We frequently see disagreements between Landlords and Tenants of retail premises about who is responsible for repair and maintenance of an air conditioning system. So, whose legal obligation is it?

Business Renter's Rights

It is common for a standard REIV or LIV Commercial Lease to include the costs of maintaining and repairing the Landlord's installations as an outgoing for which the Tenant is responsible. These Leases also usually contain a clause which specifically makes the Tenant responsible for maintaining any heating, cooling or air conditioning equipment and keeping it in good repair. If the premises form only a part of the building, then the Lease often requires the Tenant to be responsible for a share of the costs of providing those services to the entire building.

That might be fine for a standard Lease of commercial premises but what if the Lease is for retail premises?

Retail Leases Act 2003

The Retail Leases Act 2003 contains additional protections and rights for Tenants of retail premises. The Act says that the Landlord is responsible for maintaining any plant and equipment at the premises which the Tenant is not entitled to take at the end of the Lease. The plant and equipment must be maintained in the same condition as at the start of the Lease. The provisions of the Act will always override the terms of the Lease, regardless of what the Lease says.

Who is responsible for repairs?

Even though the Act makes the Landlord responsible for maintenance, the Landlord can still pass on to the Tenant such maintenance costs as an outgoing. Provided the Landlord has included a reasonable estimate of maintenance costs in its Retail Leases Disclosure Statement given to the Tenant at the commencement of the Lease, the Landlord should still be in a good position to claim the cost of repairs and maintenance from the Tenant.

However, an exception is where capital expenses are incurred, such as replacement parts or systems. The Act prohibits the Landlord from claiming capital costs from the Tenant and they would therefore not be responsible for repairing the air conditioner under these circumstances, according to these terms of the Lease.

The Victorian Small Business Commission provides more information on the rights and obligations of who is responsible for the repair and maintenance of retail premises.

Practical Tip

Do not rely on the wording of the terms of the Lease or make assumptions about who has responsibility for air conditioning, as the Act might provide a different result! It also pays to make sure the Landlord's Disclosure Statement is detailed and sets out all estimated outgoings for maintenance and servicing.

If you require assistance in any property matter, please feel free to contact Andre Ong on 1300 205 506 or fill in the form below.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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