Commercial Property Lease Disputes

A Guide for Landlords and Tenants in Queensland

By Nanae Yoshiwara, Senior Associate | Litigation & Dispute Resolution

Commercial leases are crucial agreements that underpin the business relationship between landlords and tenants. When properly drafted, they create a stable foundation for both parties, ensuring smooth business operations. However, disputes can arise when terms are unclear or incomplete, which can be costly and time-consuming to resolve. 

This article outlines the essential components of a well-drafted commercial lease, common issues that arise from unclear clauses, and the legal recourse available to landlords and tenants in Queensland.

What Should a Commercial Lease Include?

For a commercial lease to be legally binding, it must contain certain essential elements. Under Queensland law, the following are the absolute minimum requirements:

• Identification of the parties (landlord and tenant).
• Description of the premises (address and size of the leased space).
• Term of the lease (start and end dates).
• Rent and payment terms.

What should be included to avoid disputes?

While these elements ensure that the lease is valid, more comprehensive terms should be included to minimise the risk of disputes. These terms should address:

• Repairs and maintenance responsibilities (clearly allocating duties between landlord and tenant).
• Rent review mechanisms (how and when rent can be increased).
• Use of common areas (parking, storage, etc.).
• Termination provisions (including grounds for breach and procedures for ending the lease early).

Having a lease that is both legally binding and well-structured helps both parties avoid costly disputes and ensures smooth operations throughout the lease term.

What are the Risks of DIY (Do-It-Yourself) Leases?

In many cases, parties may rely on DIY lease templates found online. While these templates can cover the essential terms, they often lack the detail necessary to prevent or resolve disputes. For example:

• Use of common areas definition: Disputes may arise over the use of shared spaces if the lease does not clearly define how these areas can be used.
• Ambiguities in maintenance obligations: Without clear language on who is responsible for repairs, parties may disagree on who should bear the costs of repairs or maintenance.
• Lack of a well-defined termination clause: This leads to confusion when either party wishes to end the lease early. Without clear terms outlining how and when a lease can be terminated, disputes can arise over whether sufficient grounds exist for termination and the correct procedures to follow. This can result in costly legal action to resolve the matter. 

Even though a DIY lease may technically bind the parties, its inadequacies often make it more difficult to resolve conflicts. Under the legal principle of contra proferentem, any ambiguity in the lease will generally be interpreted against the party who drafted the contract or the party seeking to rely on the ambiguous provision. This means that if a DIY lease contains unclear terms, the courts may interpret those terms unfavourably for the party who prepared the lease. 

This highlights the importance of having clear and precise language in all lease provisions, especially in key areas like termination.

How Can a Landlord Terminate a Commercial Lease?

In cases where a commercial lease does not specify how to terminate the agreement, landlords have a few options under Queensland law:

• Termination by agreement: Landlords and tenants can mutually agree to terminate the lease early. This agreement should be formalised in a deed of surrender and release.
• Termination for breach: If a tenant has breached the lease (e.g., failure to pay rent or improper use of the premises), the landlord can issue a Notice to Remedy Breach of Covenant (Form 7) pursuant to Section 124 of the Property Law Act 1974 (Qld). This notice gives the tenant 14 days to remedy the breach, after which the landlord can proceed with terminating the lease under Section 131 of the Property Law Act 1974 (Qld). If the notice is not given, any purported termination of the lease by the landlord will be invalid.

Nevertheless, in the case of termination under Section 131, the breach must typically involve a significant or essential term of the lease, meaning one that goes to the core of the agreement. Examples of breaches that justify termination include failure to pay rent, violating use clauses (e.g., using the premises for an unauthorised purpose), or failure to maintain insurance. Minor or trivial breaches, especially those that do not affect the landlord’s ability to use the property, are generally not sufficient to justify termination.

It is important to seek legal advice before taking any steps to terminate a lease, especially if the lease does not clearly outline the termination process. Our lawyers can assist landlords in navigating these legal complexities and ensure that the termination process is legally sound and enforceable.

How Can Tenants Avoid Disputes and Legal Costs?

Tenants can take proactive steps to avoid disputes and potential termination:

• Carefully review the lease before signing: Ensure that all critical aspects of your business operations, such as parking, use of common areas, and maintenance responsibilities, are clearly addressed.
• Open communication with the landlord: If issues arise, discussing them early can often prevent the situation from escalating into a legal dispute.
• Respond promptly to breach notices: If you receive a Notice to Remedy Breach, seek legal advice immediately and take action to remedy the issue. Failure to do so can lead to the landlord terminating the lease, resulting in significant disruption to your business and additional legal costs.

If a tenant believes they are being unfairly targeted with a breach notice, they should seek legal advice to ensure that the landlord is acting within the bounds of the lease and the law. Argon Law can assist tenants in defending against unreasonable termination actions and in resolving disputes before they escalate.

How Can a Commercial Lease Dispute Lawyer Help?

At Argon Law, our lawyers are experienced in commercial lease disputes and can assist both landlords and tenants in navigating the complexities of lease agreements. Whether you need advice on drafting leases, responding to breach notices, or negotiating lease terminations, we provide tailored legal solutions to meet your needs.

Contact us today to find out how we can help you resolve your commercial lease dispute and ensure a positive outcome for your business or read about the latest changes to tenants rights and safety standards.