The recent High Court decision in Portofino Wellington Waterfront Limited v Stride Property Limited emphasises the importance of written agreements for leasing arrangements, and the dangers of relying on informal communications. 

Background

Italian restaurant Portofino has operated on the Wellington waterfront since 2009. Its occupancy of the Customhouse Quay premises was governed by a lease it had with Stride Property Limited, which had a final expiry date in September 2022. 

Portofino wanted to extend its lease in the premises, but the lease did not contain a right of renewal.  

Despite this, Portofino brought proceedings against Stride seeking a declaration that it was entitled to a new lease. Portofino argued that verbal and email communications that it had had with Stride had led it to reasonably believe that it would be granted a new lease. Stride disputed this and sought to have Portofino’s claim struck out, or in the alternative, sought summary judgment against Portofino on the basis that none of Portofino’s causes of action against Stride could succeed. 

Stride successfully maintained the new lease discussions were negotiations only, and Portofino was unable to satisfy the Court that a new lease was already in place.

The Court held that Stride had demonstrated that Portofino’s claims could not succeed and in particular that the communications could not have reasonably led Portofino to believe that it was entitled to a new lease, as Stride had told Portofino that numerous conditions would have to be met before a new lease would be in place. 

Key takeaways

There are three key takeaways from this case:

  1. The importance of keeping a record, such as a file note, of all negotiations and discussions concerning your lease; 
  2. Ensuring that your lease contract captures all key terms and variations; and 
  3. The need to obtain independent legal advice when negotiating, or renegotiating, your lease.   

Maintaining written records

First, this case emphasises just how important it is to have a written record of all negotiations with your landlord or tenant, as the case may be. Portofino’s evidence regarding the alleged promised lease renewal included references to oral discussions with Stride. Further, the discussions the parties did have concerning lease renewal were only recorded by the landlord. While the Court held that the material facts were not in dispute in this case, this allowed Stride to essentially set the narrative in Court, with Portofino’s evidence paling in comparison.

The takeaway here is to ensure you keep your own written record of all discussions and negotiations with your counterparty so that you are not reliant on the other party’s recollection or summary of events.  It is important to note however, that while these records will be useful from an evidential standpoint, they will not amount to a lease, which needs to be recorded in writing between the parties.

Capturing variations

Second, this judgment serves as a cautionary tale concerning written requirements. Throughout the case, Portofino alleged that it had been led to reasonably believe that it was entitled to a new six-year lease, with two further rights of renewal of three years each. However, and unfortunately for Portofino, it never formally varied the Deed of Lease. The Court held that any offer of a right of renewal was subject to recording that agreement in a variation to the lease.  As such, the oral discussions relied on by Portofino had no real effect. It is essential your written lease reflects everything you intend to rely on as part of the agreement. If it does not, it may be that little can be done to protect your interests. 

Seeking independent legal advice

Third, this decision is not unlike other recent case law concerning lease disputes, in that it highlights the importance of seeking independent legal advice when negotiating your lease. Despite the landlord recommending Portofino seek legal advice during negotiations, Portofino did not do this. Had independent legal advice been obtained, Portofino may have better understood its position regarding the lease’s expiry, and the steps it needed to take to ensure security of the space for a further term. 

This case serves as a timely reminder that good independent legal advice during any phase of contract negotiation can help to properly secure your rights, avoid uncertainty and prevent time-consuming and costly litigation later down the line. 

Get in touch

If you would like to talk to one of our experts about any aspect of this decision, or of leasing agreements in general, please get in touch.

Special thanks to Mary Holden and Lucy Scottwood for their assistance in writing this article.

 

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