Warning to Landlords: Section 243 of the Australian Consumer Law gives tenants a powerful weapon
By Evelyn Marcou, Senior Associate, MST Lawyers
Section 243 of the Australian Consumer Law (“ACL”) provides a wronged tenant with a powerful weapon. Landlords need to be extremely careful about what representations they make when negotiating leases as section 243 permits the court to make an order declaring the whole or any part of a contract void or to vary a contract.
In the case of Kizbeau Pty Ltd v WG and B Pty Ltd (1995) 184 CLR 281 (regarding section 243’s predecessor section 87 of the Trade Practices Act 1974) the High Court varied a lease as a result of a representation made by a landlord.
In the case of Morgo’s Leisure Pty Ltd and others v Morgan v Toula Holdings Pty Ltd and others  QSC 325, the Supreme Court of Queensland recently used section 243 of the ACL to set aside a lease and a guarantee.
In this case, the tenant and guarantors alleged that they were induced to enter into a 30 year lease by representations that, if the tenant paid rent at a rate of $180,000 per annum for three years and had not purchased the freehold after three years, the landlord would cancel the lease and enter into a new lease at a rental of about $120,000 per annum.
The court found that the representation had been made and relied upon and that the tenant and the guarantors had suffered detriment as a result of the conduct of the defendants.
The Court declared the lease and the guarantee “void ab initio” under section 243, meaning that the lease was invalid from the outset.
Landlords and agents need to be extremely cautious when making representations to tenants in light of this decision.