A question which is often asked when parties enter into a commercial lease is whether the lease should be registered on title to the property. This article summarises the advantages and disadvantages associated with registration of leases.
The principal benefit of registration of a lease is that it provides the tenant “indefeasible” possession to the premises pursuant to law and in accordance with the terms of the lease. What this means is that the tenant’s interest in the premises will be protected from events which may affect title to the property, such as if the landlord sells the property to another entity, a mortgagee seeks to obtain possession and sell the property, or any other entity asserts an interest in the land, amongst other potential issues.
Registration is therefore particularly important for tenants where premises are leased for their good location, size or some other strategic reason, and the tenant wants to protect their possession of the premises from any future events affecting the landlord’s interests and over which they have little control.
Another good reason for registration of leases is that it creates an official record of all leases affecting a particular property. An official record is often useful for landlords of shopping centres, ‘strip-shops’ and other commercial precincts where there are several leases granted for different areas on the same property. It assists with a landlord’s intended sale of the property, and when landlords seek to obtain a loan, or refinance a loan, where the property is to be used as security.
The only disadvantage to registration of the lease is that there are some upfront costs which are usually borne by the tenant. Those costs include:
- The Titles Office registration fee for the Lease;
- Mortgagee consent fees (if applicable to the particular property); and
- Where the leased premises are only a part of the land, a registered surveyor will need to prepare a survey plan for lease purposes to be annexed to the lease prior to registration.
The above costs can range between a total of $169.00 (being the registration fee for the lease), to approximately $2,000.00 (if there is a mortgagee, a survey plan needs to be prepared, and the lease is thereafter registered).
Whilst it is acknowledged that these upfront fees may be relatively significant to a small business which is in the process of setting up, we suggest that the advantages of lease registration may outweigh the costs associated therewith, particularly if the lease is for an extended period of time (such as over 3 years).
Should you have any queries with respect to registration of a lease, please do not hesitate to contact a commercial solicitor of ABKJ Lawyers who will be able to assist.