28 February 2011, the respondents filed in the Tribunal the response to the applicant's further amended application.
On 28 March 2012, the respondents filed an application against the applicant seeking leave pursuant to s 11(5)(b) of the CTRSA Act, and rectification of the terms of the Deed of Lease to delete the reference to items 7.4, 7.5 and 7.6 of the schedule to the Deed of Lease; that is, the market rent review provisions contained in the same (crossapplication). In short, the grounds of the respondents' crossapplication were that the Deed of Lease did not reflect the true terms as agreed by Ms Unsworth and the sole director of the applicant in a written contract between them made on 1 September 2006, whereby the former agreed to purchase the business from the applicant's sole director. The crossapplication, in part, formed the basis of the respondents' response to the applicant's further amended application and statement of issues, facts and contentions.
On 2 May 2012, the applicant filed in the Tribunal a further statement of issues, facts and contentions which largely, but not exclusively, was a response to the respondents' crossapplication.
On 9 May 2012, the parties attended at the Tribunal for a compulsory conference of the parties' expert valuers. It appears that the conference became a mediation of the issues rather than a compulsory conference of the parties' respective valuation experts. As a consequence of the mediation, it was agreed, and it was recorded in a consent order made on 9 May 2012 by the Tribunal, that the only questions for determination were:
(a)Has the respondent lost the right to occupy the two residential units rent free under item 16 of the schedule to the lease by reason of the assignment of the lease to the respondent on or about 22 June 2009?
(b)If the answer to the question [above] is no, then does the rent review of the leased premises under item 7.5 of the schedule to the lease include the right to occupy the two residential units which was granted under item 16 of the schedule to the lease?
By consent, it was ordered that all other matters were resolved. At the hearing on 21 May 2012, this was clarified and counsel for both parties agreed as follows:
1.The intention of the parties concerning issues 1 and 2 above is to be determined by reference to the Deed of Lease and the Assignment and not by reference to any extrinsic material or evidence.
2.The respondents' cross[]application and contentions in their response that the Deed of Lease requires rectification was formally withdrawn.
The valuation evidence called
The applicant called Mr S Incerti, a licensed valuer, to give evidence of the annual market rent of the Leased Premises and the units. Mr Incerti's witness statement records that he valued the annual market rent for the Leased Premises as at 1 August 2011 at $60,960, plus GST, and the annual market rent for the units as at 1 August 2011 at $36,400. In his supplementary witness statement he stated that he valued the annual market rent for the Leased Premises on the terms that a lessee was permitted to occupy the units 'rent free', to equate to the combined value of the Leased Premises and the units that is, $97,360 per annum, plus GST, as at 1 August 2011.
The respondents did not call any valuation evidence. The respondents did not accept the statement contained in Mr Incerti's supplementary witness statement. Mr Incerti was called and gave evidence from Broome, Western Australia, by video link. In crossexamination Mr Incerti agreed with the respondents' counsel that there was a smaller market for a tenant who wanted to lease the Leased Premises upon the terms of the Deed of Lease (that is, to operate the type of business provided for in the Deed of Lease) and occupy the units as one package. However, he stated that, notwithstanding that fact, he did not consider that the individual values he ascribed to each of the Leased Premises and the units should be discounted because the market for residential accommodation was so high any lessee of the Leased Premises would, in all likelihood, readily take up the right of 'rent free' occupation of the units. The Tribunal accepted this evidence. No other evidence of rental value was led.
The relevant terms of the Deed of Lease
By cl 2 of the Deed of Lease, the applicant leased to the 'Lessee' and the 'Lessee' took upon lease from the applicant:
[a]ll of the leased premises … TO BE HELD by the Lessee at the rental and for the Term and on and subject to the covenants, conditions and stipulations contained herein.
Clause 2 of the Deed of Lease provides for some reservations and exceptions of the demise of the 'Leased Premises' to the Lessee, none of which are relevant to these proceedings. The 'Lessee' is defined in cl 1.1 of the Deed of Lease to mean and include the lessee defined in the heading of the Deed of Lease as 'JILLIAN UNSWORTH T/A BOAB PHARMACY & PHOTOGRAPHICS of 76 Louise Street, Nedlands' and 'permitted assigns'. Clause 1.6 of the Deed of Lease provides that the headings shall not form part of the Deed of Lease and shall not affect the construction of the Deed of Lease.
Clause 3 of the Deed of Lease provides that the term of the lease of the Leased Premises shall be five years from 1 August 2006, subject to the option for extension of that lease as provided for by 'clause 7.5 hereto'. Clause 7.5 of the Deed of Lease confers upon the Lessee the option to renew or extend the term of the lease of the Leased Premises for a further term or terms, as provided for by item 5 of the schedule to the Deed of Lease; that is, two successive terms of five years. Clause 4 of the Deed of Lease identifies the rent upon which the Lessee holds the lease of the Leased Premises. Clause 6 of the Deed of Lease and item 6 of the schedule to the Deed of Lease, read together with items 7 and 8, provide that the rental payable in the first year is $55,000, plus GST, and in the second year (unless otherwise agreed) $55,000, plus a CPI increase, plus GST. It is similarly provided for the third, fourth and fifth years of the lease of the Leased Premises.
Clause 5 of the Deed of Lease provides for various covenants by the Lessee to be performed during the term of the lease of the Leased Premises, including the promise to pay the rent (cl 5.1.1).
There is no reference in the Deed of Lease to any leasehold estate or interest in any property other than the Leased Premises. Clause 7.6 of the Deed of Lease provides in terms:
It is HEREBY MUTUALLY AGREED AND DECLARED by and between the parties hereto that the special provisions specified in Item 16 of the Schedule hereto shall form part of this Lease and shall be observed and complied with by the party therein set forth to do so.
Item 16 of the schedule to the Deed of Lease relevantly provides:
The Lessor agrees that the Lessee shall be entitled to occupy rent free the two units (the 'units') which are demarcated on the Plan annexed hereto and marked 'B' for the term of the Lease and any extensions thereof provided that:-
16.1Only the Lessee and not any Assignee of the Lessee shall be entitled to occupy the units. …
Clause 5.4.1 of the Deed of Lease prohibits the Lessee from assigning, subletting, parting with possession or occupation of the Leased Premises or any part thereof, or the lease of the same or any estate or interest in the lease of the same, but provides that if the Lessee wishes 'to assign or sub-let the whole of the Leased Premises the Lessor shall not unreasonably withhold its consent to such assignment or subletting' subject to various conditions specified being met. The conditional entitlement to assign or sublet conferred on the Lessee by cl 5.4.1 of the Deed of Lease is limited to an assignment or sublease of the whole of the Leased Premises. The conditional entitlement to assign does not extend to any interest the Lessee may have in the units. The operation of s 80 and s 82 of the Property Law Act 1969 (WA) are excluded by cl 5.4.1 of the Deed of Lease.
The relevant terms of the Assignment
Relevantly, the recitals and the express terms of the Assignment refer only to the Leased Premises, an estate or interest in the lease of the Leased Premises. Recital A refers to the 'Assignor', defined as Ms Unsworth trading as 'Boab Pharmacy & Photographics', as being 'vested of an estate as Lessee in the … Leased Premises' by reason of the terms of the Deed of Lease. There is no reference in the Assignment to the units.
Leave and s 11(5) of the CTRSA Act
In this proceeding, the facts disclose that the parties have not agreed to the appointment of a valuer to determine the reviewed rental value of the Leased Premises and that the parties, or one or other of the parties, have failed to appoint a representative valuer to determine the reviewed rental value of the Leased Premises as provided by the term implied by s 11(3) of the CTRSA Act. No one 'has acted under subsection (3)(a) or (b)' and the question of the rent payable as a result of the review may be referred by a party to the retail shop lease to the Tribunal with the leave of the Tribunal (s 11(5) of the CTRSA Act). The application for leave allows the Tribunal the opportunity to 'inquire into the reasons why the term implied by the statute has failed to achieve its purpose … [and] the Tribunal may consider whether all reasonable steps have been taken … and for that valuer to resolve the question of the rent payable following review': see Khayat Investments Pty Ltd v Winston Holdings Pty Ltd [No 2] [2011] WASCA 196 (Khayat) per Martin CJ at [9] (with whom Newnes and Murphy JJA agreed).
The Tribunal has had the opportunity to ascertain why the term implied by s 11(3) of the CTRSA Act has failed to resolve the question of the rent payable on review the dispute revolves around the issue of the construction of the terms of the Deed of Lease as identified above. A valuer or valuers cannot resolve the construction issue, and the Tribunal may consider the matter in such a case and 'fill the gap and determine the rent payable following a review': see Khayat per Martin CJ at [8].
The Tribunal finds that there is a genuine dispute concerning the issues referred to herein, the resolution of which is required for the reviewed rent to be determined. Accordingly, the Tribunal granted leave to the parties following the hearing on 21 May 2012.
The nature of the right to occupy the units and the relevance of the same to the review of the rental value of the Leased Premises
The nature of the right to occupy the units
The terms of item 16 of the schedule to the Deed of Lease do not purport to create a legal right of exclusive possession to the units in Ms Unsworth. Such a right is necessary for a leasehold interest in any property: see Radaich v Smith (1959) 101 CLR 209, at [214], [217] [218], [220] and [222] [223]; Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2011] WASCA 49 per Buss JA (with whom Newnes and Murphy JJA agreed). The absence of a right to transfer a right is suggestive of an absence of the right of exclusive possession. For the reasons referred to below, the Tribunal concludes that the terms of item 16 of the schedule to the Deed of Lease render the right conferred on Ms Unsworth in respect of the units to be incapable of transfer or assignment. The right conferred upon Ms Unsworth by item 16 of the schedule to the Deed of Lease is not a leasehold estate or interest in the units, but a personal right of occupancy on the terms provided by item 16 of the schedule to the Deed of Lease. By its nature that right is not transferrable to another.
Although cl 7.6 of the Deed of Lease expressly incorporates the special provisions in item 16 of the schedule to the Deed of Lease, such incorporation does not change the nature of the right conferred on Ms Unsworth, by item 16 of the schedule to the Deed of Lease, to a leasehold interest or estate in the units. Rather, cl 7.6 of the Deed of Lease expressly provides that the special provisions specified in item 16 of the schedule to the Deed of Lease are to be observed and complied with by 'the party therein set forth to do so' that is, the obligations identified in item 16 are to be performed and observed consistently with the covenants in respect of the lease of Leased Premises. By way of an example, a breach of any provision of item 16 of the schedule to the Deed of Lease would therefore operate as a breach of a covenant of the lease of the Leased Premises as provided for in the Deed of Lease.
The terms of item 16.1 of the schedule to the Deed of Lease provide that the right to occupy the units is granted to '[o]nly the Lessee and not any Assignee of the Lessee'. The respondents submitted that the reference to 'Lessee' in that phrase means the same lessee as is defined by the provisions of cl 1.1 of the Deed of Lease and is intended to include Ms Unsworth and her 'permitted assigns'. The respondents also submit that the next phrase in item 16 'and not any Assignee of the Lessee' should be construed as a reference to nonpermitted assignees. The term 'Assignee' is not defined by the Lease. The applicant submitted that the reference to '[o]nly the Lessee and not any Assignee of the Lessee' in item 16.1 of the schedule to the Deed of Lease means the original Lessee Ms Unsworth but not her assignees, permitted or not.
The Tribunal disagrees with the respondents' submissions and agrees with the applicant's submission. First, there is no reason to construe 'Assignee', as it appears in item 16.1 of the schedule to the Deed of Lease, to have any meaning other than its ordinary meaning (notwithstanding that it has been give a capital 'A'), being Ms Unsworth's assignees generally. Secondly, the draftsperson has gone to some trouble to distinguish the person to whom the right is granted ('[o]nly the Lessee and not any Assignee of the Lessee') from the person to whom the Lease of the Leased Premises is granted (the Lessee Ms Unsworth and her permitted assigns). If it had been intended that the right to occupy the units was to be conferred on Ms Unsworth and her permitted assigns (being the permitted assignees of the Leased Premises pursuant to cl 5.4.1 of the Deed of Lease), then it would have been sufficient for the draftsperson to have just referred to the 'Lessee' in item 16.1 of the schedule to the Deed of Lease. That would have prevented Ms Unsworth and her permitted assigns from leasing out the units to third parties, as only the Lessee of the Leased Premises would have the right to occupy the units. For these reasons, the Tribunal does not consider there is any reason why 'Assignee' should be read as a reference to nonpermitted assignees. Instead, the Tribunal considers that the use of the word 'Assignee', in the context of the terms of the Deed of Lease, means all of Ms Unsworth's assignees permitted or otherwise. For this reason, the Tribunal concludes that the right to occupy the units 'rent free' was conferred upon Ms Unsworth alone and is not transferrable by Ms Unsworth to anyone, whether or not that person is also the permitted assignee of the Leased Premises.
Further, that right is only conferred on her while, as the original lessee of the Leased Premises, Ms Unsworth traded as the 'Boab Pharmacy & Photographics' business. The right did not extend to Ms Unsworth in her capacity as an assignee or joint and several assignee of the lease of the Leased Premises or as a joint trader under the name 'Boab Pharmacy & Photographics'.
The Tribunal concludes that the right to occupy the units 'rent free', or at all, conferred by item 16 of the schedule to the Deed of Lease, expired upon the execution of the Assignment.
The Assignment
Further, as commented above, the terms of the Assignment do not refer to the right to occupy the units ('rent free' or otherwise) and do not purport to assign any such right. The fact that the Assignment refers to the Deed of Lease does not, in the Tribunal's view, reveal an intention to assign or transfer the right to occupy the units a right which the terms of item 16 of the schedule to the Deed of Lease provide is entirely personal to Ms Unsworth. The absence of any reference in the Assignment to any right to occupy the units 'rent free', or at all, is consistent with the construction of the terms of cl 5.4.1 of the Deed of Lease and item 16 of the schedule to the Deed of Lease as referred to above that the right is not capable of assignment or transfer at all.
The relevance of the units to market rent of the Leased Premises
Given the Tribunal's conclusion that the right to occupy the units 'rent free', or at all, ended when the Assignment was executed, this issue is no longer determinative of the proceeding. However, should the Tribunal's conclusion above be incorrect, the Tribunal shall consider this issue.
Item 16 of the schedule to the Deed of Lease expresses the duration of the entitlement to rent free occupation of the units as 'for the term of the Lease and any extensions thereof' subject to the provisions of items 16.1 16.5.3 of the schedule to the Deed of Lease. These words do not support the applicant's submission that the entitlement was to endure only for a first term or was a mere inducement to Ms Unsworth to execute the Deed of Lease. Should the Deed of Lease and item 16 of the schedule thereto be construed so as to allow the market rental value of the units to be incorporated into the market rental value of the Leased Premises, it could not be said that the occupation of the units is truly rent free. Such a construction would permit the market rental value of the units to be disguised as the market rental value of the Leased Premises. The Tribunal concludes that the express words of item 16 of the schedule to the Deed of Lease reveal an intention that rent free means strictly rent free in every way, as submitted by the respondent.
Whilst the Tribunal accepts Mr Incerti's evidence that, as a matter of market forces, a lessee's right of rent free accommodation of the units will likely increase the market rental value of the Leased Premises, in this case the Tribunal concludes that the express terms of the Deed of Lease prohibit the lessee's right to be taken into account when assessing the market rental value of the Leased Premises, subject to the provisions of item 16.1 16.5.3 of the schedule to the Deed of Lease.
The market rent as at 1 August 2011
The only evidence before the Tribunal of market rental value of the Leased Premises as at the date of the review 1 August 2011 - is that of Mr Incerti. His evidence is that the market rental value for the Leased Premises as at 1 August 2011 was $60,960, plus GST, per annum. The Tribunal finds that the market rent for the Leased Premises as at 1 August 2011 is $60,960, plus GST.
Other matters
The Tribunal acknowledges that Ms Unsworth and/or Mr Loi continued in occupation of the units rent free following the execution of the Assignment on or about 22 September 2009. That fact alone does not alter the Tribunal's construction of the Deed of Lease. That fact alone does not alter the nature and duration of the right conferred by item 16 of the schedule to the Deed of Lease. That fact alone does not give rise to any variation to the Deed of Lease or any kind of estoppel. No such arguments were ultimately advanced in any event.
The Tribunal's conclusions
The Tribunal has determined the issues as follows:
1)The parties require leave pursuant to s 11(5) of the CTRSA Act, and that leave should be granted. Leave was granted on 21 May 2012.
2)The right to occupy the units is a personal right and was conferred upon Ms Unsworth alone as the original Lessee for the term of the Lease (including any extended terms of the lease of the Leased Premises).
a) The right to occupy the units was affected by the Assignment in that it brought to an end Ms Unsworth's right to occupy the units 'rent free', or at all, as the original Lessee under the terms of the Deed of Lease.
b) Having brought Ms Unsworth's right to occupy the units to an end, the occupancy of the units is not relevant in the assessment of the market rental value of the Leased Premises. Further, even if the right to occupy the units 'rent free' had not terminated upon execution of the Assignment as found by the Tribunal, that right is not relevant to the assessment of the market rental value of the Leased Premises.
The Tribunal concludes that the market rental value for the Leased Premises as at 1 August 2011 is $60,960, plus GST.
The Tribunal has concluded that the respondents are obliged to pay the difference between the rent paid to date and the market rent payable as from 1 August 2011, as determined by the Tribunal, pursuant to the terms of the Deed of Lease, by three equal monthly instalments. So as to afford the respondents some time to pay the additional rent payable pursuant to the Deed of Lease, the Tribunal shall order the instalment to be due and payable by the respondents to the applicant on the 30th day of each of November 2012, December 2012 and January 2013.
Costs
Both parties were legally represented at the hearing. Neither party raised the issue of costs of the proceeding. So as to afford the parties an opportunity to consider the issue, the Tribunal shall make an order that permits the parties to advance a cost claim in the event that they fail to reach agreement on that issue.
Orders
1.The Tribunal declares that the respondents do not have a right to occupy the residential units demarcated on the plan marked 'B' and annexed to the Deed of Lease executed by the applicant and the firstnamed respondent on a 'rent free' basis, or at all, following the execution of the Assignment of the Lease on or about 22 June 2009.
2.The rent payable by the respondents to the applicant pursuant to the Deed of Lease, upon review as at 1 August 2011 is the sum of $60,960, plus GST, per annum.
3.The respondents shall pay to the applicant the difference between the rent paid from 1 August 2011 by the respondents and the rent as reviewed by the Tribunal and referred to in order 2 above to date, by three equal monthly instalments due on the 30th day of each of the months of November 2012 and December 2012 and January 2013.
4.The parties have liberty to apply for an order for costs of the proceeding in the event that they fail to reach agreement.
I certify that this and the preceding [50] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MS NATASHA OWEN-CONWAY, MEMBER
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