At common law (judge made law), there is no implied obligation on a lessee to provide repairs and maintenance on a leased property. For this reason, a commercial lease will almost certainly include an express covenant that the lessee repair and maintain a leased premises at their expense. This covenant will exclude ‘structural repairs’. Although this may sound straightforward and within common sense, disputes between lessors and lessees concerning repairs to premises are very common.
Definition of Repair
So what is considered to be a ‘repair’? There are numerous factors that the Court will take into consideration in determining whether work required or carried out is in fact a ‘repair.’ These factors include:
- all, or any particular wording in the lease including its context in the lease as a whole;
- the factual circumstances of each matter including the age and location of the premises, the state of the premises when the lease was granted, what the defect is and the cost and work needed to fix it;
- the current building practice; and
- the effect of the works on the value of the premises and the lifespan of the premises.
Generally speaking, if the work required to be done beyond reasonable wear and tear, it will be the lessee’s obligation to carry out that repair, at their cost, unless the work amounts to structural maintenance or repair.
The definition of ‘structural repairs’ has been considered in numerous cases. The Court has defined structure to mean ‘something which has been constructed.’ Likewise, a defect of a structural character means ‘a fault in putting the structure together or some subsequent failure on the part of the structure to remain satisfactorily put together.’ On buildings, the Court considers the ‘bare building’ to be the structure. The Court has further considered and defined ‘structure’ about structural repairs to mean the ‘part of the total building that supports the loads and stops the building falling’.
It is important to note that in the absence of an express obligation in the lease, a lessor is not necessarily obligated to remedy structural repair. This situation has been considered before the Courts and is has been acknowledged that a situation can exist whether neither the lessee nor the lessor is responsible for the costs of structural repair. This scenario has been confirmed by the New South Wales Courts.
Repairs in Retail Leases
Retail leases in New South Wales are governed by the Retail Leases Act 1994 (NSW) (the Act). Section 22 provides that a lessee is liable to pay to a lessor, outgoings to the extent that they are provided for by the lease. The term ‘outgoings’ has been defined by the Courts to mean those expenses directly attributable to the ‘operation, maintenance or repair of the building in which the retail shop is located.’ Section 23 of the Act provides that a lessor is not able to recover capital costs from a lessee.
Is your tenant refusing to pay for repairs as part of their outgoings? Or maybe your landlord is passing on the costs incurred for structural repairs? Obtaining legal advice in respect of your rights and obligations early may help to prevent your lease dispute from escalating. Contact a LegalVision leasing lawyer if you have any questions.