Lina*, a hairdresser, signed a lease agreement 10 months ago and began the fit-out process for a new salon. After receiving conditions from the Development Approval (DA), she found it difficult to meet the requirements. Because she was unable to open her salon she accumulated unpaid rent.
Lina sought mediation through the Commission to exit the lease. Lina hoped to negotiate a settlement or explore the possibility of sub-leasing the premises to mitigate the financial loss.
Understanding the complexity of her situation, the Commission appointed an independent mediator with expertise in commercial disputes, ensuring a neutral ground for both parties to engage constructively.
Within the first 15 minutes of mediation, the parties discussed the details of the premises to consider the space available to offer potential sub-tenants, increasing their chances of mitigating their losses. As part of the mediation process, both parties were able to explore options that could be pursued within the terms of the lease agreement resulting in a good outcome for both sides.
The mediation then turned to the DA conditions that had caused the business to stall. Key issues such as fireproofing and safe access needed to be addressed. The property owner explained they had not been aware of the tenant’s intended modifications prior to signing the lease. Typically, in most commercial leases, the lessor is only required to give consent for such works, but in this case, the property owner saw an opportunity for a more collaborative approach.
The property owner offered to contribute to some of the works necessary to meet the DA requirements, even though they were not strictly obligated to do so, to support the ongoing viability of the lease. This offer, motivated by a longer-term view, which helped make the property more attractive for future tenants if the current arrangement could not proceed.
By this stage, Lina began to see potential for a resolution. Having not paid any rent since the start of the lease, her current arrears were up to $20,000. Supported by the mediator, communication between the parties improved and the property owner considered what would be a viable path forward for the tenant, which included a way to open the business and generate the income needed to cover the rent.
In the end, the parties reached an agreement with both parties collaborating to avoid a long and difficult negotiation that would leave them parting ways. In this case, a seemingly impossible situation was transformed into a win-win outcome for both sides, demonstrating the power of mediation in resolving complex disputes.
* All names have been changed.