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Question: Business Law Question 3 15 Marks Stuart had a 5-year written lease of a shop in the Prince Mall. ...
Business Law
Question 3 15 Marks
Stuart had a 5-year written lease of a shop in the Prince Mall. He entered the lease at $1000 per week at the end of 2010 and ran a successful music business for about two-and-a-half years. In 2013 the business was affected by decreased sales in CDs as a result of the increased ability of people to access music through the internet.
In December 2013 Stuart asked the lessor, Westphalia Marts Pty Ltd, for a reduced rental of $700 per week until the business improved. He told the lessor about his business problems and plans to diversify and indicated that he might have to terminate the lease early. Westphalia Marts agreed to allow Stuart to pay the reduced rent and in January 2014 Stuart began to pay the new agreed rent of $700.
In December 2014 Westphalia Marts decided to sell the Mall, including all the shops. They wanted the income from the Mall to look healthy, and asked Stuart to pay the full amount of $1000 per week rental beginning in January 2015 and also demanded the shortfall of $300 per week for each week of the year 2014.
Advise Stuart, with reference to the relevant principles.
Explanation / Answer
US rents are generally been freely negotiated except for communities in four states such as California, Washington D.C, New Jersey and New York where it’s been regulated under rent control ordinances which in fact are contained in local laws and sometimes also known as rent stabilization or maximum rent regulations.
Thus landlords can increase rent if the tenancy agreement permits them but for this they need to give appropriate notice and adhere to prescribed rules and regulations. Furthermore they need to take into account the tenancy type, notice period and market rents. However simultaneously they can also increase the bond money if required.
Furthermore landlords can increase rent only after a lapse of first 180 days of the tenancy however he needs to confirm that the enhancement in rent is not within 180 days of the last increase. Thus landlord needs to give at least 60 days prior written notice to the tenant clearly mentioning the amount by which the rent has been increased along with appropriate applicable day.
Thus US law doesn’t restricts the landlord from adopting a policy to increase the rent amount but however it does mentions certain prescribed rules and regulations which the landlord needs to follow while adopting the policy to increase the rent amount and what can be done under circumstances where tenant disapproves the new rent amount.
However a landlord or tenant can approach the tenancy tribunal to examine and evaluate the rent increase if the tenant doesn’t agrees to the rent increase. Under such circumstances if the tenancy tribunal court is of the view point that the landlord is charging considerably higher rent when compared to other similar properties then it can order to reduce the rent amount. However tenant needs to provide with adequate evidence that their rent is significantly high when compared to rent of other shops in the area similar to the place where they have rented.
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