Sub-tenant obtains relief against forfeiture of head lease

The termination of a lease automatically terminates any sublease. See: Bradbrook, Croft & Hay Commercial Tenancy Law, para 19.6. Where a landlord seeks to enforce a right of re-entry or forfeiture against a tenant the Court, on application of the sub-tenant, may vest the property in the head lease in a sub-tenant for the whole of the term of the lease or a lesser term on terms that the Court thinks fit. See: s.146(4) of the Property Law Act 1958 (Vic).

In Leahy v Austin Management Services Pty Ltd [2011] QCA 186 the Queensland Court of Appeal rejected an appeal by a landlord from the granting of relief to a sub-tenant based on the Queensland equivalent of s.146(4), being s.125 of the Property Law Act 1974. The sub-tenant leased only part of the area of the land leased by the tenant from the landlord. The new lease awarded to the sub-tenant was on the same terms as the forfeited head lease except for the expiration date (which was the date of expiry of the sub-lease) and the area demised and the rent and outgoings which were payable in accordance with the sub-lease. The sub-tenant had operated its workshop business for 25 years on the site. The landlord appealed on the basis that the primary judge erred by not giving due recognition to the prejudice she would suffer by not being able to lease the site to a new tenant as a whole. There also was evidence that the area occupied by the sub-tenant would have achieved a higher rental than was being paid by the sub-tenant. The appeal was unsuccessful.