A guide to commercial leasing disputes

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Commercial and retail leases – a stitch in time

Commercial leases generally cover the leasing of such areas as offices, warehouses or industrial facilities. A specific type of commercial lease, a retail lease, applies to retail premises: shop fronts, food outlets, and stores inside shopping centres. The Retail Leases Act 1994 (NSW) covers these leases and also defines specific cases where the Act does not apply. The purpose of the Retail Lease is to give extra protection to these tenants.

Whatever the type of lease, it is a formal and legal agreement between landlord and tenant, lessor and lessee, that defines both the obligations and the rights of both parties. That said, no lease can make demands that contravene established law.

Commercial leases need to cover all reasonably foreseeable circumstances and can therefore become somewhat complex. It is crucial that both parties are fully aware of implications before acceptance and signing.

Nevertheless, difficulties do arise. In many cases the cause can be misunderstanding or inattention due to business workload or other stressors.

In the last year or so, one such stressor has been the COVID pandemic. This has placed great stress on tenants with enforced closures, and quite restrictive rules even when allowed to operate. Landlords have likewise been required to be accommodating with rent. Government assistance for both sides has been offered, nevertheless, times have been demanding for all.

There are many possibilities for disputes to arise, including:

  • A landlord may be seeking restitution for a failure to pay rent, or perhaps have a property dispute where a tenant has damaged rental premises. In these circumstances the landlord will be seeking damages – essentially, asking to be reimbursed so that they are returned to the position they would have been in had the tenant not breached their obligations.
  • Equally, a tenant may seek damages if they have been denied proper access to their premises, as required under the terms of the lease. They will be asking for reimbursement to reinstate their position – either financially, or in terms of lost opportunity or damaged reputation.

First steps

It will come as no surprise that the first step in any perceived dispute is to communicate with the other party. It is often the case that what one party sees as an impending problem is actually just an accidental oversight. Such informal discussions should nevertheless be documented: date and time, people present, what was discussed. If resolution is agreed upon, this too should be well documented in case of future disagreement.

When first steps fail

Retail lease disputes are handled by the NSW Civil & Administrative Tribunal (NCAT), however, except for urgent circumstances, the Tribunal will require that mediation be attempted first through the NSW Small Business Commissioner. Should that mediation be unsuccessful, the Commissioner will issue a certificate to that effect, and application may then be made to NCAT with the certificate attached.

NCAT hearings are less formal than court hearings – generally the applicant will present their case, and then the respondent will present theirs. Both parties are entitled to legal representation.

Where the commercial lease is not a Retail Lease, NCAT has no jurisdiction, and proceedings will take place in the Local, District, or Supreme Court.

In either case, sound legal advice is imperative in order that real or perceived breaches of lease requirements are handled correctly.

Commercial Law – it’s what we do. Owen Hodge Lawyers. We are here to help. If you have a question about commercial leasing disputes please don’t hesitate to contact us on 1800 770 780 or send us an email at [email protected]

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