Recent court decisions from New South Wales illustrate that when making commercial decisions about tenancies at a centre, landlord’s need to take into consideration the impact of their decisions on existing lessees.
Take home points
1. Landlord’s should carefully consider the impact on other tenants of installing kiosks in centres, particularly if they are amending fit out guides and advertising guidelines for the kiosks. A landlord should not attempt to rectify an issue by implementing and backdating a new policy.
2. Lessee’s should consider any reasonable proposals put forward by landlords to remedy disputes as courts may look unfavourably on lessees’ who dismiss reasonable attempts by the landlord to resolve the matter in favour of litigation.
3. In claiming damages from a landlord, a lessee must be able to quantify their losses and produce evidence that such losses are a direct result of the landlord’s actions. Where claiming for turnover loss a lessee must be able to show that the landlord’s conduct had a direct impact on its turnover and be able to quantify that loss and attribute it to the landlord.
In the various decisions of Spuds Surf Chatswood Pty Ltd v PT Ltd the landlord decided that it would install kiosks in the walkway area of the shopping centre which would be located directly outside the lessee’s premises. It was alleged that the placement of the kiosks affected the advertising and viewing of the lessee’s premises by retail shoppers.
The lessee claimed that the Landlord had acted unconscionably by building kiosks which did not comply with the then fit-out guide of the centre. The landlord subsequently changed the fit out guide and backdated its operation so the kiosks complied.
The lessee claimed damages from the landlord representing reduced turnover and profits.
The eventual decisions of the Court were that the actions of the landlord surrounding the construction of the kiosks amounted to unconscionable conduct. The lessee was not able to prove that their reduced turnover was a direct result of the installation of the kiosks in the centre and did not award damages for losses. The court however determined that the lessee was entitled to a reduction in rent on account of the unconscionable conduct of the landlord.
By Belinda Pinnow, Solicitor – Commercial