The practice of registering leases is not the same in all states and territories. For instance, the practice differs between New South Wales and Victoria. The purpose of registering a lease generally is to, among other things, protect the rights of a lessee under a lease by giving notice to third parties of the lessee’s interest in the property. The effect of this is that any future dealings with the title of that property will be subject to the lease.
New South Wales
In NSW pursuant to section 42(1) of the Real Property Act 1900 (NSW) the interest of a registered proprietor will be subject to the following valid leases, if any:
- leases registered on title of the property; and
- leases not registered on title of the property which have a term of 3 or less years (including all options to renew, if any) if the lessee is in possession of, or entitled to immediate possession of, the leased premises.
This means that a lease which exceeds 3 years and is not registered will not be protected from any adverse future dealings with the property. To avoid a lessee losing its protection, it is essential that a lease exceeding 3 years is registered on the title of the property.
In Victoria, although the Transfer of Land Act 1958 (Vic) permits the registration of a lease, the practice is not to register leases at all. This is because of section 42(2)(e) which provides that a property will always be subject to, among other things, the interest of a tenant who is in possession of the land.
It follows that, even though registration is possible, it does not afford any greater protection to a lessee than the protection it is afforded by being in possession of the premises. The rationale for this is that possession of the premises by the lessee serves as sufficient notice to all other third parties of the lessee’s interest in the property.
It is important to be aware of the lease registration practices of each state to ensure your rights under a lease are protected. For more information, or for assistance with a commercial lease, contact us.