Unfortunately there is no easy answer to the enquiries LPLC has received from practitioners seeking our view on whether a lease needs to be included in a section 32 statement.
Some practitioners believe leases must be included while others believe it is not necessary to include them in the section 32 statement.
Practitioners who argue that leases must be included refer to:
- section 32C of the Sale of Land Act 1962 (Vic) which sets out the requirement to provide a description of any easement, covenant or other similar restriction affecting the land. A lease is considered to be a ‘similar restriction’
- the case of Vouzas v Bleake House Pty Ltd [2013] VSC 534 where Justice Macaulay commented that section 32(2)(b) (now section 32C) could be read wide enough to include a lease.
Practitioners who argue that leases do not have to be attached refer to the need to provide details of any leases in the particulars of sale and Hoa Tha v Cinta Pty Ltd 1997 VConvR 54-574. In this case Justice Byrne comments that as a lease is not similar to an easement or covenant section 32(2)(b) does not require disclosure of leases.
From a risk management perspective, attaching any lease to the section 32 statement is preferred as it is the most conservative approach. This is in addition to including details of any lease in the particulars of sale.
LPLC also recommends practitioners consider including a special condition in the contract dealing with any lease issues. Examples are:
- how adjustments are to be made
- how any bank guarantees will be dealt with, especially where it is a term of the lease that the tenant provide a replacement bank guarantee to a purchaser on the sale of the property
- delivery of lease documents at settlement
- conduct of vendor prior to settlement in dealing with any lease issues.
