If you are a tenant in a lease for land entered into after 1919, the covenant to pay rent is an implied term in your lease by the Conveyancing Act (NSW) 1919. This means that you, along with your executors and administrators, are obligated to make payments within the stipulated lease term. Therefore, your obligation to pay rent exists even if not expressly stated in the lease. This article highlights the implications of the implied lease covenant for your rent payment and the importance of specifying payment details in the lease.
Practical Implications
As the obligation is implied, you must pay rent under the lease without waiting for a demand or invoice. Accordingly, you must ensure payment of rent is made by the due date. Additionally, you should not wait for any demand or invoice to make payment. However, you should ensure that an invoice is provided to you. Further, it is recommended that the lease specifies the manner in which payment is to be made. This will reduce the likelihood of confusion or dispute between the parties.
Payment of Rent as An Essential Term
Leases commonly treat rent payment as an “essential term” due to the implied covenant. The lease will also often specify that a breach of an “essential term” will constitute its termination. Whether the landlord is obligated to provide notice prior to termination on this ground will be determined by:
- the specific terms of the lease; and
- the rights of each party.
Exceptions to the Implied Covenant of Payment of Rent
While the payment of rent is considered essential to commercial leases, it can be common for a lease to include a number of exceptions to the covenant to make payment of rent. These include:
- where the leased premises or any part of the premises during the term of the lease is destroyed or damaged (by fire, flood, lightening, storm, etc.); or
- the leased premises or part of the premises is unfit for occupation and use.
In such circumstances, you will not be obligated to pay rent or a proportionate part of rent according to the nature and extent of the damage.
A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it.
Key Takeaways
The payment of rent is an essential aspect of your lease. It is, therefore, critical to fully understand the practical implications of the implied lease covenant for the payment of rent. Additionally, you must specify payment details in the lease to avoid potential misunderstandings or disputes with your landlord.
If you are experiencing a dispute in relation to the payment of rent or would like to ensure your lease appropriately specifies your obligations, our specialist leasing lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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