Retail and commercial leasing: your rights and obligations after a natural disaster

If you have a retail lease, the Retail Leases Act 1994 sets out key obligations for both landlords and tenants, particularly in situations where a premises has been damaged, or access is restricted.

While you should refer to your lease for specific information about your rights and obligations, the below information may offer some quick tips to help better understand where you stand. If you would like further assistance, you can contact the NSW Small Business Commission to discuss your situation.

Contact the Commission by phone on 1300 975 534 or by enquiring online.

Who pays for urgent repairs

If the retail premises has been significantly damaged because of a natural disaster, tenants should notify their landlord in writing as soon as possible, outlining the extent of the damage and any repairs required to the premises.

In some cases, emergency repairs may be required to prevent further damage and it may not be possible to wait for landlord approval. The responsibility and processes for undertaking urgent repairs is commonly outlined in the lease agreement itself. Depending on the lease, tenants may be unable to claim costs back unless certain conditions or requirements are followed so it is helpful to be familiar with the relevant terms. For example, sometimes there can be different arrangements for repairs to fittings, fixtures and structural elements of a building.

Tenants should notify landlords when urgent repairs are required at the earliest opportunity, particularly if they believe the landlord is responsible.

Responsibility for non-urgent repairs

If repairs are non-urgent then it is best for landlords and tenants to communicate and agree on the best way forward.

For both retail and commercial leases, a tenant is generally responsible for non-structural repairs (such as internal fixtures or minor damage), while a landlord is responsible for structural repairs under the terms of the lease. However, lease terms vary and both parties should check their agreement to determine specific obligations.

Significant damage or destruction – rent abatement

Retail leases

There are specific arrangements in place for retail leases where part of a shop cannot be used due to damage or destruction.

If a shop or building is damaged, section 36 of the Retail Leases Act 1994 provides a retail tenant with a right to a rent and outgoings reduction relative to the proportion of the premises that are unusable, for the period during which the shop cannot be used or is inaccessible due to the damage.

Commercial leases (other than retail)

If premises under a commercial lease are unusable or partially damaged, the lease may include provisions for rent relief, or the landlord and tenant may negotiate temporary arrangements. Check the lease for any relevant terms.

When a lease may be terminated

Retail leases

There are specific arrangements in place to terminate a retail lease in circumstances where repairs are impracticable or undesirable.

If damage is significant such that repairs are impracticable or undesirable, the landlord may choose to terminate a retail lease subject to the requirements outlined in section 36 of the Act (including giving a minimum of 7 days’ notice in writing to the tenant).

Tenants have similar rights to terminate a retail lease, however they must provide the landlord reasonable time after a request for repairs has been made (section 36 provides that the lessee is not liable to pay rent or outgoings for the period during which the shop cannot be used or is inaccessible due to damage).

Commercial leases (other than retail)

As commercial lease terms vary, parties to a commercial lease should check the terms of the lease to determine the rights and responsibilities of the parties in relation to damaged premises, repairs, rent abatements and lease termination requirements.

Damage to personal property

Tenants are generally responsible for maintaining insurance for their own property within the rented property. A landlord is not obliged to compensate the tenant for any damage to the tenant’s furniture or equipment unless specific arrangements exist under the lease.

Rent relief when access to the premises is restricted

Under Section 34 of the Retail Leases Act1994 a retail tenant may be entitled to compensation if they are prevented from accessing or using the premises due to unreasonable action taken by the lessor that:

inhibits access of the lessee to the shop in any substantial manner
inhibits the flow of customers to the shop, or
has a significant impact on trading from the shop.

Retail tenants will not be entitled to compensation for any action taken by the landlord as a reasonable response to an emergency or if the action is taken in compliance with government orders, such as mandatory evacuation or road closures. The lease agreement may outline specific provisions for rent adjustments in such circumstances.

Further information

Negotiating rent reductions or deferrals

If a tenant is struggling to meet rent obligations due to the impact of a natural disaster, landlords and tenants are encouraged to negotiate in good faith to explore their options. This could include consideration of:

Temporary rent reductions or deferrals
Waiving outgoings for a period of time
Extending the lease term to help a tenant recover financially.

Landlords and tenants should document any agreed changes in writing to avoid disputes. Tenants should provide financial evidence to support their request.

The NSW Small Business Commission can help parties to resolve disputes. Find out more about our services by contacting the Commission by phone on 1300 975 534 or by enquiring online.

Disputes and mediation

If landlords and tenants cannot agree on repairs, rent relief, or other lease matters, they may seek assistance through the NSW Small Business Commission, which provides mediation services for retail and commercial leasing disputes.