Lessor’s purpose for demolishing leased building is irrelevant

Here is an interesting and useful blog post from Robert Hay about demolition clauses in retail leases. Lawyers advising tenants should alert them to a demolition clause in a retail premises lease. These are often overlooked or underestimated by tenants. In particular, provided that the proposed demolition is carried out within reasonable time, the tenant is only entitled to be compensated for the value of its fitout, and not for the value of its goodwill or other losses to the business caused by the demolition notice (see s 56(4)(b) of the RLA here).

The Property Law Blog

 

Leases commonly permit a landlord to terminate a lease if the landlord intends to demolish the building located on the leased premises. Section 56 of the Retail Leases Act 2003 (Vic) implies terms into a retail premises lease that provides for the termination of lease on the grounds that the building is to be demolished. Section 56(2) of the Act says:

 

The landlord cannot terminate the lease  on that ground unless the landlord has—

(a)        provided the tenant with details of the proposed demolition that are sufficient to indicate a genuine proposal to demolish the building within a reasonably practicable time after the lease is to be terminated; and

(b)       given the tenant at least 6 months’ written notice of the termination date.

Tenants often claim that a proposal is not a “genuine proposal” because the landlord intends to demolish the building so that the new building constructed on the…

 

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