Recent New South Wales Administrative Decision Tribunal findings regarding exclusivity clauses have reinforced the risk confronted by landlords in negotiating with prospective tenants.

In Gizah Pty Limited v AXA Trustees Limited the tribunal considered the effect of verbal promises to a small commercial tenant of exclusive rights to sell certain foods in a food court. The tribunal deemed that the statements, which were made by a person under the landlord's authority, amounted to a misrepresentation that induced the tenant to enter the lease. That the disclosure statement (required to be given by the landlord to the tenant before entering the lease) contained no reference to the oral representations was irrelevant. The tribunal found that the exclusive rights were "an essential part of their commercial negotiations". The tribunal determined that without the representations regarding the exclusivity rights the tenant would not have entered the lease "in its wildest dreams". The tribunal awarded $132,976 as compensation to the tenant based on start-up costs and reference to the relevant award, less accumulated profit.

In another recent decision from the tribunal involving exclusive rights, Khao Thai Pty Ltd v Coles Myer Properties Holdings Limited (pending appeal), the tribunal found that the landlord had not complied with its obligations under the lease. The landlord had stated in a special condition in the agreed letter of offer that "it is our intention not to have more than one operator of Thai and Malaysian food". Subsequently, another shop began selling Thai and Malaysian food. The tribunal deemed that the special condition in the letter of offer had contractual effect between the parties and formed part of the lease between them. In selling a substantial range of food from the Thai and Malaysian category, the rival shop was deemed to be a Thai/Malaysian food operator. Consequently, the tribunal deemed that the landlord had not complied with its obligations under the lease.

For further information on this topic please contact Katerina Petrogiannakis or Toby Mittelman at Arnold Bloch Leibler by telephone (+61 3 9229 9779) or by fax (+61 3 9229 9889) or by e-mail ([email protected] or [email protected]).

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