Issue
Can the glossy brochures and promotional videos produced for marketing purposes along with glowing statements by Landlords and their agents be taken at face value by a prospective Tenant? Can a Landlord's glowing view about their property result in misleading and deceptive conduct against a Tenant?
The Federal Court has found in favour of Tenants on both these questions.
What happened?
A Landlord developer was building a shopping centre known as 'The Foundry' between Bourke Street and Little Collins Street in Melbourne. Prospective Tenants, being a mother (teacher) and son (tradesman), looked to lease a premises in The Foundry to operate a cafe. The prospective Tenants had not previously operated a cafe business.
The prospective Tenants saw a video and brochure that promoted 'The Foundry' (which was then under construction) as full of 40 quality tenants and as able to attract significant foot traffic between Bourke Street and Little Collins Street. The brochure contained a legal disclaimer. Representations were also made by the Landlord about the specific nature and location of other Tenants in the building. In reality, no other leases had at that time been executed for any of the other premises in 'The Foundry'.
When the cafe opened there were no other tenancies open in 'The Foundry' and very few of the other premises had been leased. The cafe closed within three months and the Tenants sued the Landlord for misleading and deceptive conduct under the Trade Practices Act (now the Australian Consumer Law).
The Federal Court found the Landlord's representations did amount to misleading and deceptive conduct towards the Tenants because the representations made were representations as to future matters which the Landlord had no reasonable grounds to make. The legal disclaimer in the brochure had no effect on liability, as the Court found it did not change the overall misleading impression given to the Tenants. Accordingly, the Landlord had to pay significant compensation to the Tenants.
Practical tip:
As a Landlord, be aware of what you or your agents are saying and showing to a Tenant. Always ensure that you have reasonable grounds to make those representations. In order to be effective, any legal disclaimer needs to be prominent, specific to the circumstance and a clear part of the overall picture of the premises being represented to a prospective Tenant.
If you require assistance, please give us a call on 1300 205 506 or send your query to sp@sharrockpitman.com.au.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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For further information contact
Mitchell Zadow
Mitchell is the Managing Principal of our law practice.
He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.
