In brief - Tenant found not liable to pay outgoings under lease
The Queensland Civil and Administrative Tribunal (QCAT) recently found that a tenant of a retail lease in Queensland was not responsible for payment of trade waste charges. The tenant’s entire liability to pay outgoings under the relevant lease was struck out.
Landlord attempts to pass trade waste charges on to tenant
In the matter Downpat Laundromat v Jones  QCAT 534, the tenant and the landlord were parties to a retail lease for premises operating as a laundromat at Eagleby, in Brisbane ("the Lease").
The local authority issued an account for trade waste charges in the amount of $4,116.91 to the landlord. The landlord attempted to pass on those costs to the tenant. Following the tenant’s failure to pay those charges, the landlord issued the tenant with a Notice to Remedy Breach.
Tenant not required to pay for rates, cleansing, general or water charges
Clause 4 of the Lease provided that:
• the tenant was not required to pay outgoings under the Lease; and
• in the event of any local or other authority providing any cleansing or refuse service for the demised premises (whether it be at the request of the tenant or by direction of any such authority), the tenant was to pay the costs to the assessing authority.
The landlord’s disclosure under the Retail Shop Leases Act 1994 (Qld) confirmed that the tenant was not required to pay for the landlord’s outgoings, including rates, cleansing, general and water charges.
Was the tenant liable for removal of trade waste from the laundromat?
The tenant argued that:
• The trade waste charges were landlord’s outgoings applicable to the building, rather than the premises; and
• The tenant was not required by the Lease to contribute towards the landlord’s outgoings.
The landlord argued that:
• Trade waste charges are not outgoings applicable to the building, but rather charges applied for the removal of trade waste from the laundromat premises; and
• Trade waste charges were a "service" provided for the sole use of the tenant and therefore the tenant’s responsibility under clause 4 of the Lease.
QCAT strikes out tenant's requirement to pay outgoings under the lease
The Queensland Civil and Administrative Tribunal held that the trade waste charges were an outgoing of the landlord and not payable by the tenant. The landlord’s Notice to Remedy Breach was held to be invalid and the tenant’s requirement to pay outgoings under the Lease was struck out.
Landlords must ensure that outgoings will be covered by agreed rent
The case highlights the importance of landlords exercising caution when entering into retail leases under which tenants are only responsible for payment of direct charges and not for payment of outgoings relating to the building.
If entering into a retail lease where no outgoings will be payable, landlords need to consider carefully whether the cost of outgoings actually incurred by the landlord will be adequately covered by the rent agreed with the tenant.
If entering into a retail lease where outgoings are potentially chargeable to a tenant, landlords should err on the side of caution and comply with the outgoing disclosure and annual reconciliation requirements set out in the retail leasing legislation.
Please contact us if you would like to discuss any issue raised in this alert further.
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