Managing the lease and any issues during the lease | NSW Small Business Commissioner

Key dates and how to manage issues as they arise

To best manage your lease and any issues that may arise during the lease, it’s recommended that you maintain your records with the following:

a copy of the signed lease;
a copy of the signed Retail Lease Disclosure Statement;
the condition report and any photos you took as part of this;
notes about discussions you have with the lessor/ lessee or any relevant agents or advisors in case you need to refer to them; and
a list of key dates related to the lease (see below).

Potential Issues That May Arise During The Lease

If any of the below issues arise, you should seek independent advice if you are unsure about what to do, and review your lease. For further guidance, you should also review the Retail Leases Act 1994 No 46.

Disruptions

Lessees should tell the lessor in writing as soon as possible about any disruptions impacting their business, as it may affect when they may be able to claim compensation for such disruptions.

The Act requires the lessor to take all reasonable steps to avoid disrupting the lessee’s business. Lessees may be compensated, unless they were told about the disruption before starting the lease.

Keep detailed records of any disruptions so you can be specific about their impact and have a better chance of getting fair compensation if your business is affected. Collect evidence to help validate your claims such as photos or relevant sales/customer data. Consider seeking independent advice if necessary.

Repairs and damage

Leases usually state that you must keep the premises and equipment in good repair. However, leases often don’t say who must replace equipment when it breaks down and can’t be repaired. The lease should clearly state the lessee’s or the lessor’s obligations to repair or replace equipment that the lessor supplies.

Tell the lessor in writing as soon as possible about any damage, or subsequent repairs that are required.

Lessees are entitled to compensation if they write to the lessor asking them to clean, replace or fix something that they are responsible for and they don’t do this as soon as possible. If the lessee can’t use the premises at all because it is damaged, they don’t have to pay rent until it is repaired, and may be able to terminate the lease.

A lessee is not usually responsible for latent or inherent defects to the building, but the lease should clearly outline who is responsible for these, and in which circumstances.

It may be wise to have insurance for the premises. This may also be a condition of the lease.

Relocation notices

If a lessee receives a relocation notice, they should check whether the lease has a relocation clause. For further guidance, see what is a relocation notice.

If the lease has a relocation clause, the lessor must give the lessee at least three months’ notice in writing when they ask the lessee to move to another premises.

The lessee has one month to tell the lessor that they don’t want to move when they get the relocation notice.

If the lessee does not accept the new premises, the lease finishes at the end of three months from the original notice (or earlier if agreed).

Demolition notices

If a lessee receives a demolition notice, they should check whether the lease has a demolition clause and if the lessor has to compensate them for reasonable costs.

If the lease has a demolition clause, the lessor can end the lease to demolish the building or shopping centre if the work requires vacant possession of the premises. This applies whether all or part of the building is being demolished. Demolition includes any major repair, renovation or reconstruction.

The lessor must give at least six months’ notice that the lease will end because of demolition. You can end the lease during that time by writing to the lessor and giving at least seven days’ notice.

What happens if someone breaches the lease?

If a lessee or lessor does not abide by the lease then it may be a breach of the lease. For example, if the lessee doesn’t pay rent on time it is a breach of the lease. Similarly, if the lessor fails to repair or maintain the premises as stipulated in the lease, it is a breach of the lease. Where a party has breached the lease, the other party may recover any losses they experience because of the breach. Note that the non-breaching party must take reasonable steps to minimise their losses. In addition, certain breaches may entitle a party to terminate the lease. Seek legal advice if concerned.

What happens if the lessee has been locked out of the premises?

If a lessee has been locked-out of the premises, or received a letter or warning that the lessor or their agent is considering what is sometimes known as ‘re-entry’, ‘repossession’, ‘eviction’ or ‘termination’ they should seek immediate independent legal advice on these warnings due to the potential impact on their business. For further guidance, see I’ve been locked out. What happens next?

Improper conduct

Neither the lessee nor the lessor may engage in unconscionable conduct, or misleading or deceptive conduct. This is a complex matter that usually requires legal advice to make a successful claim.

Dispute resolution

The NSW Small Business Commission provides mediation services for disputes between the lessor and lessee of a retail lease. Mediation is an effective and cost-efficient way of resolving disputes, as a neutral mediator helps both parties try to negotiate a solution. If you need help resolving a dispute, you can submit an application for Mediation at no charge. A Mediation Officer will be allocated to your matter and will assist both parties. If the parties decide a mediation session could help, they share equally in the relatively low Mediator’s fee. For more information on mediation and the costs, see how does mediation work?

To apply for a mediation, you can fill out a mediation application form.

The NSW Civil and Administrative Tribunal

If mediation is not successful or appropriate you may be able to seek orders from the Tribunal in order to resolve the dispute.

Unlike mediation, the Tribunal strictly focuses on legal matters and solutions. You can represent yourself at the Tribunal or engage a lawyer. If you want to represent yourself, consider getting legal advice about your case before the hearing so you know exactly how to put your arguments to the Tribunal and improve your chances of success. For further guidance, visit NSW Civil and Administrative Tribunal's retail leases page.

Tips

Keep written records of your dealings with the lessor/lessee during the term of the lease.
Keep detailed records of any disruptions or damage so you can be specific about their impact and have a better chance of getting fair compensation if your business is affected.
Try to resolve disagreements by discussion and negotiation wherever possible as they will be less costly and time-consuming.
To find out more about you rights when facing these issues, visit our Help Centre for information on retails leases and more.
If you need help resolving an issue and would like to access our mediation services, see how does mediation work?

Retail and commercial leases