Robert Toth and Kristen Attard

retAIl leASINg- rePAIr & MAINteNANCe oBlIgAtIoNS - part 1

Who is liable for repairs and maintenance costs when the roof is leaking, the roller door jams, and the air conditioning stops working?

Disputes between landlords and tenants in relation to repair and maintenance obligations continue to be an active area of dispute. This article focuses on retail premises covered by the Retail Leases Act (Vic) 2003 (RLA). Whilst the RLA is Victorian legislation, there is similar legislation in each State and Territory. Post Covid, retail tenants who managed to survive and were able to obtain rent relief from their landlords have then had to deal with issues regarding repair and maintenance costs of their leased premises. We have been involved in several Small Business Commission (VSBC) mediations where landlords have refused to undertake necessary repairs, or a dispute has arisen as to who is liable for the cost of those repairs.

the Starting point

When retail leasing laws came into being, most people assumed a landlord had a common law obligation to provide a tenant a wind and watertight premises. However, it may come as a surprise this is not the case.

This may be why commercial leases have contractual obligations in the lease that states the landlord will provide a “wind, watertight and structurally sound” building. Tenants expect this to be the case when they lease premises. A non-retail lease can exclude obligations on a landlord for structural repairs. Retail Leases legislation was enacted to give some protection to retail tenants around disclosure and the legislation has (in a rather complex way) sought to clarify these obligations. However there continues to be confusion and we have had to rely on a number of VCAT decisions to clarify where the obligations for repairs and maintenance actually lie between a landlord and tenant.

Many landlords and their agents may be surprised as to their responsibilities to repair and will often seek to pass costs of repairs and even maintenance on to their tenant when they have no right to do. Many responsible landlords will do what is required to maintain a positive relationship with their tenant, but many do not. In addition to the retail leasing legislation, there are a number of other laws that can impact on the landlord’s obligations under the Victorian Building Act 1993, and the OH&S Legislation (with similar legislation in each State and Territory). Although there are some differences between the various State Acts, largely the obligations on landlords are the same but landlords and tenant need to ensure they seek legal advice in their own State or territory.

basic principles

Ok so hold on and take a seat!

“Disputes between landlords and tenants in relation to repair and maintenance obligations continue to be an active area of dispute.”

in the same condition as when the lease was entered into:

• the structure of the premises (the walls and the roof);

• fixtures in the premises (items belonging to the landlord);

• plant and equipment at the premises (air conditioning system);

• appliances, fittings and fixtures provided by the landlord under the lease relating to services such as gas, electricity and water (power boards, water pipes and the hot water system).

Robert Toth is a Partner of Sanicki Lawyers, with over 35 years’ experience in Franchise, Licensing and Distribution law acting for both local and International franchisors, franchisees and master franchisees and with expertise in dispute resolution. Robert is an Accredited Commercial Law and Franchise Specialist, a member of the Franchise Council of Australia (FCA) and the International Franchise Lawyers Association (IFLA) and regularly writes for franchise and corporate journals online. Contact: Robert@sanickilawyers.com.au or even call him on mobile 0412 67 37 57.

A landlord is not responsible for maintaining those items if the need for the repair arises out of the tenant’s misuse of that item or the tenant is entitled or required by the lease to remove the item at the end of the lease (section 52(3) RLA). A tenant is responsible for keeping the premises clean and in good order, subject to ‘fair wear and tear’ over the term of the lease.

The thing to note here, is that the obligation on the landlord is to “maintain” that equipment that is, to service it and ensure it is in working order. Does it go as far as replacing the equipment it if it breaks down completely? There are cases that suggest that may well be the case.

tip

As a retail (or any commercial tenant) you should ensure you complete a condition report (with photos and even a video) at the start of the lease on the building and plant and equipment at the start of the lease. That report should be signed off by both the tenant and the landlord and perhaps even annexed to the lease. This will greatly assist if a dispute arises down the track.

Kristen Attard is a senior associate with expertise in franchising, leasing and sale of business. Contact: kristen@sanickilawyers.com.au Office: 03 9510 9888. https://sanickilawyers.com.au/

A new report should be obtained at the commencement of each option. Seems relatively straight forward doesn’t it but it can be a minefield!

Summary

Landlords have greater obligations for repairs and maintenance under the Retail Leases legislation and tenants should seek advice if a landlord refuses to carry out necessary repairs and maintenance and also ensure they are not being charged for outgoings or maintenance charges that the landlord is liable to pay. Seeking specialist advice may well save a tenant a considerable amount of money and also prevent a landlord from being made liable for a breach of the retail tenancy laws. v