Tribunal Confirms Limits of Leaseholder’s Rights Over Basement Area: Take Two Seven Pty Ltd v Hewson Properties Pty Ltd [2025] NSWCATAP 1

A recent Appeal Panel decision of the NSW Civil and Administrative Tribunal (Take Two Seven Pty Ltd v Hewson Properties Pty Ltd [2025] NSWCATAP 1) has confirmed that a lessee’s claim to the entire basement of a leased commercial premises can be defeated where the terms of the lease and supporting documents do not clearly support such an entitlement.

The dispute centred on the interpretation of the term “basement area” within the lease and whether it encompassed the whole of the basement level or only part of it. The Appeal Panel ultimately found in favour of the lessor, confirming the original Tribunal's interpretation, despite acknowledging a legal error in the handling of some evidence.

Background to the Dispute

The case involved a café operated by Take Two Seven Pty Ltd (Take Two) at premises located at 43 Booth Street, Annandale. Take Two held the lease via assignment from a previous lessee.

The respondent, Hewson Properties Pty Ltd (Hewson), had acquired the building after the original lease was granted. The issue arose as to whether Take Two was entitled to exclusive use of the entire basement, or only a portion, as Hewson contended.

Take Two filed proceedings in NCAT in August 2023, seeking declaratory relief and compensation under the Retail Leases Act 1994 (NSW), claiming it was entitled to the whole of the basement, which Hewson had partially occupied and used.

Original Tribunal’s Decision

The Tribunal, constituted by Senior Member Bluth, found against Take Two on 6 August 2024. It held that the proper construction of the lease limited Take Two’s entitlement to only the portion of the basement depicted in a colour-coded floorplan provided in the Lessor Disclosure Statement, rather than the entire basement level.

Grounds of Appeal

Take Two appealed on a question of law, arguing that the Tribunal had wrongly relied on inadmissible extrinsic evidence, particularly regarding the conduct of an assignee during a prior inspection of the premises.

While the Appeal Panel (Balla ADCJ and Molony SM) accepted that an error had occurred, it nonetheless agreed with the Tribunal’s ultimate conclusion. Both parties invited the Appeal Panel to re-decide the matter, relying on s 81(1)(e) of the Civil and Administrative Tribunal Act 2013 (NSW).

Key Issues Considered on Appeal

1. Interpretation of the Lease – The “Demise” Clause

The core of the dispute was the clause in the lease which described the demised premises as:

"Part Identifier 1/306865 being the whole of the ground floor and basement area of the building at 43 Booth Street, Annandale."

Take Two argued that the word “whole” applied to both the “ground floor” and the “basement area”. Conversely, Hewson contended – and the Appeal Panel agreed – that the wording suggested a deliberate distinction between “floor” and “area”, and that “whole” only modified “ground floor”.

The Panel stated:

"We agree with Hewson’s primary submission which was that a distinction should be given to the use of the words “floor” to describe the ground floor and “area” to describe the basement area so that the word “whole” only applies to the ground floor."

2. Use of the Word “Area” in the Lease

The lease used the term “area” elsewhere to describe partial or non-exclusive parts of the building, such as “Common Areas” and “garage areas”. The Panel found that this usage supported the interpretation that “basement area” referred only to a part of the basement.

3. Lessor Disclosure Statement and Floorplan

The Tribunal accepted the colour-coded floorplan from the Lessor Disclosure Statement – provided under the Retail Leases Act 1994 (NSW) – as evidence of how the basement was physically used at the time of the lease assignment. While Take Two contested its legal relevance, the Panel accepted its utility in identifying physical characteristics of the basement, noting:

"We are satisfied that we can use the document to enable us to understand the physical characteristics of the basement level..."

4. Car Parking Clause and Common Areas

Clause 19.01 of the lease granted Take Two one car parking space within the Common Areas, further implying that part of the basement (where parking was located) was not demised. The Panel found that this was inconsistent with Take Two’s claim to the entire basement, stating:

"We do not accept that the lease should be construed in any of the ways put by Take Two. They do not give effect to the words used in the lease..."

Take Two’s submission that clause 19.01 conflicted with the Demise was also rejected, particularly as the principle of repugnancy was only to be used as a last resort.

Outcome of the Appeal

The Appeal Panel dismissed the appeal, concluding that the original Tribunal’s decision, although based on some inadmissible evidence, was nonetheless correct. The Tribunal had rightly found that Take Two was not entitled to exclusive possession of the whole basement.

As a result, Take Two’s original application, which had sought extensive declaratory and compensatory orders – including for rent refunds, outgoings adjustments, and nuisance damages – was properly dismissed.

Implications for Commercial Leaseholders and Landlords

This decision serves as a timely reminder for both tenants and landlords to:

• Ensure clarity in drafting lease terms, especially in identifying the demised premises. Ambiguous references, such as “area” versus “floor”, can lead to litigation and conflicting interpretations.

• Review and understand disclosure documents, including plans provided under the Retail Leases Act 1994 (NSW). These may later be used to help interpret lease entitlements.

• Recognise the limits of extrinsic evidence in construing lease terms. As reinforced in cases such as Mount Bruce Mining and Ecosse Property Holdings, the interpretation of a lease turns primarily on text, context and commercial purpose, not subjective intentions or post-contract conduct.

• Be aware that registered leases, like registered easements, may limit the admissibility of external material in construction, though evidence of physical features remains relevant.