Common Lease Disputes and How to Avoid Them

Two-minute summary

Lease disputes are common in both commercial and retail leasing and can result in costly, time-consuming conflicts if not properly managed. At Farahs Legal, we help landlords and tenants navigate and prevent these disputes through clear drafting, strategic advice, and proactive communication.

The most frequent disputes include:

• Rent and outgoings disagreements, often caused by unclear clauses around rent reviews or recoverable expenses.

• Make good obligations at lease end, particularly where the lease is vague on reinstatement or fit-out removal.

• Repair and maintenance responsibilities, which are often disputed when the lease fails to clearly divide obligations between structural and non-structural items.

• Option renewals and market rent reviews, where procedural missteps or disagreement over market value can lead to disputes.

• Permitted use and zoning compliance, especially if the tenant’s operations conflict with planning laws.

• Subleasing or assignment disputes, where consent is required but may be unreasonably withheld or improperly managed.

To minimise risk, parties should carefully draft leases, maintain clear communication, document all variations, and seek legal advice early, especially before lease commencement, renewal, or exit.

Farahs Legal provides practical and strategic leasing advice to help protect your commercial interests and avoid unnecessary litigation.

Full article

Leasing disputes are one of the most common and costly challenges faced by commercial landlords and tenants. Whether arising from miscommunication, poor drafting, or changing business conditions, these disputes can disrupt business operations and lead to protracted legal battles.

At Farahs Legal, we regularly assist clients in resolving lease-related disputes and, more importantly, preventing them before they escalate. Below are some of the most frequent issues we encounter, and how to avoid them.

1. Rent and Outgoings Disputes

The Issue: Disagreements often arise over how rent is calculated, when it is due, or what constitutes recoverable outgoings. Problems also occur when landlords seek to recover costs not clearly set out in the lease.

How to Avoid It:

• Ensure the lease clearly defines rent, outgoings, GST treatment, and review mechanisms.

• Review lease clauses on annual increases (e.g. CPI, fixed percentage, market rent).

• Maintain transparent records and issue invoices with itemised breakdowns.

2. Make Good Obligations at Lease End

The Issue: Tenants and landlords frequently disagree about the extent of restoration required at the end of a lease, especially where the lease terms are vague or the premises were modified during the tenancy.

How to Avoid It:

• Include detailed make good provisions and clarify whether reinstatement includes removal of fit-out or cosmetic repairs.

• Conduct condition reports at lease commencement and end.

• Consider negotiating a cash settlement or agreed make good scope upfront.

3. Maintenance and Repair Responsibilities

The Issue: Ambiguities around who is responsible for maintaining or repairing certain parts of the premises (e.g. air conditioning, plumbing, structural elements) can lead to dispute.

How to Avoid It:

• Clearly allocate responsibility for repairs, maintenance, and capital works in the lease.

• Tenants should understand their obligations in relation to routine servicing of plant and equipment.

• Landlords should ensure service agreements are in place and transparent.

4. Lease Renewal and Option Disputes

The Issue: Tensions arise when the lease is silent, vague, or poorly drafted regarding renewal rights or market rent review mechanisms. A common issue is tenants failing to exercise an option correctly or on time.

How to Avoid It:

• Ensure the lease includes clear option periods, notice timeframes, and rent review processes.

• Send reminder notices ahead of option deadlines (even if not legally required).

• Document any renewal agreements in writing and register variations if necessary.

5. Permitted Use and Zoning Issues

The Issue: Disputes may occur where a tenant’s intended use of the premises is inconsistent with the permitted use clause or the local zoning regulations.

How to Avoid It:

• Clearly define the permitted use in the lease.

• Tenants should verify council approvals and zoning compliance before signing.

• Where necessary, negotiate flexibility in permitted use clauses to accommodate future needs.

6. Subleasing and Assignment Disputes

The Issue: Tenants may attempt to sublease or assign the premises without consent, or landlords may unreasonably withhold consent, creating conflict.

How to Avoid It:

• Include clear procedures for requesting and granting consent to subleasing or assignment.

• Landlords should act reasonably, as required under most state legislation.

• Tenants should be aware that approval is not automatic and must comply with lease terms.

Proactive Tips to Minimise Lease Disputes

• Seek Legal Advice Before Signing: Both parties should obtain legal review of lease terms to identify and correct potential ambiguities.

• Use a Comprehensive Heads of Agreement: This can help clarify key terms early and form the basis for a well-drafted lease.

• Keep Communication Open: Prompt, transparent communication between landlords and tenants can prevent minor issues from escalating.

• Document Everything: Agreements, variations, and communications should be recorded in writing to minimise misunderstandings.

How Farahs Legal Can Help

At Farahs Legal, we act for both landlords and tenants across commercial, retail, and industrial leasing matters. Whether you're negotiating a lease, responding to a dispute, or enforcing your legal rights, we offer practical, timely, and strategic advice.

Contact us today and speak with one of our property law experts.