Option to take lease not binding

The High Court has held that a medical centre with an option to take a lease in a proposed commercial development was not bound to contribute to the costs of the development of the project. It had decided not to take a lease in the project because the proposed rental was too high and the developer tried to get it to pay for the costs of developing the project.

The company developing the building wanted a 6% return on its investment and therefore set the rent at twice what the medical centre was paying elsewhere.  The medical centre tried to negotiate for a lower rent, but this was rebuffed.  They therefore decided not to take up their option of a lease.  Other tenants also decided not to take up their options of a lease leaving the project with no tenants and uneconomic to pursue.  The developer was left out of pocket for all the development costs and the High Court held that the company with an option to take up a lease was not obliged to take up the lease and had not mislead the developer or caused its losses.

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