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Landlord and tenant disputes frequently occur, and the actions of each party can have an extreme financial impact on the other. It is absolutely vital to get experienced legal advice, in particular if one of the parties sends or receives a notice under the lease or pursuant to legislation.
If a tenant breaches a lease, the lease might be terminated. A month-to-month lease may be used providing less certainty for a tenant.
Conversely, if a landlord does not issue notices to the tenant correctly, a tenant may be able to commence proceedings for repudiating the lease, and all of the loss of profits that go with losing their business.
Is a commercial lease dispute causing problems for your business?
Are you a tenant, landlord, or property owner and have a dispute with another party in a commercial or retail shop lease? At Gibbs Wright, we can provide you with legal advice regarding your rights and obligations to ensure you achieve an outcome that’s right for you.
What legislation applies to commercial leases in Queensland?
The majority of business leases in Queensland are regulated either by the Property Law Act 1974 (Qld) (the PLA) or the Retail Shop Leases Act 1994 (Qld) (the RSL Act). These acts impose various statutory obligations and powers on the lessor (property owner or manager) and the lessee (the tenant) alike. Disputes between lessors and lessees most often arise in the contexts of these obligations, especially where the parties are not sure about precisely what their rights and obligations are in the circumstances.
Obligations of tenants in commercial leases
If you are a tenant in a commercial lease, your obligations under the lease will generally be set out in the lease document itself. Irrespective of the obligations expressly included in a particular lease, the PLA also imposes the following additional obligations on all tenants:
Tenants are obligated to pay rent. However, where a particular event (such as fire or flood or other natural disasters) results in the tenant enjoying limited use of the property, the rent (or a proportionate part of the rent) will be reserved until the event is resolved and the premises is again restored to its full use. No action to recover rent by the lessor can take place until the premises are fit for the occupation of the tenant as originally intended under the lease.
The tenant is obligated to keep the property in good repair (with reference to its condition at the start of the tenancy) and to care for the premises in the manner of a reasonable tenant.
If a tenant receives any court document in relation to the leased land, such as a writ for recovery or delivery of land, they must immediately provide that document to the lessor. Even if they simply know about the existence of the document, but have not yet been provided with a copy of the relevant document, the tenant will still be obligated to give notice to the lessor of its existence.
If a tenant breaches any of its obligations, either under statute or under the lease itself, the lessor may issue a Notice to Remedy Breach of Covenant. This might result in the tenancy being terminated.
If a tenant receives a notice from a lessor to repair the premises, and those repairs are essentially decorative, the tenant can apply to the court to have their obligations under that notice waived. However, this right does not apply where there is an express covenant in the lease requiring that the property be kept in a decorative state of repair.
Obligations under the Retail Shop Leases Act
Leases for shops in a retail shopping centre or any other premises for the purpose of carrying on a retail business are regulated specifically by the RSL Act. The RSL Act imposes a number of obligations on parties to these types of leases, specifically:
At least seven days before entering into a lease under the RSL Act, the parties to the lease must give each other their respective disclosure statements. The form, structure and content of these disclosure statements are prescribed by the RSL Act, and PDF versions of the documents can be downloaded from the QLD Government website here (current at the date of publication):
A tenant (unless they are a ‘major lessee’) will also be required to give the prospective lessor copies of reports to confirm that they have received financial and legal advice before entering into the lease.
A retail shop lease must not require a tenant to make payments other than those required for rent, the landlord’s outgoings (including maintenance and repairs), damages for breach, indemnity for loss suffered, interest on arrears, and reasonable legal expenses.
A landlord who requires payment for maintenance into a sinking fund must only keep one sinking fund in an interest-bearing account and must pay all maintenance amounts paid by the tenant into that account. Amounts withdrawn from that account can only be put towards maintenance of the building and areas associated with the leased premises.
If a landlord requires the tenant to make payments towards marketing, including promotions and advertising, they must provide the tenant with a marketing plan detailing the proposed spending at least one month before the start of the accounting period.
The RSL Act provides for a number of circumstances in which compensation will be payable by the landlord (lessor) to the tenant (lessee).
A landlord is liable to pay the tenant compensation when they:
- Have caused a disturbance to the tenant’s business which restricts their access to the leased shop;
- Have taken action which restricts access by customers or the flow of potential customers;
- Cause significant disruption to the tenant’s trading, or otherwise do not take all reasonable steps to prevent such a disruption;
- Fail to rectify breakdown in plant or equipment that is under their care;
- Neglect to clean, maintain or repaint the shopping centre or other premises as necessary; and
- Have made a false or misleading statement that the tenant relied upon in entering into the lease.
The tenant must give notice to the lessor of any loss or damage they wish to claim for compensation.
The RSL Act prohibits the landlord (lessor) to a commercial lease from engaging in unconscionable conduct (i.e. conduct deemed so unreasonable that it defies good conscience). Indications that a landlord has engaged in unconscionable conduct can include requiring the tenant to comply with unnecessary conditions, exercising undue influence, pressure or unfair tactics against the tenant, failing to disclose intended conduct which might affect the tenant, unwillingness to negotiate, or failing to act in good faith.
Landlord’s Power of Entry
A landlord (lessor) may enter a property for a number of reasons, such as for the purpose of conducting an inspection of the premises or to repair something. However, the landlord may not simply enter the premises at any given time.
Some of the restrictions imposed on lessors in relation to entering a leased property include:
At least seven days before entering into a lease under the RSL Act, the parties to the lease must give each other their respective disclosure statements. The form, structure and content of these disclosure statements are prescribed by the RSL Act.
PDF versions of the documents can be downloaded from the QLD Government website:
A tenant (unless they are a ‘major lessee’) will also be required to give the prospective landlord (lessor) copies of reports to confirm that they have received financial and legal advice before entering into the lease.
If the landlord (lessor) wishes to enter the property in order to conducts repairs the property, they must provide the tenant (lessee) reasonable notice of the repairs to be undertaken, the time at which the repairs are to be undertaken, and who will be entering the premises to perform the repairs.
If the landlord has provided the tenant with a notice requiring them to repair the property, and the tenant has failed to do so within a reasonable time, the landlord may enter the premises to conduct the repair.
A landlord (lessor) or their agent may enter a property to comply with present or future legislation affecting the property (such as the destruction of noxious weeds or animals).
These powers are to be carried out without undue interference with the occupation of the premises by the tenant.
Landlord’s power to re-enter and take possession
There are a number of circumstances in which a lessor will be entitled to enter the premises and retake possession of the premises from the tenant, including where:
- The tenant’s rent is in arrears for one month; or
- The tenant has defaulted in the fulfilment of any covenant, obligation, condition or stipulation, and the default continues for two months.
The power of re-entry or forfeiture is limited by the requirement under the PLA that the lessor first serves a Notice to Remedy Breach of Covenant on the tenant.
Assignment with landlord’s consent
Commercial leases will frequently include clauses that will prevent the tenant from transferring or assigning the lease to another person or entity without the lessor’s (landlord) consent. In relation to such clauses, the PLA implies certain automatic provisos, including:
This does not prevent the landlord from requiring payment for any legal costs incurred in connection with the transfer.
This does not prevent the landlord from requiring payment of a reasonable sum for expenses incurred in relation to the consent. This proviso can be expressly prohibited by a clause to that effect.
It is important to note that the lessor’s (landlord) consent is not required for the transfer, sale, or assignment of property under a lease where these acts are conducted by a liquidator or trustee in bankruptcy.
The lease has ended, but the tenant has not yet left the premises
Where the term of a lease has expired, but the tenant has not yet vacated the property, the landlord has a number of avenues of legal redress available to them, including:
A landlord may bring a Court proceeding seeking recovery of all or part of a land in which the tenant has failed to vacate.
A complaint made by the lessor (landlord) of this type can be made to the Magistrates Court of Queensland. Upon application and hearing of the matter, the Court may issue a Warrant for Possession, which permits an authorised person to enter (by force, if necessary) onto the land in order to eject the tenant and remove the tenant’s goods from the premises.
In the course of an application seeking recovery of possession, a landlord can also seek an order for payment of any outstanding rent in arrears.
Where a tenant is required to vacate premises and give possession of the premises back to the lessor (landlord) but does not do so, the tenant may be liable for significantly increased rental payments. If the tenant has given a notice of intention to leave the land but does not leave as required, they are liable for double the rent that would normally have been payable to the landlord. Where they are a yearly tenant, the liability is slightly different. These amounts can be claimed by the landlord in a legal claim for damages.
Disputes and dispute resolution
Most commercial lease agreements will generally contain a clause setting out how disputes between the parties to the agreement are to be resolved. In many cases, this may involve referring a dispute to mediation.
The RSL Act specifically provides for disputes between lessors (landlords) and tenants to be referred to mediation upon the lodging of a dispute notice by one party. When that happens, the chief executive (i.e. a government officer appointed for dispute resolution purposes under the RSL Act) will set down a mediation before an appointed mediator.
If a dispute cannot be resolved through alternative dispute resolution, a party may bring an application to a tribunal, such as the Queensland Civil and Administrative Tribunal, or a court, seeking relief under either the PLA or the RSL Act.
We can help
The legislation regulating commercial tenancies is lengthy and complex, and common law decisions about the interpretation of that legislation even more so.
Our solicitors are experienced professionals that deal with dispute resolution and litigation on a daily basis. If you have a concern about a potential dispute involving your commercial lease or retail shop lease, we can provide you with high-quality advice to help you navigate around a dispute. If a dispute has already arisen, we can represent you through the legal process, including to trial.
Contact us about your commercial leasing or retail shop lease matter for a free and confidential initial consultation to discuss your legal rights and obligations.