Lease renewal slips: offer or invitation to treat?

In Shun Ho Energy Development Co Ltd v Golden Crown Industries Ltd ([2014] HKEC 446, LT) a tenant (T)’s leases of 3 shops expired. The landlords (L) served notices of expiry on T. These called upon T to state whether it would take new leases of the premises on the terms set out in the notice. If so, they were to return the reply slips. Some time after the deadline set out in the notice, T returned the reply slips. T’s representative had, in an earlier phone conversation, indicated that it was only prepared to pay certain lower rents. These counter-proposals were rejected by L’s representative.

The Lands Tribunal found that the return of the reply slips did not create binding leases. First, they were mere invitations to treat ([40]). Second, if they were offers, T’s counter-offer terminated the offer ([41]). Third, time was impliedly of the essence for returning the reply slips and T had replied after the express deadline ([43]).

When T’s representative agreed to pay L’s proposed rent for the new leases, L’s leasing manager replied ‘OK’. In the circumstances, however, it was clear as a matter of interpretation that this was not an acceptance of T’s offer to contract on the terms originally proposed by L. T had made it clear that she was acting as an intermediary and had no authority to conclude a lease ([45]).

T held over on expiry of the leases. L sent T a debit note calling on it to pay ‘rent’. Did this estop L from denying that it had agreed to new leases? It did not. There was no representation that new leases would be granted. The fact that the debit notes were generated automatically by a computer went a long way to undermining any suggestion that they were an accurate indicator of L’s intentions.

Michael Lower

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