Posts Tagged Justice Croft

Is a purchaser of land bound by covenants in a lease?

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When premises are sold the question often arises as to whether a tenant can enforce  covenants contained in the lease against the new owner?

At common law, unaffected by statute, an assignee of the reversion is not bound by any of the covenants and conditions of the lease. See: In re Hunter’s Lease [1942] 1 Ch 124 at 128.

In Victoria, s 142 of the Property Law Act 1958 altered this position and an assignee of the reversion is bound by covenants contained in the lease that “touch and concern” the land.

In Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2010] VSC 44 Croft J held that a restraint of trade clause contained in a lease did not “touch and concern” the leased land and therefore did not bind the assignee of the reversion.

The case contains a detailed analysis of the type of covenants that “touch and concern” land (see [52] – [67]). In broad terms any covenant that affects the landlord as a landlord or the tenant as a tenant will probably be within the class of covenants that touch and concern the land.


See: Bradbrook, Coft & Hay Commercial Tenancy Law, 3rd ed, paragraph 15.20, p. 483.


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What is the tenant to do if the landlord unreasonbly withholds consent to an assignment?

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Where a landlord refuses consent to an assignment of the term of the lease the tenant’s usual remedy is to seek a declaration that the landlord has unreasonably withheld consent.

Damages are not normally available because in the absence of clear words provisions requiring the landlord’s consent are construed as merely amounting to a qualification of the covenant not to assign. See: Bradbrook, Croft & Hay Commercial Tenancy Law, para 15.9.

Vickery J’s decision in Xiao  v Perpetual Trustee Company Limited & Anor [2008] VSC 41 poses real problems for tenants because at [21] he held that s.124(1) of the VCAT Act only empowered VCAT to grant a declaration instead of an order it could make or in addition to an order it could make. His Honour said:

“Given that Mr Xiao does not claim damages, in order to enliven the jurisdiction of VCAT to grant a declaration, he would have needed to claim, or demonstrate that he was entitled to claim, other relief, for example by way of a permanent injunction pursuant to s 123 of the VCAT Act, before a declaration could be granted.”

Because the tenant is not usually seeking other relief or not entitled to other relief what is it to do?

The same problem will arise if a tenant and landlord seek a declaration that moneys to be paid by a tenant are not key money (see s.23 of the Retail Leases Act 2003)

Parliament needs to clarify VCAT’s powers to grant declarations.


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