Insights

In brief – Industrial leases need to be drafted carefully

A landlord may be liable for excessive costs for repairs which may be required as a result of the tenant's conduct. When a landlord and tenant enter into a lease for premises, the landlord may believe that the lease provides that the tenant is liable for all repairs.

However, depending on the way that the lease was drafted, this may not be the case. This may apply particularly to specific repair and maintenance obligations in the lease.

What are the usual repair and maintenance obligations?

Most leases provide for specific obligations on the tenant to repair and maintain the premises, including any damage that the tenant causes to the premises except to the extent of "fair wear and tear". This also includes repair and maintenance of the landlord's fixtures, fittings, plant and equipment supplied in the premises.

The tenant is not liable to repair or maintain any structural elements of the premises as they are the landlord's responsibility, unless the damage has been caused by the tenant's negligence or use of the premises.

Landlord sues tenant for damage to hardstand and common property

In Konstantopoulos v R & M Beechey Carriers Pty Ltd [2011] NSWCA 388, there was a licence provision in the lease which allowed the tenant exclusive use of a concrete hardstand surrounding the premises. There was also a non-exclusive use entitlement by the tenant to use the driveway which was common area.

The landlord sued the tenant for a substantial amount for repairs to the hardstand and common property, claiming that the damage to these areas resulted from the tenant's use of a heavy forklift to transport, load and unload heavy containers.

Lease permits use of forklift to load and unload shipping containers

Prior to entering into a lease, the parties must give thought to the repair obligations and also to the permitted use of the premises. In this case, there was a clause which provided that the landlord acknowledged the tenant's permitted use of loading and unloading of shipping containers by the use of a forklift and that the landlord would accept any damage which required repair to the concrete hardstand that fell within the reasonable fair wear and tear category.

There was another provision in the lease that the tenant would maintain and repair the hardstand area, having regard to the state of repair at the commencement date of the lease.

The landlord was adamant that the repair was not a fair wear and tear exception and that the hardstand area had been damaged by the tenant.

The court took the stance that as the use of the forklift was permissible under the lease, the landlord's claim for damages for repair and maintenance to the hardstand area could not succeed.

Leases should specify the type and weight limit of heavy equipment

Where the permitted use may be for the purposes of a warehouse, is an industrial use or the landlord is aware that heavy equipment will be brought onto the premises, then a landlord must consider what equipment will be brought onto the premises by the tenant.

The landlord must ensure that specific drafting is included in the lease setting out the weight limit of equipment that can be brought onto the premises and who will be liable if there is damage.

This will avoid a landlord being liable for repair and maintenance resulting from equipment on the premises which has caused damage that is not fair wear and tear, but where it is a reasonable incidence of the permitted use.

Communication and documentation can help avoid disputes

A tenant must communicate with the landlord and specify what items will be brought onto the premises. The tenant also needs to let the landlord know if this changes during the term of the lease.

It is also prudent for the parties to carry out a condition report of the premises prior to the tenant's occupation of the premises.

Ultimately, however, there is a fine line between damage caused to the premises by a tenant on the one hand and the premises requiring repair and maintenance due to fair wear and tear on the other.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​