What is Lease registration, and why you should care
If you have ever had any involvement with a retail or commercial lease, you will probably have been asked the question ‘do you want the lease to be registered?’. But what does this even mean, and does it matter?
What is registration?
First off, registration of a lease is the process of recording on the title to the land a tenant’s interest under the lease. Once registered (and the relevant fee paid), the tenant and their right to use the property will be shown on the title to the property. In the ACT registration is done through Access Canberra while in NSW it is through Land Registry Services.
In NSW, retail and commercial leases with a term (including any option periods) exceeding 3 years must be registered. Leases shorter than 3 years may be registered where the parties agree to do so. In the ACT lease registration is not mandatory, regardless of the length of the lease term.
That’s great. But why does it matter?
This is where things get a bit more complicated. Where it is properly completed and signed by all parties, the lease will be valid and enforceable by the tenant and landlord without registration. The problem though is that things can change – the most common example being the sale of the property by the landlord.
The point of registration isn’t just to note your interest on the title. What registration is really for is to protect a tenant’s right to use the property. Where the property is sold, a new owner will be required to honour the registered lease agreement, including any renewal options.
Where the lease term (including any option periods) exceeds a total of 3 years, and the lease is not registered, then change of ownership can present significant problems for a tenant.
If the buyer genuinely has no idea that the property is occupied and subject to the lease at all (which practically is very unlikely, since that would require both the seller to have not disclosed the lease and the buyer to have never inspected the property and seen that it was occupied!) then the new owner could argue that they aren’t required to honour the tenancy at all and could seek to force the tenant to vacate.
Where the buyer is aware of the lease, but it hasn’t been registered prior to the sale, the new owner is not obliged to honour any options under the lease.
Why 3 years?
The short answer is ‘because that is what the legislation says’. In both the ACT and NSW there are specific protections in the legislation for ‘short leases’, being leases with a term (including options) of 3 years or less. Where you have a short lease, you effectively automatically receive the same protections as you would receive from registration even if the lease isn’t registered.
If you have further questions or are uncertain about any aspect of your lease or registration, please contact us, we are here to help.