Retail Leases Update

By Paul O'Connell January 23, 2019

Landlord’s Failure to Repair Air Conditioning allows Tenant to Terminate Lease

We thought you may be interested to know of a recent VCAT hearing which is of relevance to all landlords of commercial property.

As commercial property managers, issues with air conditioning would probably be one of the most frequent repairs/ maintenance requests we receive from our tenants. This is not something to be taken lightly. In October 2018, VCAT determined that, despite repeated requests from the tenant, the landlord’s ultimate failure to fix the air-conditioning, allowed the tenant to terminate the Lease.

In summary:

  • The Lease contained a clause requiring the landlord to install an air-conditioning unit to properly service the premises;
  • Despite several requests by the tenant to the landlord over a period of some 4 months, the landlord failed to sufficiently fix the air-conditioning;
  • VCAT determined that the air conditioning did not appropriately service the premises and that the landlord had therefore repudiated the Lease;
  • The tenant was still obligated to pay the rent, outgoings and undertake the makegood, however given the landlord’s repudiation of the lease, the tenant could opt to terminate the lease.
This case highlights the importance of proactive property management and thorough repairs and maintenance. Of equal importance is proper representation of the premises and landlord obligations at the time of Lease negotiation. If there is an obligation on the landlord to provide air-conditioning under a Lease, the landlord must ensure that the air-conditioning works appropriately for the premises.

You can read the full order about the case of relevance, being Sth Melb Pty Ltd v Red Pepper Property Group Pty Ltd [2018] VCAT 1684, here:

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Paul O'Connell

Written by Paul O'Connell

Paul brings a broad range of skills and experience having held roles in the Commercial Property Industry as a Finance Broker, Sales & Leasing Consultant and Property Manager.

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