Contents
Table of Contents
Introduction
The recently decided case of GPP Arundel Ltd v Basford Pty Ltd [2025] QSC 165 has important implications for commercial property owners, letting agents and prospective tenants.
Facts of the Case
Basford Pty Ltd and Wisely Pty Ltd were the owners of a commercial property in Arundel which was leased to GPP Arundel Pty Ltd under a lease due to expire in August 2025.
Negotiations in relation to a new lease commenced in 2023 between the landlord, lessee and another prospective tenant. Negotiations were carried out by agents and consultants. The landlord’s consultant was employed by a related entity of the landlord and clearly advised the parties that any new leasing deal would be subject to the landlord’s approval.
In June 2023, the landlord’s consultant issued a draft letter of offer to the tenants which stated that the offer was ‘subject to the lessor’s acceptance’. The consultant subsequently issued an amended letter of offer and signed for the lessor under ‘Lessor’s Acceptance’ with the additional words ‘on behalf of’ in parentheses in the signing block. At this stage, the approval of one of the directors had not been obtained.
The directors of the landlord rejected the deal in September 2023 on the basis that the rental was too low. The tenant failed to accept the rejection and sought orders that there was in fact a binding lease deal.
Court Finding
It was clear that the landlord’s consultant did not have actual authority to bind the owner. However, the tenant argued that the agent’s actions constituted ostensible authority. This was on the basis that the agent was the sole contact for the tenant and the agent was authorised by the landlord to communicate acceptance of any brokered deal.
The Court held that an agent authorised to negotiate the terms of a lease was not necessarily authorised to bind the owner to a lease. Although the consultant had signed the letter of offer ‘on behalf of’ the lessor, the landlord had not done anything to grant ostensible authority to the agent. In addition, the tenant had not established that they had relied on any misrepresentation by the landlord about the consultant’s role.
Lessons for All Parties
If you are a lessor, this case shows the risks that you could potentially become bound by the actions of an agent or property consultant. This can occur if you represent to the tenant or even act in a way that allows the inference to be drawn that the agent has your authority to attend to all lease negotiations on your behalf.
If you are a prospective tenant, it is important to understand that confirmation from the landlord be sought before relying on the terms of a deal.
If you are contemplating leasing a commercial property either as lessor or lessee, we recommend that a carefully drafted heads of agreement be prepared and legal advice be sought about the proper execution of the same. If you have any concerns about the binding nature of a letter of offer, we have an experienced team of property lawyers who can offer you guidance in this complex field.
Victoria advises on a wide range of property and commercial matters, including contract negotiations and real estate transactions. She has a passion for assisting clients in understanding complex legal issues so that they can successfully achieve their business goals.
