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As a tenant, it is important to be aware of your rights and responsibilities under your lease. If you fail to meet your obligations, a possible dispute may arise. Two common leasing disputes involve negotiating rent and dealing with an agent. Importantly, you can mitigate the risk of a dispute escalating by understanding what you should do in these circumstances. For guidance, this article will discuss common leasing disputes regarding negotiating rent and dealing with agents.

Negotiating (and Renegotiating) Rent

Rent is usually clearly set out in the schedule of the lease as a dollar figure, payable monthly in advance. Commonly, there is also a mechanism in the lease that allows the landlord to increase the rent by a small percentage each year to account for inflation. Paying rent is mandatory and a key obligation under a lease. If you cease to pay rent for a sufficient period of time, a landlord will be entitled to evict you. This time period is usually brief; tenants are generally afforded a formal grace period of 14 days to address any rent arrears. After that, the landlord can take action.

What Happens if You Stop Paying Rent?

If your rent default leads to you eviction, you are likely to be liable for more costs than just the unpaid rent. Typically, a lease will allow a landlord to claim back costs they incurred in the eviction process and claim damages. A damages claim seeks to put the landlord back in the position they would have been in if you did not breach the lease.

For example, they could claim rent for the months following your eviction, up until the premises was re-let to someone else, or until the time the lease was meant to end. It is worth noting that if you guaranteed the performance of the lease personally, you could be personally liable for all of these additional costs.

What Should You Do if You Cannot Pay Rent?

If your business is struggling and you cannot meet your rental obligations, the legal position is usually straightforward; you will be in breach of the lease and exposed to eviction.

The solution to this is often more commercial than legal. You may need to make the case to your landlord that they should reduce your rent or provide you with a payment plan. It is not a good idea to just cease paying rent or ignore this problem until you are in arrears. Rather, you should get on the front foot and communicate with your landlord to try and obtain a grace period. This will assist you while you consider your legal and financial options.

Suppose the market that the premises are located in has changed. In that case, you may want to press for a market rent review. However, note that unless this is mandatory under the lease, any concessions of this nature are ultimately at the landlord’s discretion.

In the context of COVID-19, there are temporary rules which enable tenants to seek rent relief from their landlords, underpinned by a national Code of Conduct. The Code is implemented in each state and territory through regulation, and each regulation has been designed slightly differently to reflect the specific context. This guide will not go into detail about the COVID-19 rent relief process. However, LegalVision is able to assist with any enquiries regarding this process.

Can You Withhold Rent for Other Reasons?

Commonly, tenants decide to withhold rent as leverage in a dispute with their landlord. For example, if they are: 

  • concerned that they are being overcharged in relation to outgoings; or
  • frustrated that a landlord is not organising repairs or maintenance. 

It is worth noting that in most circumstances, this is a risky tactic because you can still be exposed to eviction, even if the landlord is found to be in breach for another reason. Just because you have concerns about a landlord’s potential breach does not give you a corresponding right to breach your payment obligations also.

In some circumstances, there will be mechanisms under a lease that set out circumstances in which a tenant may be able to claim an abatement of rent. An abatement is a temporary break from paying rent. For example, if part of the premises is uninhabitable for a period of time. However, these clauses are usually very specific in their wording and application. Therefore, you should always seek legal advice before you withhold rent in the context of a leasing dispute.

Common Leasing Disputes: Dealing With an Agent

A landlord’s agent is formally authorised to act on their behalf. You can think of a real estate agent as your landlord’s proxy or mouthpiece. Often, you can go an entire tenancy without dealing with the landlord directly. Ultimately, an agent’s job is to protect the landlord’s interests. As such, if you get in a dispute with your landlord, you will find yourself dealing with the agent.

What Happens if an Agent Makes a Mistake?

Real estate agents can sometimes be the source of disputes. For example, suppose they did not communicate clearly between the landlord and the tenant about the parties’ intention regarding the renewal of a lease. In that case, it could lead to a misunderstanding about the future of the lease.

If an agent does something wrong, the legal scenario can become complicated. You, as a tenant, are not in a contractual relationship with the agent. Therefore, you may still need to assert a claim against the landlord for events that transpired due to an agent’s mistake. In turn, the landlord could theoretically take action against the agent. If an agent’s conduct is particularly egregious, you may be able to assert a non-contractual cause of action against them. For example, you may bring a negligence claim.

If you have concerns about how an agent has caused or exacerbated a legal dispute, you should certainly seek legal advice.

How to End a Lease Factsheet

A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it.

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Tips for Tenants to Communicate With Agents

If you are dealing with an agent about any issue that has the potential to become disputed, it is advisable to always correspond in writing and keep a paper trail. For example, if you have a phone call with an agent, you should immediately send them an email afterwards, which reiterates and confirms the discussion.

Suppose you are having trouble communicating with an agent during a dispute, and you consider that the agent is making the problem worse. In that case, one strategy you can consider is to escalate the matter to legal correspondence. If your lawyer sends a letter to the landlord directly, the landlord may engage a lawyer of their own. This will likely elevate the conversation to be more focused on the legal issues. Further, it can leave behind the baggage of your relationship with the agent.

Suppose you are genuinely concerned about an agent’s conduct. In that case, you could also consider complaining to their company (assuming they are not the principal) or alternatively, to the state Real Estate Institute.

Key Takeaways

It is not uncommon for leasing disputes to arise between tenants and landlords or tenants and agents. It is a good idea to understand your rights and obligations under a lease to prevent the chance of a dispute arising. However, in the event that a dispute does arise, you can seek the advice of a lawyer to help you navigate the dispute. For advice regarding leasing disputes, LegalVision’s disputes and litigation lawyers can assist 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.

Frequently Asked Questions

Should I withhold rent as leverage in a leasing dispute?

It is not recommended as you can still be exposed to eviction, even if the landlord is found to be in breach. You may have concerns regarding a landlord’s potential breach, but this does not give you the right to breach your payment obligations.

What happens when an agent makes a mistake?

As a tenant, you are not in a contractual relationship with the agent. Therefore, you may need to assert a claim against the landlord for events that occurred due to an agent’s mistake. Additionally, the landlord could may be able to take action against the agent themselves.

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Simon Hillier | Disputes and Litigation Lawyer | LegalVision
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