Perry Park v City of Darwin [2018] NTCA 5

OVERVIEW

Generally, a lease agreement between lessor and lessee provides specific circumstances within which a tenant may do things only with the landlord’s consent. While a landlord is statutorily prohibited from unreasonably withholding consent, there is confusion as to what matters they may take into consideration when refusing to provide consent. A recent Northern Territory case looked to resolve this issue.

 FACTS

In 2008, Perry Park and the Darwin City Council (DCC) entered into a lease agreement whereby Perry Park agreed to lease land from the DCC for a period of 10 years commencing in 2010. Perry Park operated a golf course on the land, and the lease required lighting works to be completed to illuminate parts of the course. The lease specified that these works were to be undertaken only with the prior consent of the DCC on such reasonable terms, conditions and directions as required by the DCC.

The lease also contained provisions that required Perry Park to prepare a plan for the proposed lighting works, undertake a community consultation process and provide the DCC with a report that included any responses received from the community consultation process.

The DCC, as stipulated by the lease, could make a decision as to consent after taking into account various relevant matters, including the outcome of the community consultation.

After the first stage of the light installation was completed, Perry Park submitted a plan for the second and third stages. As community consultation was required, Perry Park engaged a consultant to prepare a report and hold a public forum to assess community views on the project. The forum was attended by members of the public, who expressed opposition to the lighting plan, and several members of the DCC, including the CEO.

Immediately after the forum, the DCC resolved to refuse consent of the installation of the lights. The issue in court was whether the DCC was lawfully permitted to refuse consent solely based on the public opposition to the project.

In coming to its decision, the Northern Territory Court of Appeal considered the lease agreement, which was said to provide the DCC with flexibility as to what matters it could consider, along with s 134(2) of the Law of Property Act 2000 (NT), which provides that if a lease contains a condition that requires the consent of the lessor, that consent is not to be unreasonably withheld.

The Court found that s 134(2) implies that consent cannot be unreasonably withheld by a landlord and operates to invalidate clauses within a lease which allow a lessor to unreasonably refuse consent.

However, the Court also considered precedent; it has been found that where a landlord’s interests – commercial, proprietary or otherwise – may be detrimentally affected, they may reasonably refuse to provide consent. The terms of the lease agreement were also of great significance as they plainly contemplated that the process of obtaining consent would include a community consultation, and the DCC was entitled to allow the outcome to influence its decision. Here, as the opposition to the proposed lighting works demonstrated by the community consultation was primarily the reason for the DCC refusing consent, the Court found that its refusal of consent was valid and legal.

In addition, the Court of Appeal concluded that if a landlord reaches a decision of which would be reached by a reasonable person in those circumstances, that decision is not challengeable by a lessee.

 SUMMARY

 A landlord may reasonably refuse consent to a lessee’s request if:

  • They have considered all matters outlined by the lease agreement or;
  • The lease agreement is not descriptive as to relevant matters, but the landlord has considered all matters associated with the lease or;
  • The decision was one which a reasonable person in the circumstances would have made.

 COMMENTS

 It is important to be aware of the exact contents of your lease before you sign it. If you intend to make structural or other significant changes – does your lease allow for that? If you require consent from the landlord – what matters is the landlord entitled to consider? So long as the matters considered by the landlord are relevant to the agreement and circumstances, it is likely that your landlord’s refusal will be non-negotiable, and un-challengeable.