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6 Leases and Licences

Lease Terminology

      Leases are not estates like fee simple type estates
      The rights granted under a lease are not inalienable
      Leases can be assigned a lease by a landlord
      Subleases can be granted, often granted for technical reasons, ie so as not to
       assign the lease
      Landlord and Tenant Amendment Act 1948 (The Rent Control Act) only
       applies where there is a lease and not a licence

      Lessor
          o Landlord
      Lessee
          o Tenant
      Leasehold/Tenancy
          o Tenant’s interest
      Reversion
          o Landlords interest in the land after the lease is granted
      Assignment
          o Where the whole of the tenant’s interest is assigned or transferred
      Sublease
          o Transfer of something less than the whole lease
          o Eg put sublease for one day less than their whole lease to obtain
              different legal rights
          o Often require landlord’s consent to sublease
                   Landlord cannot unreasonably withhold consent (s133(b)
                      Conveyancing Act

Requirements for a lease
   1. Certainty of term/period
   2. Exclusive Possession
   3. Certainty of premises: Interest in land rather than mere personal privilege

Rent is not an essential component
         Burns v Dennis (1948)

Parties can stipulate rent other than money
         Greco v Swinburne [1991]

1. Certainty of term

Commencement Date
Date on which the lease commences must be certain or capable of being rendered
certain before the lease takes effect

      This requirement is satisfied with reference to the lease commencing:
          o Tomorrow


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           o From completion of the building
                 Pirie v Saunders (1961)
           o When the gas is connected
                 Terry v Tindale (1882)
           o When a certificate issues
                 Panucci v Motor Body Assemblers (1958)

      Lease with no ascertainable commencement date is void
      Where no commencement date is expressed, on might be implied under the
       general principle for implying terms in contract

      Commencement date must be within 21 years
         o Section 120(A)(3) Conveyancing Act

Duration
Maximum duration of lease must be certain or capable of being rendered certain
before the lease takes effect

There is no lease if the duration is referred to as:
    For the duration of the war
            o Lace v Chantler [1944]
    Until the end of the peanut crop
            o Bishop v Taylor (1968)
    For the period the lessee holds shares in the company
            o Re Lehrer and the Real Property Act[1961]
    Until the completion of the new premises
            o Mangiola v Costanzo (1980)
    Until the land is required by council for road widening purposes
            o Prudential Assurance Co Ltd v London Residuary Body [1992] 3 WLR
                279
There is a lease if the maximum duration is known, but it may be cancelled earlier
    “For 20 years, or sooner ending of the war”
            o Prudential Assurance Co Ltd v London Residuary Body [1992] 3 WLR
                279

The requirement of certain duration does not apply to:
    Tenancies for life
           o Greco v Swinburne [1991]
    Tenancies at will
    Tenancies at sufferance
    Periodic Tenancies

If a lease is void for breach of requirement of certainty of terms, but the tenant goes
into possession and begins paying rent, a valid tenancy may arise under section 127
Conveyancing Act

A lease cannot vest an interest in the tenant retrospectively, however the landlord and
tenant can contract that obligations under the lease are to run from a date earlier to the
actual grant of the lease


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      Cadogan v Guiness [1936]

2. Exclusive Possession
     Exclusive possession is the main test of whether there is a lease
     Requires that the lease give the tenant the right to exclude anyone
           o   Although most leases give the landowner the right to enter the premises

In determining whether it is a lease or a licence, the court looks to the substance, not
the form of the textual agreement: Exclusive possession is a lease rather than a licence
     Radich v Smith (1959) 101 CLR 209 (High Court Australia)
           o FACTS
                    Rent control legislation only applied to leases and not licences
                    Lawyer carefully drafted agreement in form of licence, using
                       language of licence not lease
                    Radich brought forward claim that she was tenant, rather than
                       licencee
           o HELD
                    It was a lease, and thus Radich had the protection of the Act

Radich applied in England
    Street v Mountford [1985] AC 809
          o FACTS
                   Similar facts to Radich
                   Agreement included a clause saying “I the occupant agree that
                     this gives me rights of a licensee and not a tenant”
          o HELD
                   Exclusive possession meant lease existed

Exclusive possession can be implied by the nature of the rights granted
    Lewis v Bell (1985) 1 NSWLR 731 at 736

3. Certainty of premises: Interest in land rather than mere personal privilege
     When rooms leased are not exactly specified, there will be a licence rather
       than a lease

Precision of language suggests lease rather than licence – poorly specified aspects,
such as the area and manner of payment suggest licence
    National Advertising Pty Ltd v Wavon Pty Ltd (1988) 4 BPR 9732
           o Imprecise description of the area and manner of payment suggest
               licence

Sham provisions

An agreement that is in substance a lease cannot be converted into a licence merely by
calling it one – (substance rather than form)


      Radich v Smith (1959) (Australia)
      Street v Mountford [1985] (England)



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Types of Leases
Tenancy for a fixed term
    Lease for a given term

Periodic Tenancy
    Tenancy which rolls over from one period to the next
    Usually arises out of the way rent is paid
    Either party can bring periodic tenancy to an end by giving notice for the
       period of the lease
           o Eg weekly tenancy – 1 weeks notice
           o Exception:
                    Only six months notice required for annual lease

Equitable Leases
   Courts of equity not so concerned with whether a lease has met the formal
      requirements
                   No need for actual order of specific performance of the
                      agreement to grant the lease
                   Sufficient that parties entitled to obtain such an order
          o Walsh v Lonsdale (1882) (English)
                   Ie if landlord does not have title, it is irrelevant if the tenant
                      gets everything they require out of the lease
                   Estoppel – see pg 296
   An equitable lease is similar to any equitable interest
          o Liable to be defeated by a bona fide purchaser of a legal estate in the
              land without notice of the equitable lease
   Court of equity will grant specific performance of an equitable lease, but the
      legal interest survives if there is no notice
          o As long as tenant is in possession, there will be notice

Tenancy at will
    Lease where either party can terminate at their will without prior notice
    Can be granted expressly or by implication
         o Eg when tenant stays on after lease has expired

Usually no notice requirement, but may require notice in exceptional circumstances
    Landale v Menzies (1909) (High Court of Australia)
           o FACTS
                    Two partes in a ‘holding over’ situation as they adopted a fence
                      running along a stream as the boundary between properties on a
                      give and take basis
                    Each therefore held parcels of land from the other on a tenancy
                      at will
                    After giving a few days notice, but without permission,
                      Menzies cut through the fence in order to get better access to
                      the water
           o HELD
                      Reasonable notice required due to importance of access to water




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                      There was no reasonable notice, and so agreement was still in
                       existence, and plaintiff entitled to injunction and inquiry as
                       damages for trespass

Tenancy at will under section 127 Conveyancing Act
    Ie if tenant paying rent but lease does not meet statutory formalities

Formerly, under English law:

If you have a lease over three years, it must be written and signed
     Statute of Frauds 1677

If not written and signed, takes effect as a tenancy at will
     Statute of Frauds 1677

BUT: Common law courts of England ignored this:
   Said that if you have a lease that does not meet the formalities, but the tenant
      pays rent:
         o Tenancy will be treated periodically from year to year until the full
             period agreed upon has transpired
                  Terminable with 6 months notice
                  Courts imply all terms agreed upon as long as consistent with
                    tenancy from year to year

Under Section 127(1) Conveyancing Act
    Courts will hold that a tenancy at will exists
    To protect the tenant, one months notice required to bring the tenancy to an
      end

Courts will read into a s127 tenancy at will whatever obligations the parties originally
agreed upon so long as they are consistent with a tenancy at will
     Dockerill v Cavanagh

BUT:

That relates to Common law courts
    Courts of Equity would uphold agreements in the terms the parties had
        reached

      See below, Chan v Cresdon regarding guarantors

Unsigned lease gives rise to tenancy at will, and imputes all consistent obligations
    Wykes v Samilk Pty Ltd (1998) NSW ConvR 55-871
          o FACTS
                   Tenant never signed lease
                           Problem regarding s23C Conveyancing Act
                   Landlord sued for rent owing under the lease
                   Tenant claimed there never was a lease
          o HELD



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                      Tenant was in possession and had paid rent, therefore lease
                       under s127 Conveyancing Act, even though nothing in writing
                      In tenancy at will, obligations consistent, tenant liable to pay
                       rent, and could be sued for unpaid rent

Unregistered Torrens title lease gives rise to tenancy at will
    Chan v Cresdon Pty Ltd (1989) 168 CLR 78
           o FACTS
                   Shop leased on Torrens’ title land for 5 years
                            Tenant required to pay rent and supply guarantors
                   Lease was register-able, but not registered by the landlord
                   Tenant defaulted on payment, and landlord claimed against
                      guarantors
                   Guarantors said they guaranteed against a registered lease, and
                      not an unregistered one – guaranteed ‘under this lease’
                            Guarantors argued that as not registered, total failure of
                               consideration
           o HELD
                   Guarantors not liable
                   As lease never registered, only a common law tenancy at will
                      came into existence
                            Terminable by one month’s notice
                            Agreement treated as equitable lease
                   Therefore, the obligation to pay rent did not arise under the
                      lease, it arose out of possession

Pastoral Leases

      Wik Peoples v State of Queensland (1996) 187 CLR 1; 71 ALJR 173
          o FACTS
                  Pastoral lease over two arid properties.
                  Properties low intensity farming (relevant)
                  Leases granted under statute – ie not common law leases
                          Allowed others (eg mining prospectors) to enter the
                             property, and minister could allow anyone on land for
                             any reason
                  Issue whether leases extinguish Native title because they
                     granted exclusive possession
          o HELD 4:3
                  Use of the land not inconsistent with native title, and legislation
                     showed no clear and plain intention to extinguish native title.
                  As not common law leases, must examine statute
                          Did not afford exclusive possession – others allowed on
                          History of pastoral leases showed concern for
                             traditional occupiers of the land
                  Suggested that as intensity so low, possibility that peoples
                     could co-exist on the properties with the farmers
                  Minority
                          Did extinguish, as required leasees to pay rent



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Statutory Formalities for establishing a lease

Conveyancing Act
   Applies to old system title, and only sometimes to Torren’s title

To create a legal lease you must use a deed
           o This is a signed, sealed and delivered document
           o A standard signed contract will not suffice
    Section 23B Conveyancing Act
           o Does not apply to Torren’s title

To create an equitable lease, it is sufficient to use writing
            o Must be signed by the landlord or agent
     Section 23C Conveyancing Act
            o Applies to Torren’s title

You can create a legal lease without writing or deed so long as it:
           o Does not exceed three years (including options to renew)
                    Leases for life included, as they may end within three years
           o Is at the market rate
                    Best rent reasonably obtainable without requiring a lump sum
                       payment
           o Lease mist take effect in possession
                    Must give the tenant the right to immediate possession
    Section 23D(2)

There may be an equitable lease even though it is not in writing if it is partly
performed
     Section 23E(d)
          o Applies to Torrens’ title

A lease which is not in writing or not partly performed takes effect as a lease at will
only
          o Old statute of Frauds
     Section 23D(1)

Unsigned lease gives rise to tenancy at will, and imputes all consistent obligations
    Wykes v Samilk Pty Ltd (1998) NSW ConvR 55-871
          o FACTS
                   Tenant never signed lease
                           Problem regarding s23C Conveyancing Act
                   Landlord sued for rent owing under the lease
                   Tenant claimed there never was a lease
          o HELD
                   Tenant was in possession and had paid rent, therefore lease
                      under s127 Conveyancing Act, even though nothing in writing
                   In tenancy at will, obligations consistent, tenant liable to pay
                      rent, and could be sued for unpaid rent




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Real Property Act
    Regarding Torrens’ Title land
    NOTE:
         o Leases need not be by deed in Torrens’ title

Torrens’ title leases which exceed 3 years should be in ‘approved form’, and must be
registered to gain indefeasibility
     Section 53 Real Property Act

Registration of the lease gives it priority over all alter registered interests
    Section 36(9) Real Property Act

If an interest is not registered it has no force at all
     Section 41 Real Property Act
            o Although courts will treat it as an equitable interest

Unregistered leases which do not exceed 3 years in duration are protected against a
change in ownership unless the purchaser had no notice of the leases existence
    Section 42(1)(d)
           o Basically puts into effect the equity concepts
           o Note:
                   If a tenant is in possession of the land the purchaser almost
                     certainly has notice of the lease
                          One case which contradicts this
                                 o Tenant on holiday

Unregistered Torrens title lease gives rise to tenancy at will
    Chan v Cresdon Pty Ltd (1989) 168 CLR 78
           o FACTS
                   Shop leased on Torrens’ title land for 5 years
                            Tenant required to pay rent and supply guarantors
                   Lease was register-able, but not registered by the landlord
                   Tenant defaulted on payment, and landlord claimed against
                      guarantors
                   Guarantors said they guaranteed against a registered lease, and
                      not an unregistered one – guaranteed ‘under this lease’
                            Guarantors argued that as not registered, total failure of
                               consideration
           o HELD
                   Guarantors not liable
                   As lease never registered, only a common law tenancy at will
                      came into existence
                            Terminable by one month’s notice
                            Agreement treated as equitable lease
                   Therefore, the obligation to pay rent did not arise under the
                      lease, it arose out of possession




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Covenants (Obligations) in Leases where written agreement gives no guidance

      In the absence of a contrary agreement between the parties, Common law
       implies 6 covenants
           o Covenants may be contracted away
      These are implied even in the absence of a deed: Baynes & Co v Lloyd & Sons
       [1895]
           o Landlord’s covenants
               1. Quiet Enjoyment
               2. Not to derogate from the grant of the lease
               3. For furnished dwellings, ensure they are reasonably fit for
                  habitation when the lease term starts
           o Tenant’s Covenants
               1. Use the premises in a tenant-like manner
               2. Yield up possession to the landlord at the end of tenancy
               3. For agricultural land, cultivate in a husband like manner

Quiet Possession/Enjoyment
    Neither landlord not those claiming through the landlord will interrupt the
       tenant’s peaceful enjoyment of the premises
           o Implied promise not to interfere with the use of the right given
                   Kenny v Preen [1963]
    Examples of breach by landlord or agent:
           o Removed doors and windows to coerce tenant into giving up
               possession
                   Lavender v Betts [1942]
           o Disconnected gas and electricity supplies
                   Perara v Vandiyar [1953]
           o Structural repairs within an area properly occupied by the tenant
                   Dowse v Wynyard Holdings Ltd )1962)
           o Repairs in a way that obstructed tenant’s potential customers
                   J C Berndt Pty Ltd v Walsh [1969]
           o Allowing rainwater to damage the premises
                   Martins Camera Corner v Hotel Mayfair [1976]

Landlord is liable for breach, even if compelled to act by statute (eg fire safety), if the
possibility of the need to interfere could have been reasonably foreseen at the date of
entering into the covenant
            o Reid House v Benekee (1987)

Covenant extends to interference by third parties if:
          o Interference by someone claiming through landlord
                  No breach when interference by someone with title superior to
                      landlord
                           Eg if A rents for 6 months, then grants lease to B for 1
                             year. When A’s landlord evicts B, B cannot sue A for
                             breach of covenant of quiet enjoyment
                                 o Besley v Besley


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          o Protection only extends to lawful acts of persons claiming through the
              landlord
                   Remedies in tort for unlawful acts of third parties
                   This does not apply if landlord specifically covenants against
                     interruptions by a specific persons
                          Protection then extends to unlawful interruptions by
                             named person
                                 o Nash v Palmer (1816)
      Ozzy Traveller v Marklea (1997)
          o FACTS
                   Landlord owned large complex
                          Leased room to A for selling camping equipment
                          Leased room to B for manufacturing timber articles
                   Noise interfered with camping business
                   A sued Landlord for breach of covenant of quiet enjoyment
          o HELD
                   A succeeded
                          Landlord has right under lease to stop B causing
                             nuisance and disturbance to other tenants
                          By declining to exercise clause, A suffered a loss, and
                             LL was in breach of covenant for quiet enjoyment

Extended to include quality of possession
    The English Mill’s Case
          o English council leased flat to Mills
          o Soundproofing of walls in flat so poor that landlord had breached
              covenant of quiet enjoyment
    See Ozzy Traveller above

Not to derogate from the grant of the lease

If leased for a purpose, the landlord cannot interfere with tenant’s use of property
      Karraggianis v Malltown (1978) SA
            o FACTS
                     Landlord leased 6th floor of building for use as public restaurant
                     Landlord shut off lifts - cutting off access to 6th floor
            o HELD
                     Derogation from grant
                     Note:
                             Most leases have express clauses allowing landlord to
                                develop without suing
      Vasile v Perpetual Trustees
            o Landlord leased for coffee shop, then stopped up one of the two doors

Covenant breached when landlord’s activity or non activity renders the leased
premises ‘unfit or materially less fit’ for the particular purpose
    Browne v Flower




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Test is whether the premises ‘for practical purposes’ are to be ‘fairly regarded’ as
having been rendered unfit
    Gordon v Lidcombe Developments

Furnished dwelling houses must be reasonably fit

Applies only to condition of house when lease begins: No implied covenant that
house will continue to be fit for habitation
    Sarson v Roberts [1895]

Applies only to the premises, not to the furnishings or appliances
    Pampris v Thanos (1967)

Statutory Inroads:
     Can only rent ‘dwelling-house’ that is in ‘fair and tenantable repair’ at the date
       of letting
            o Section 39 Landlord and Tenant (Amendment) Act 1948 (NSW)
     Landlord has duty to provide and maintain premises that are habitable
                    Extends to contents supplied by landlord
            o Section 25 Residential Tenancies Act 1987


Use the premises in a tenant-like manner
    Ie not to commit waste
          o Marsden v Edward Heyes Ltd

“If the house falls into disrepair through fair wear and tear or lapse of time, or for any
reason not caused by him, the tenant is not liable to repair it”
      Warren v Keen
           o Lord Denning
           o Note: Statutory alteration of covenant

Tenant must not commit voluntary waste
    Section 32(1) Imperial Acts Application Act 1969
          o Leasehold tenant includes (s32(3))
                   Tenant for a term
                   Tenant under periodical tenancy
                   Tenant holding under s127 Conveyancing Act
                   Tenant at will

Tenant under a ‘residential tenancy agreement’ must not intentionally or negligently
damage the premises, and must keep them in a reasonable state of cleanliness, having
regard to their condition at the start of the tenancy
     Section 26 Residential Tenancies Act 1987




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Yield up possession to the landlord at the end of tenancy

Landlord may recover damages for loss of rent and legal expenses incurred in evicting
a tenant’s sub-tenant who, after the (head) tenancy expires, retains possession against
the will of the tenant
     Henderson v Squire

Landlord may use ‘self-help’ to eject a tenant whose right to possession has come to
an end
     MacIntosh v Lobel (1993)

Self-help allows only force that is reasonably necessary
     Section 18 Imperial Acts Application Act 1969

For agricultural land, cultivate in a husband like manner

Cultivation according to custom of the country: usage which is prevalent in the
neighbourhood where the land lies and which has subsisted for a reasonable length of
time
     Williams v Lewis

Tenant of farm must pay owner fair compensation for any deterioration of the farm
during the tenancy owing to the tenant’s failure to cultivate in accordance with good
farm management practices
     Section 13 Agricultural Tenancies Act 1900
            o Conversely, owner must pay tenant fair compensation for general
               improvement of the farm
                   Section 8


Covenants under Section 84 of Conveyancing Act
    Applies to both old and Torrens title land unless contracted away

Tenant has obligation to pay rent, and must pay it on time
    Section 84(1) Conveyancing Act
           o Rent decreases if premises become unfit for occupation through fire,
              flood, lightening, storm or tempest
                   Belfour v Weston

Tenant must keep premises in ‘good and tenable repair’
    Section 84(1)(b) Conveyancing Act
          o Give premises back in condition they were in at start of lease
          o No obligation to repair damage caused by
                  Accidents
                  War damage
                  Damage from flood, lightening, storm, tempest
                  Reasonable wear and tear
          o Difficulty in definition of term repair
                  Does not mean rebuild, but what does it mean?



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Tenant and Landlord covenants when lease is assigned
    Assignment:
          o Transfer of whole of tenant’s interest in the lease
                   Ie whole of unexpired term of lease
    Covenants and obligations bind the assignee if they are inherently relevant to
      the relationship of landlord and tenant
          o Obligations must touch and concern the leased premises
                   Eg pay rent, repair etc
    Reasoning: Privity of Estate
          o Exists between parties who stand in relationship of landlord and tenant

When landlord sells reversion
   Obligations and covenants run to the purchaser, as long as:
         o Covenants relate inherently to the landlord, and tenant
         o Obligations touch and concern the leased premises
   Section 117 and 118 Conveyancing Act

Covenants when Sub-leased
    Sub-lease
          o Transfer of less than whole of tenant’s interest in the lease
          o Sub-lease leads to joint tenancy
    No direct relationship between original landlord and new tenant, therefore
      obligations of original lease do not bind the sub lessee
    No privity of estate

Landlord Remedies
    If Tenant refuses to pay rent
          o Breach of contract
                  Note: At common law, no obligation to pay rent unless legal
                     lease exists (by deed, or registration for Torrens title)
                          Courts of equity hold it is sufficient if an equitable term
                             is created
    If no precise amount of rent agreed upon
          o Landlord awarded what the court thinks is a reasonable sum for the
             tenant’s use and occupation
                  Mayor of Thetford v Tyler
    If tenant repudiates lease, (eg through failure to pay rent)
          o Landlord can accept repudiation and terminate the lease
                  Forefieture means the obligation to pay rent terminates, but the
                     landlord may claim damages including loss of benefit of future
                     rent
    If tenant breaches the lease but does not repudiate
          o Landlord has right to terminate the lease
          o Question regarding entitlement of landlord to damages
                  Non-monetary fault
                          Sue for damages
                          Repudiation – terminate the lease
                          Must give notice before terminating the lease (Section
                             129 Conveyancing Act)


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Relief against forfeiture of a lease

      If tenant remedies breach, and breach was non-monetary, and If lease
       terminated by landlord
            o Courts of equity grant relief against forfeiture of the lease by
               reinstating the lease

Waver of Breach
   If landlord knows about breach and is in position to exercise a remedy:
         o Accepting payment of rent after breach amounts to waiver of the
            breach (Finley v Russell-Jones)
                 Landlords often try to get around this with clause that
                   acceptance of rent does not amount to a waiver, but court can
                   find that breach was waived despite this
                        Owendale Pty Ltd v Anthony

Right to assign or sublease

Right to assign or sublease is a right incident to every leasehold interest
    Keeves v Dean

Right attaches itself to leases for a term and periodic tenancies, including short term
periodic tenancies such as those from week to week
     Cth Life Assurance v Anderson

Right to assign or sublease only part of the leased premises
    GJ Coles v Commissioner of Taxation

Exceptions to right to assign or sublease
    Tenancy at will arising at common law and tenancy at sufferance may not be
       subleased
          o Attempt to do so terminates tenants’ interest and confers no interest on
               the purported assignee or sublessee
                    Anderson v Toohey’s Ltd
          o Tenancy at will under s127 Conveyancing Act can be assigned or
               subleased
                    Because it is not a tenancy at will as in common law, but is
                       essentially a periodic tenancy from month to month terminable
                       by one month’s notice in writing expiring at any time

      Contract often requires landlord’s consent to assign/sublease
          o Cannot unreasonably withhold consent
                   Section 133B Conveyancing Act
                          Does not apply to tenancies at will
                                  o Anderson v Toohey’s Ltd
                          Only applies if true construction of lease contains a
                             covenant not to assign or sublease without landlord’s
                             consent
          o Unreasonable refusal includes



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                   Refusal where object is to gain collateral advantage by forcing
                   tenant into giving up possession before end of lease
                        Lehmann v McArthur
                  Forcing tenant or assignee into paying more rent that the leae
                   requires
                        Wagner v Phot Engravers
                  Forcing tenant to re-negotiate on terms more favourable to the
                   landlord
                        Australian Mutual Provident Society v 400 St Kilda
                           Road




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language:English
pages:15
Description: Australia Landlord and Tenant document sample