Construction and disturbance
Construction work or disturbances caused by a lessor in a commercial tenancy can impact a tenant’s viability, and disputes may arise over downturn in trade, quiet enjoyment, and compensation.
Case law supports a tenant’s right to quiet enjoyment. Tenants are entitled to occupy the commercial premises without interruption from the lessor. Examples that breach a tenant’s right to quiet enjoyment may include:
Disturbances the lessor cannot not foresee or that are out of the lessor’s control (e.g., an emergency, construction in adjacent buildings or roadworks) may not be a breach of the tenants right to quiet enjoyment.
Notice for retail tenants
In certain situations, the lessor is entitled to limit a claim for compensation by providing the tenant with a written notice of an anticipated disturbance, explaining:
The lessor must compensate the tenant if the work is likely to cause significant disruption.
A clause in a retail lease that goes against provisions of the Retail Shop Leases Act 1994 (RSL Act) is prohibited (Section 16 of the Act).
For commercial (non-retail shop) leases, the specific requirements related to works carried out by the lessor, will vary depending on the lease agreement.
- When making an application for mediation specify the amount of compensation being sought.
- A QSBC mediator can mediate disputes up to $750,000 in value.
Flood and cyclone help
The impact of natural disasters may involve repairs to buildings by lessors. The Queensland Legal Assistance Forum has published a fact sheet for flooding on leased premises.
Communicate the issue
If faced with disturbance, the tenant can write to the lessor about the issue, referencing the relevant provisions in the lease, the RSL Act or under common law. Following legal advice can ensure a tenant does not inadvertently waive their rights. To increase the likelihood of a positive response:
Loss of foot traffic
A decline in foot traffic may not in itself breach the lease and might be caused by a combination of factors, making it difficult to pinpoint a single cause. Factors may include:
Section 43 of the RSL Act details when compensation for loss or damage is payable for business disruption or false or misleading statements.
Under the RSL Act, failing to give the lessor written notice of the loss or damage as soon as practicable after the business disturbance, won’t affect any right to compensation but can impact the amount of compensation paid.
Compensation can be available to a sublessee or a franchisee of the tenant, or where the lease term has ended but the tenant still rents the retail shop one month at a time (a periodic tenancy).
Amount of compensation
In retail shop lease disputes, if the tenant and lessor cannot agree on the amount of compensation, the details are negotiated at mediation.
For a dispute in a non-retail shop lease, the parties can agree to mediation through the QSBC. But if they can’t agree to mediate or want to get specific orders or decisions, they should get legal advice to work out which court is responsible for handling the case.
Consider the following steps:
- Look at the terms in the lease
- Seek legal advice from a lawyer experienced in commercial property law
- Find information on how the RSL Act or the right to quiet enjoyment applies
- Investigate ways to minimise the disruption or attract more customers
- Negotiate commercially sensible solutions
- Make an application for mediation
QCAT considers disputes between a tenant and lessor related to retail shop leases if the dispute is not resolved after mediation.
Download the Construction and disturbance fact sheet.