Commercial Leases: Obligations for Maintenance and Repairs

If you occupy a shop, office, workshop, warehouse or other commercial property under a lease, you may have had difficulties in persuading the lessor to carry out necessary “structural” repairs and maintenance, writes TGB’s Giles Kahl.

Almost all commercial leases make a distinction between non-structural repairs and maintenance, which are mostly the lessee’s responsibility, and structural works, which are not.  Many lessees assume that because their lease says that structural repairs and maintenance are not their responsibility, they must be the responsibility of the lessor.  It is however rare to find a lease which says this, and in the absence of a clear statement to that effect in the lease, there is considerable uncertainty as to whether the lessor has any legal obligation at all.

There have been many attempts over the years to find justifications for putting a legal obligation on the lessor to do necessary structural works.  On the facts of some particular cases, the courts have found that such an obligation existed.  There is however no general legal principle which a lessee can rely on, and in many, perhaps the majority, of cases the lessor is under no legal obligation whatsoever.  Many lessors, and even their lawyers, may have a contrary understanding, or may look after their premises for practical commercial reasons, or simply because they believe that they have a moral obligation to their lessee.  That is however of no assistance to lessees when their lessors are trying to avoid the expense of repair and maintenance works.  This is particularly infuriating if, for example, some of your stock has already been ruined by water leaking in through the roof.

The Retail & Commercial Leases Act (SA), despite being generally “pro-lessee”, is of little assistance in relation to this issue.  There is a lessor’s statutory warranty of structural fitness for purpose, however that can be, and almost invariably is, excluded by a written notice from the lessor’s lawyer to the lessee before the lease is entered into.  Further, section 13 of the Act prevents the lessor from imposing obligations to reimburse “capital expenditure” on the lessee in most instances, however again that does not place any obligation on the lessor to incur the expenditure in the first place.

So what should the lessee do?

– Inspect the premises thoroughly before committing to the lease, especially if they are of an age at which repair and maintenance issues are more likely to arise, and ask for the lessor’s written agreement to fix any identified problems, but;

– As it is very difficult to be sure that an inspection will identify all potential problems, negotiate to have a clause inserted in the lease putting the lessor under a positive obligation to promptly carry out all necessary structural and capital repairs and maintenance during the term of the lease, as the needs arise.

This is one of the key areas in which having a lease reviewed before you commit to it is strongly advisable – but there are others. Seeking legal advice at this early stage can save the lessee many headaches, and considerable expense, at a later stage.

To arrange an appointment and get advice about your commercial or property matter in South Australia, contact your local TGB office or register online.