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Lessees have an interest in the land leased pursuant to the lease. But is that leasehold interest guaranteed? Well, the answer is maybe.
This article discusses what happens to unprotected leases, when you should protect a lease and how to protect a lease.
Primewest
In Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd as trustee for Golden Asset Pty Ltd [2012] WASC 443 (Primewest) it was held that an unregistered lease for a term which exceeds five years is destroyed upon the transfer of the freehold property to a third party.
Primewest considered section 68 of the Transfer of Land Act 1893 (WA) refers to the paramountcy of the estate of the registered proprietor, ie the registered proprietor holds the land free from prior unregistered interests.
There is an exception in section 68(1A) for leases. The exception is for:
“any prior unregistered lease or agreement for lease or for letting for a term not exceeding 5 years to a tenant in actual possession”; and
“such lease or agreement is registered or protected by caveat”.
For example, if a lease term is 4 years long and the lessee is in actual occupation, then it will be protected by section 68(1A).
Alternatively, if the lease term is 7 years long and is registered or protected by caveat, then the lease will be protected. However, if the same lease is neither registered nor protected by caveat, then as contemplated in Primewest, the lease will be destroyed upon the transfer of the freehold property to a third party.
How to protect your leasehold interest?
If a lease is registerable, then our recommendation is to always seek to register leases.
Registration of a lease will require the consent of all relevant interest holders and will therefore validate the lessee’s leasehold interest.
However, if registration is not possible, then a lessee is free to register its leasehold interest on the title by way of caveat.
Even if the term of the lease triggers the protection under 68(1A), a lessee may nonetheless choose to register a lessee caveat to put the world on notice of its interest in the property.
How to lodge a lessee caveat?
Landgate provides forms for the lodgment of caveats and provided the form is correctly completed, supported by the relevant evidence of the caveatable interest (being the lease for a lessee caveat) other required supporting documentation and lodgment fee, Landgate will register the caveat.
In saying that, a successfully lodged caveat does not mean that the caveat is free of defect.
For example, the caveatable interest could be incorrectly described leaving the caveat defective and the caveator unprotected.
Accordingly, care must be taken when preparing a lessee caveat in order to ensure that the leasehold interest is adequately protected.
Please contact us for assistance in lodging a lessee's caveat.
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