Is a stated intention to exercise an option sufficient to create a new agreement to lease? Part 2

September 5, 2013

Property / leasing

A recent VCAT decision, discussed here, discussed a decision in which a letter stating that the tenant intended to exercise its option was equivocal and did not create a binding contract between the parties.

In a recent decision from the Magistrates Court of Victoria, Magistrate Ginnane considered a similarly worded letter signed by the tenant and the surrounding authorities (including the recent VCAT decision cited above) and concluded that:

18.  In my judgement I think it would be artificial to elevate the importance of the word, “intentions” when considering the whole of the letter and the surrounding circumstances. Mr. Oswald-Jacobs characterised the expression as an everyday figure of speech. I agree. I am not satisfied that the letter from NEA is couched in equivocal language such that the invitation contained in the body of the letter was uncertain.

While it remains prudent to avoid words like ‘intend’ in documents associated with the exercise of an option and each decision will depend upon its circumstances, Magistrate Ginnane’s decision should provide some comfort to landlords or tenants who find themselves facing a similarly worded document.

A copy of the decision of Zuzic & Zuzic v Honeybee Toys Pty Ltd & Ors [2013] VMC 22 is available on Austlii.

Thanks to Peter Lowenstern of the REIV for alerting me to this decision and to Robert Hay for discussing it with me.

About Sam Hopper

Sam is a property and insolvency barrister.

View all posts by Sam Hopper

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