LESSEE'S COMPENSATION

Tenants with an interest in premises which have been compulsorily taken can claim compensation for any damage to or loss of the interest. The compensation payable will be determined by the length of the residue lease term and profit rental (if any). The high probability that a lessee will take up an option or any close relationship that the lessee may have to the lessor are not sufficient grounds for extending the period of compensation - Minister v NSW Aerated Water (1916) 22 CLR 56. Such matters are too personal:

For these reasons, somewhat elaborated by reason of the comparative novelty of the subject as well as its vast importance, I am of opinion that no enhancement of the value of the leasehold term by reason of a chance of extension can be considered unless there is some right established to obtain extension, and in that case the only extension relevant is that to which the right is shown - Isaacs J.

Also in Pengly v Comm for Railways (1951) 69 WN 25, 11 The Valuer 368. The claimant lessee's tenure must be a secure one for the claimed goodwill to be real goodwill. For example, the fact that an incoming lessee paid for goodwill by itself, is not sufficient grounds for compensation:

In the present case, there is no evidence that the business had any significantly special features. It was an ordinary chemist shop and, assuming that there was any personal goodwill attached to the former owner, the contract makes no provision for the buyer acquiring or paying anything in respect of that. It is true that in the contract the goodwill is mentioned in one paragraph and the lease in another and a separate consideration of $1000 is attached to the goodwill, but no significance can be attached to this" - Comm of Tax v Williamson (1943) 67 CLR 561, The Valuer, October 1943.

If the lessee has no profit rental or goodwill they can still claim for disturbance. For example:

• Extra cost of removal
• Loss in value of stock and fixtures
• Costs of reestablishment for example, advertising
• Compensation for a less favourable tenure for example, forced to pay a higher rent.
• Loss of site goodwill (if any).

If the lessee has an option to purchase or an option for extension of the lease such an option only has value if the price or rent quoted is below market value.