Do lease renewals have anything in common with franchise renewals

A recent High Court case found that a lessee, who had not exercised their right of renewal within the stipulated manner and time frame set out in the lease, could nevertheless rely on an oral agreement to renew.
Because of the parallels with renewal of franchise agreements, the case is worth a look. Arguably, the same principles apply.
Franchise agreements usually provide for at least one right of renewal, on certain terms and conditions. Such provisions normally provide for a set time frame and manner of renewal, when exercising the right. To an extent, certain parallels can be drawn between renewal provisions in franchise agreements and those in leases. The concept is the same, in that, prior to termination of the agreement / lease, and within a stipulated time, the franchisee/ lessee is require to give notice of renewal.
In a perfect world, a franchisee gives notice in the manner and time frame stipulated in the agreement. There are however few people living in a perfect world and the question of “faulty” renewals looks set to continue to lead to expensive litigation.
As indicated above, a recent High Court case examined a fact scenario where no renewal notice was given under a lease within the time and manner stipulated. The evidence established that there was an oral agreement to renew the lease. The Court found the oral agreement to renew was enforceable despite the fact that under section 24 of the Property Law Act, all agreements for lease renewal must be in writing in order to be enforceable.
For the purposes of this article, I will summarise the case in so far as it dealt with the issue of whether there was an agreement to renew, and how the Court arrived at that conclusion despite no written notice of renewal being given.
The date for the notice of renewal to be granted was 31 October 2010. That date and the expiry date of the initial term of the lease, 31 January 2011, came and went with no action by either party. Had the lease continued, there was a rent review due on 31 January 2012.

The parties met on 21 November 2011, with both having recognised that there was no renewal in place, to formalise a renewal and to discuss various other issues.The evidence was the parties disagreed on what occurred at the meeting. At trial, the landlord said an agreement was reached at the meeting on there being a renewed lease. The lessee denied there was any such agreement, and attempted to categorise the meeting as part of an ongoing negotiation.
At trial, it was the Landlord seeking to uphold the renewal and force the lessee to stay in the premises. The lessee opposed that.
The primary issue before the Court was, did the parties arrive at an agreement to renew the lease despite there being no written evidence of it? In other words, if the Court found there was an oral agreement reached at the meeting, was that sufficient despite the absence of manner and form prescribed in the lease for writing.
The Court heard evidence from both parties on this question and found, as a matter of fact, an oral agreement had been reached at the meeting on 21 November 2011. To arrive at that finding the Court preferred the evidence of the landlord’s witness over that of the lessee. In doing so the Court found support for the oral agreement in various contemporaneous email correspondence the parties engaged in straight after the meeting, showing that the lessee must have thought there was an agreement reached. Of note, the Court also considered relevant certain internal documentation of the lessee, which also showed it considered there was an agreement reached on 21 November 2011. It is important to mention that factor because it can often be assumed by parties that internal communications of one or either party are privileged and can be withheld from the other party at a trial. Either that, or parties often take the view that these documents are simply not relevant because they were never sent to the other party. This is an example of Courts using evidence of a party’s subjective views (expressed in their emails) to find the existence of a contract.
The Court effectively found that the lessee acted in such a way that it must have considered that there was an agreement to renew reached on 21 November 2011.
This case is also a good example of a Court looking at the conduct of a party post contract to find the existence of a contract, ie, the existence of a renewed lease. It is consistent with (relatively) recent comments made by the Supreme Court.
In terms of its relevence to franchising, the case highlights the need to:
a) Importantly, remove uncertainty (and costly litigation) by always ensuring time limits for renewals are adhered to.
b) Be aware that a later verbal agreement to renew will, or could, be upheld, even if there is nothing in writing recording that agreement.
c) Be aware that internal memo’s or emails of a party will be documents the other party and the Judge are entitled to see and examine if the case goes to trial, despite the fact they were never intended to be sent to the other party.