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Benchmark - Cases & Commentary
Commercial leasing
    •  Option to renew
        -  Exercise of option to renew lease

Exercise of option to renew lease 

A landlord and tenant entered into a five year lease which was to commence in February 2004. That lease included an option for the lessee to renew the lease for a further five year term. The tenant was a bank which had engaged leasing agents to act on its behalf. The landlord and its managing agents were related companies.

On 6 August 2008 the landlord’s agent wrote to the tenant’s agent inviting the tenant to take up the option to renew the lease. On 29 August 2008, the director of the landlord wrote to the head office of the tenant specifying that all future notices should be addressed to the landlord’s CBD office. The landlord and its agents in fact operated out of the same office. The landlord’s letter was not addressed to the NSW Leasing Manager of the tenant and, as a result, did not reach any employee of the tenant or the tenant’s agent before the option period expired.

On 16 October 2008 the tenant’s agent wrote to the landlord’s agent to give notice of the tenant’s exercise of the option to renew the lease. On 20 October 2008 the landlord’s agent acknowledged receipt of the notice and returned a signed copy to the tenant’s agent.

The option period expired on 8 November 2008 and the landlord’s director noted in correspondence that the tenant had failed to exercise the renewal option.

The Court held that the notice of exercise of the option to renew the lease was valid as it communicated a clear and unequivocal intention to exercise the option. The Court also found that the notice complied with the specific provisions in the lease for the exercise of the option. One relevant provision was that the notice be served on the “last address notified to the tenant”. The Court considered that the landlord’s letter dated 29 August 2008 was not a valid notice to the tenant because it did not comply with the requirement in the lease that all notices be sent to “the NSW Leasing Manager”. 

Westpac Banking Corporation v Kurobe Holdings Pty Limited [2010] NSWSC 537