Australia Post's 999 year “peppercorn” lease in North Melbourne may yet be reviewed

Australia Post may yet have to pay more than a peppercorn for its 999 lease over its historic North Melbourne premises. 

The "ridiculous" lease - as dubbed by city councillor Stephen Mayne - was revealed when the City Melbourne included a list of its current commercial leases in its draft 2013-14 budget.

Signed in 1882, Australia Post has paid no rent on the premises in more than 131 years, being only required to pay ‘one peppercorn if demanded’ as the original Victorian-era contract prescribes. 

The 1882 contract has no provision for a review of the rent, which only expires in 2881. 

However, a spokesperson for the Melbourne City Council says that as part of the master planning for the future of the North Melbourne Town Hall Arts House, it intends to “commence discussions with Australia Post in the near future”. 

The original lease was signed following a grant of 2500 pounds paid “from the consolidated revenue of the colony to the mayor and councillors of the Town of Hotham in North Melbourne in order to erect a Town Hall, Court House, and Post and Telegraph office”. 

"The yearly rental was ‘one peppercorn if demanded’. There was no provision to review," reads the original agreement.

The term “peppercorn rent” derives from such Victorian-era rental agreements, referring to a nominal payment necessary for the creation of a legally-binding contract. 

“The original lease covered additional areas, which are now shops leased by the City of Melbourne to tenants and Arts House spaces at the rear of the building," said a spokesperson for the City of Melbourne.

"These were surrendered when the Court House and lock-up on the site ceased being used for those purposes – per the condition of the original lease. 

"The Post Office does not have a right to sublet the shop for another purpose and should they vacate they would have to surrender the premises to the City of Melbourne." 

Councillor Stephen Mayne, who chairs the City of Melbourne’s finance and governance portfolio, says while the council is “not in the business of breaking commercial leases” the agreement is “absolutely ridiculous”. 

He said it would be good if Australia Post voluntarily agreed to look at options. 

“If an alternative venue for a post office could be found on Errol Street, it would certainly free up the old North Melbourne Town Hall for greater community use.

“I did raise the issue socially with the new chairman of Australia Post, John Stanhope, at a recent Jazz Festival function and joked that we’d give him a 500 year extension for $100,000. 

“The renegotiation issue has not been formally raised with Australia Post but it is good to have these sorts of deals out in the open for public discussion,” he added.