In brief - Tenant held to have no contractual right to terminate lease

The Queensland Civil and Administrative Tribunal (QCAT) held in Broben & Anor v Hatfield [2016] QCAT 341 that a retail tenant, who abandoned the premises due to ongoing water leakage problems, had repudiated the lease. This case shows that tenants would be wise to consider the landlord's maintenance obligations when negotiating the terms of the lease.

Tenant vacates premises before lease expires following ongoing leakage issues and then significant rain damage to stock

The tenant conducted a business of selling aquarium fish and aquarium products from retail premises at Mermaid Beach. The premises had a history of water leakage issues following heavy or ongoing rain. The tenant reported the problems to the landlord's agent on several occasions, but was not satisfied with the responses received, nor was the issue substantially rectified by the landlord. 

A significant rain event occurred approximately six months before the lease was due to expire, causing damage to the tenant's stock. The tenant vacated the premises and commenced trading elsewhere.

Tenant held to have wrongfully repudiated lease

Notwithstanding that the landlord appeared to have accepted responsibility for the water leakage problems, QCAT held that the tenant had wrongfully repudiated the lease by abandoning the premises prior to expiry of the lease. The tenant's security bond was forfeited to the landlord, and the tenant was ordered to pay rent for the remaining portion of the lease, make good costs, and other expenses.

What is repudiation?

Repudiation is conduct which clearly shows:
  • an unwillingness or inability to be bound by the terms of the contract, or to render substantial performance of the contract, or
  • an intention to fulfil one's obligations under the contract in a way which is substantially inconsistent with the contract terms
In this case, QCAT held that as the tenant had no contractual right to terminate the lease, the tenant's abandonment of the premises prior to expiry of the lease constituted a wrongful repudiation.

Retail leases that are well-drafted may help tenants in repudiation of contract situations

A repudiation situation following damage or maintenance problems relating to the premises can prove costly for both parties. 

A tenant who has wrongfully repudiated a lease is exposed to a claim for balance rent under the lease and other damages, such as make good costs and loss of bargain. The landlord can find itself out of pocket, particularly where its loss goes beyond the amount of security held from the tenant, with the prospect of legal costs and delays to pursue a claim against the tenant. 

A well-drafted retail lease which clearly sets out the parties' contractual rights with respect to maintenance and repair obligations may have assisted the tenant in the case. When a tenant is negotiating a lease, it is recommended to consider what positive obligations are required to ensure that the landlord keeps the premises in good structural and watertight condition during the term.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.

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