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ARTICLE · 15 APRIL 2013

When does a lessee validly exercise an option under a lease?

Holding Redlich
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Is indication of intention to exercise an option sufficient to constitute a valid exercise of that option?

AustraliaReal Estate and Construction
Chris Brodrick
Chris Brodrick
Roxanne Burd (Formerly With Holding Redlich)
Roxanne Burd (Formerly With Holding Redlich)
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In the matter of South Yarra Colonnade Pty Ltd v Designbuilt Industries Pty Ltd & Ors (Retail Tenancies) [2013] VCAT 266, VCAT held that a letter from a lessee indicating an intention to exercise an option under a retail lease was not sufficient to constitute a valid exercise of that option.

Facts

The lease contained an option to renew for a further term of six years. The relevant provision of the lease provided that the option to renew could be exercised by giving notice to the lessor in writing within a specified period.

Approximately three months before the lease was due to expire the lessee wrote to the lessor as follows:

"We write to advise you of our intention to exercise our lease option for a further 6 year period".

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