Receiving a notice from your landlord alleging a breach or threatening termination can be confronting. However, a lease dispute in NSW does not automatically end your tenancy. Whether a breach causes termination depends on the lease type, the dispute’s nature, and the lease terms. In many cases, tenants can stay in possession by asserting legal rights or negotiating rent relief or amended terms.
Distinguishing Between Retail and Non-Retail Leases
In NSW, the first step is to identify if your lease is a “retail shop lease” under the Retail Leases Act 1994 (NSW). Otherwise, it may be a “general commercial” or “industrial lease.”
Retail leases attract statutory protections including disclosure obligations, limits on recovery of outgoings, and dispute resolution via the NSW Civil and Administrative Tribunal (NCAT). Other commercial leases rely primarily on the terms of the lease and common law.
A tenant should not assume that rent relief or other statutory rights available to retail tenants apply to office or warehouse tenancies.
Lease Disputes and the Right to Remedy
Most commercial leases require the landlord to issue a formal breach notice before terminating. The notice must clearly identify the alleged breach and provide a period, commonly 14 to 28 days, to remedy it.
If the tenant remedies the breach within that period (for example, pays arrears or ceases the conduct complained of), the landlord’s right to terminate is generally lost.
Under common law, if a landlord attempts to terminate the lease without following this procedure, the termination may be invalid, and the tenant may have a claim for wrongful forfeiture.
Keeping the Lease Alive Through Negotiation or Variation
Even where the landlord has issued a valid notice, the parties can often negotiate a variation rather than end the lease. Common mechanisms include:
- Rent abatement: If the premises become partially unusable due to a cause within the landlord’s control (for example, structural damage or works restricting access), the lease may provide for rent abatement. If the lease is silent, abatement can sometimes be negotiated.
- Rent deferral or repayment plans: In circumstances of short-term financial stress or external disruptions, landlords may agree to defer or stagger rent payments.
- Repair or maintenance arrangements: Disputes about maintenance obligations can often be resolved by agreeing on shared costs, staged works, or temporary rent relief.
- Mediation or dispute resolution: For retail leases, the Retail Leases Act 1994 (NSW) requires parties to attempt mediation through the Small Business Commissioner before court or tribunal proceedings.
These approaches allow the tenant to remain in occupation while addressing the landlord’s concerns.
Relief from Forfeiture
If a landlord has already terminated the lease, a tenant may apply to the Supreme Court for relief from forfeiture. The court can reinstate the lease if the tenant promptly remedies the breach, pays outstanding rent or costs, and demonstrates an ability to comply going forward. Relief is discretionary and depends on fairness and the parties’ conduct.
When Termination May Be the Practical Choice
Continuing a lease is not always commercially wise. A tenant may decide that the premises no longer meet business needs, or that continuing would incur losses exceeding any benefit. If the landlord’s position is entrenched or the relationship has irretrievably broken down, termination or surrender may be the cleaner course.
Before taking that step, tenants should:
- review any break clause, assignment or surrender provisions;
- consider negotiating a Deed of Surrender to ensure all future liabilities (including guarantees) are released; and
- seek advice on the landlord’s duty to mitigate losses if the tenant vacates early.
Walking away without formal surrender may expose the tenant to continuing rent liability until the premises are re-let.
Assessing Options After a Notice from the Landlord
When a tenant receives a notice alleging breach or demanding possession, the following should be considered:
- Has the landlord complied strictly with the notice requirements in the lease?
- Is the alleged breach capable of being remedied?
- Does the lease provide a right to abatement or variation in the circumstances?
- Would termination cause greater financial or operational harm than resolving the dispute?
- Does the Retail Leases Act 1994 (NSW) apply, and if so, has mediation been attempted?
Early legal review and prompt negotiation may prevent escalation. Courts and tribunals in NSW prefer practical outcomes that preserve tenancies where both parties act reasonably.
Conclusion
In NSW, a lease dispute rarely spells the automatic end of a tenancy. Whether through remedy, rent adjustment, or negotiated variation, there are many ways to preserve the lease. Yet, in some cases, the better business decision is a structured exit through surrender or assignment. Tenants should respond to any notice swiftly, review the lease terms carefully, and obtain timely legal advice to determine which course best protects their commercial position.
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
