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Case Studies

Retail and Commercial Leasing Case Studies 

‘Make good’ arrangement under a commercial lease

The office of South Australian Small Business Commissioner (SASBC) was contacted by the proprietor of a car detailing business (Cliff) who in 2020 commenced leasing commercial premises for a period of three (3) years.

The business was not COVID-19 affected, but was not operating profitably, and Cliff saw no prospect of that occurring. In the ordinary course, Cliff and his business was obliged to pay rent for the whole  three-year term or at least until the landlord was able to find another tenant. Cliff contacted the SASBC to discuss his options.

A case manager was assigned to Cliff, and they contacted the landlord to discuss the situation. Through pre-mediation communication, the SASBC was able to achieve an early release from the lease for Cliff’s business so that it didn’t incur ongoing rental expenses.

As part of the arrangement, Cliff was required to return the premises to the same condition (make good) as at the commencement of the lease. Unfortunately, that was not done to the satisfaction of the landlord and a further dispute developed because of this ‘make good’ requirement.

The SASBC case worked communicated with both the tenant and the landlord to determine what was reasonable under the circumstances, and this was ultimately attended to by the Cliff.

Through careful negotiation, the SASBC was able to relieve Cliff of their obligations under the lease and satisfy the landlord’s requirements as to the condition of the premises without the matter having to go to court.

Commercial Tenancy Dispute - Terminating Lease 

The office of South Australian Small Business Commissioner (SASBC) was contacted by a landlord of a commercial tenancy who was in dispute with his tenant. Both parties had been trying to resolve the dispute through their lawyers, unsuccessfully.

The landlord advised the SASBC case manager that the dispute related to the tenant of the commercial tenancy terminating the lease and vacating the premises, well before the lease expiry date, as a result the landlord sought payment from the tenant for the amount of $29,166 until the end of the term of the lease, which was rejected by the tenant.

Through pre-meditation negotiations the landlord reduced the amount to $16,000 to resolve all matters, which was also rejected by the tenant who counteroffered with the amount of $1000 which the landlord rejected.

As an agreement could not be made, both parties were invited to mediate the dispute under the Retail and Commerical Leasing Act 1995 which they agreed to do. 

The mediation resulted in a successful resolution being reached whereby the tenant would pay the landlord a sum of $4,000 and allow the landlord to retain some of the commercial cooking equipment in full and final settlement of the matter.

Lessee and Tennant – Maintenance dispute

Sally* signed a new lease at a commercial premises when she was starting her new business. When she moved in, Sally realised that the air-conditioning was not in working order and after a failed attempt to contact the agent managing the property Sally contacted the office of South Australian Small Business Commissioner (SASCBC) to lodge a dispute.

The SASBC case worker listened to Sally’s dispute and made contact with the agent managing the property to have an impartial discussion about the air-conditioner.

Upon speaking with the agent it was confirmed that the air-conditioner was indeed faulty, but Sally had also stopped paying rent as required by the signed lease.

Discussions with Sally confirmed that she was not prepared to pay rent until the air-conditioner was repaired or replaced. Advice from the SASBC to Sally stated that taking this path may be deemed as a breach of her lease and could result in being locked-out of premises.

After speaking with both parties and impartially negotiating it was agreed that once Sally paid the rent that was in arrears, the landlord would install a new air-conditioner.

In this case study both the lessee and lessor where both assisted by the SASBC, although it was Sally who initially lodged the dispute.

*Names have been changed

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