The relationship between landlord and tenant is a melting pot of legal relationships and the possible engagement of experienced commercial lawyers, that runs its colours into business, personal and Government spheres. One particular influence that has been the source of much litigation, legislative review and advocacy is the conduct of landlords when they are negotiating the commencement, renewal or termination of a tenancy.
Aspects of agency, contract, tort and trade practices can all be enlivened at the seemingly simplest statement made by a landlord, or for that matter the landlord’s agent. The law has tried for some time to not impede the ability of parties to negotiate and communicate with each other without fear of reprisal.
Conversely, the law has also drawn some lines where those negotiations and communications have moved past innocence and traversed into areas that give rise to rights and obligations. So how far is too far?
The scale begins with “mere puffery” which means statements that a person makes that might be incorrect and in any event could not be relied upon by anyone as a statement of fact. It then extends on to misrepresentation that might be actionable because it is negligent; and then further to misleading and deceptive conduct. The scale might extend all the way to fraudulent activities, however for the purposes of this article we will focus on the ever subtle distinction between puffery and misleading statements or misrepresentation.
Statements of opinion, held by the maker of the statement, and “puffery” do not amount to a representation and consequently can rarely be relied upon to found an action. One occasion when a statement of opinion can (if incorrect) found an action are when the maker of the statement knew the statement to be false.
The complexity thickens when we turn to statements about the future. It is possible to infer (on a case by case basis) that a statement about the future brings with it an implication that the maker of the statement does not know the facts that will be required to make the statement true in the future, thus brining a potential future liability for the maker of the statement.
Additionally, there are occasions where a statement made can correctly be classified as a type of promise and if the correct circumstances of reliance, by the promise, exist then the law will not allow the promisor to resile from the promise.
Should it be then, that a statement about the future to induce a tenant to incur significant cost in refurbishment is a misrepresentation or puffery? The statement in question was made by a landlord to induce them to enter into a 5 year lease that required a significant fit out to be performed by the tenant. During negotiations, the tenant stated that they would require a 10 year lease in order to justify the expense.
The landlord told the tenant that if they did the fitout, when the lease came up for renewal the tenant would be “looked after”. The lease was not renewed by the landlord upon expiry.
The tenant’s action relied on contract, being the basis of a lease, in claiming that the misrepresentation induced them to enter into the lease or alternatively that the statement when made became a contractual term or collateral contract.
The Victorian Court of Appeal confirmed that such a statement was too vague to be counted as a contractual obligation. The statement was therefore puffery in the sense of what is discussed above. However, the Court went on to say that where the statement contains a “grey area” and is intended to induce entry into a contract; if the person so induced relies on it to the lower boundary of the “grey area” then the law will count it as a promise made and prevent the statement maker from avoiding fulfilment of the promise.
Therefore, the combination of a statement that the maker intends will induce another party to take a particular course, and the reliance on that statement by the other party can result in a similar outcome to misleading statements, even though on their own they are not more than puffery.
 Smith v Land and House Property Corp (1884) Ch. D. 7.
 Walton Stores (Interstate) Ltd v Maher (1998) 164 CLR 387