The consequences of making mistakes when issuing notices, whether under a franchise agreement or lease, can be substantial. A recent decision of the New South Wales Administrative Decisions Tribunal emphasised this point when a franchisor was found not to have validly exercised an option for a further term under a lease.
In Almaron Pty Ltd v Jonamill Pty Ltd, the landlord let premises to a franchisor tenant for five years, with an option for a further five years. As is typically the case, the option could be exercised by giving notice in writing sent by registered post to the landlord's address in the lease, or a new address notified by the landlord. The landlord sent the franchisor a letter in March 2007 notifying a new address, but did not refer in that letter to the lease or the premises. Some months later, when attempting to exercise the option for a further term, the franchisor sent a letter by ordinary post to the old address of the landlord.
The Tribunal had to decide whether the franchisor's notice was validly given pursuant to the lease, and whether the landlord had properly notified the change of address. The franchisor complained that the landlord's letter purporting to notify a new address was too vague and non specific and did not constitute an appropriate notice. This argument was rejected by the Tribunal having regard to all of the circumstances, finding that a reasonable recipient in the position of the franchisor (which had over 350 retail shop premises under lease) would consider that the landlord, by sending the letter, wished to notify the franchisor that all further communications should be sent to the new address.
The Tribunal also found that the franchisor's failure to send the letter seeking to exercise the option by registered post (it was sent by ordinary post) disentitled the franchisor from the benefit of the deeming effect of the notice provision in the lease. The option to renew was not validly exercised and the lease terminated at the end of the term.
When drafting notices, care must be taken with both the substantive and mechanical aspects of the notice. While the relevant notice provision should be read carefully, the draftsperson should also consider whether there are any other documents that might affect the notice such as a letter changing the address for service. In this respect, notices should be given by as many means as possible –email, post (both to the address in the agreement and any new address known to the person giving the notice), fax and hand delivery are standard forms of serving notices that should at least be considered in every case. It is better to issue extra notices and make sure of service than not enough and to become embroiled in a dispute about whether notice was or was not given.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
