Buildings need to be repaired and maintained otherwise they will deteriorate. Laws also change imposing additional obligations on occupants. We have recently seen Councils and the Licensing Authority imposing additional obligations in order for the building to be compliant for public safety, such as the obligation to install new firefighting water tanks at significant costs due to low water pressure.  However, the question is often asked who is responsible for structural repairs of a commercial building that is leased.

Many disputes arise between lessors and lessees regarding their respective repair and maintenance obligations.  The general position for commercial leases is that the lessee is responsible for all repair and maintenance of the leased premises except for structural repairs.

Despite the exclusion that lessees are not liable for capital or structural repairs, it must be noted that many leases do not contain a positive obligation on the lessor to actually undertake structural repairs.   The question is then whether the lessee can require the lessor to undertake those structural repairs.

There is no general legal principle that the lessor is under a legal obligation to attend to structural repairs and maintenance. If the lease does not impose any obligation on the lessor to undertake structural repairs, then the lessee must argue that there is an implied obligation.  This can be difficult, as courts do not normally like to imply an obligation on the lessor to repair and maintain leased premises.  Legal cases on this question have returned mixed outcomes, resulting in some uncertainty.

As the lessee is not required to undertake structural maintenance and repairs, it may be implied that this is the responsibility of the lessor but what factors are likely to be considered and what are structural repairs?

There is no definitive definition of ‘structural repairs’, however a suggested definition is repairs which involve interference with the basic fabric of the building – its walls, roof, foundations and floors.  The structure may consist of those elements of the building which give it its essential stability, appearance and shape.

Over the years, the Courts have formulated five conditions required for implication of a term in a contract, these are:

1. it must be reasonable and equitable;
2. it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
3. it must be so obvious that “it goes without saying”;
4. it must be capable of clear expression; and
5. it must not contradict any express term of the contract.

In 2002, the Victorian Supreme Court found that exclusion of structural repairs from a lessee’s covenant did not result in the implication that the lessor was therefore responsible. In this case, the Court noted that a situation could arise where neither the lessor or the lessee were responsible for structural repairs to the premises and that this would be a matter of negotiation between the parties.

What we learn from the above is that it is extremely important to ensure that the lease provisions are clear regarding who is responsible for repairs and maintenance.  Whilst the lessee is rarely responsible for structural repairs and maintenance, the exclusion is not overly useful if there is not a corresponding provision which requires the lessor to undertake such repairs and maintenance.

If you would like further information or advice on leasing, including repair obligations, please contact Jarrod Ryan (jarrod@ryandurey.com) or Alyce Cassettai (alyce@ryandurey.com).