The decision in Pagica Pty Ltd at the Oscinah Trust v Inlet Property Pty Ltd highlights the importance of ensuring the notice to a tenant is right, and addresses the key elements required under the Act.
In this case, the landlord stated that the rent for the new lease term would be a fixed rent amount, when it gave the notice. This notice also referred to the tenant’s right to request an early rent review.
The issue was that the rent for the renewed term under the lease was to be determined by a market rent and therefore could not be fixed. The tenant argued the notice was invalid because it did not clearly state the rent was subject to market review.
On the other hand, the landlord argued the tenant had failed to exercise the option within the required timeframe, and therefore the lease was terminated.
The VCAT found that the notice was invalid as it set a fixed rental of $110,000 per annum plus GST, contrary to the lease term. This, ‘on its face, was clearly incorrect and misleading’. Therefore, as the notice was invalid, the landlord had not given the required notice.
The Landlord also argued the one-line reference to an early rent review in the notice was sufficient.
However, the Tribunal held the defect was not the brevity of the reference itself, but the inconsistency created by the notice stating a fixed commencing rent whilst simultaneously referring to the tenant being entitled to an early rent review.
As the Tribunal stated, a tenant cannot exercise an option to renew until it receives a valid Section 28notice from the landlord.
If the landlord’s notice is invalid, any purported exercise of the option is ineffective, and the tenant’s right to renew remains alive and protected until a compliant notice is served.
This is an important reminder for landlords and agents to ensure they issue a valid Notice of option to avoid dispute.
