March 2026
Retail Lease Disputes: Common Disputes Between Tenants and Landlords
Whether you are a landlord managing a shopping center or a tenant operating a café, boutique, or medical practice, the lease governs virtually every aspect of your commercial relationship. When the relationship breaks down, the consequences can be swift and costly. In New South Wales, retail leases are governed principally by the Retail Leases Act 1994 (NSW) (Act). The Act imposes mandatory obligations on landlords and confers important protections on tenants. By understanding key obligations, businesses and property owners can mitigate risks and create a mutually beneficial leasing arrangement.
Key Takeaways
Landlords and tenants should understand their rights, obligations and lease terms by:
- Carefully reviewing the Disclosure Statement provided by the landlord and seek clarification on any unclear terms
- Before signing the lease, both parties should negotiate terms such as rent, outgoings, and rent reviews to ensure clarity and fairness.
- Ensuring both parties understand their responsibilities regarding repairs, maintenance, and the overall condition of the property.
Compliance with the terms and conditions of a lease agreement ensures safety, protects financial investments and fosters a stable, transparent relationship.
Common Disputes
Rent Reviews and Market Rent Determinations
Rent review disputes commonly arise over the method of review specified in the lease, whether CPI-based, fixed percentage or market, and whether that method has been properly applied. Market rent determinations are an expert-driven resolution mechanism used when parties cannot agree on the new rate during a market-based rent review. To avoid disputes, key obligations when undergoing rent reviews and market rent determinations include:
- Reading the Lease: Tenants should ensure they understand the precise mechanism, timing, and type of review.
- Acting Early: In many regions, tenants can request an ‘early determination’ of market rent 3 to 6 months before the option deadline, avoiding pressure-based errors. [1]
Outgoings: What is Recoverable?
Outgoings disputes arise when a landlord seeks to recover costs that the tenant believes are payable under the lease or the Act. The tenant will only be liable for outgoings if they are disclosed in the landlord’s Disclosure Statement.[2] To avoid disputes, key obligations for managing outgoings include:
- Landlord Disclosure: Landlords have strict, statutory obligations regarding the disclosure, estimation, and reconciliation of outgoings. A landlord’s failure to comply with disclosure obligations in relation to outgoings could affect their right to recovery.[3]
- Reviewing Allowable Expenses: Tenants should verify that charges relate to legitimate operating expenses, including maintenance, cleaning, security, rather than prohibited items like capital costs.
Make Good Obligations
Make good clauses require tenants, at the end of a lease, to restore the premises to an agreed condition. These clauses are a perennial source of disputes, often because neither party has a clear record of what the premises looked like before the lease. In the absence of a detailed condition report at commencement, tenants may be exposed to inflated make good claims. Safeguards both tenants and landlords can implement include:
- Detailed Condition Report: Tenants should prepare a detailed, photographic condition report at lease commencement, signed by both parties.
- Clear Drafting: Tenants should clarify any vague terms such as “fair wear and tear”.
- Negotiate Early: Tenants should negotiate specific requirements 6 to 12 months prior to lease end and maintain records of all landlord-approved alterations and discussions during the lease term.
Assignment and Subletting
Businesses change! Tenants may wish to sell their business, bring in a partner or relocate – all of which may require assignment or subletting of the lease. A landlord cannot unreasonably withhold consent to an assignment of a retail lease.[4] What constitutes ‘unreasonable’ withholding is contested and fact dependent.[5] When reviewing assignment and subletting clauses, tenants should consider:
- Release on Assignment: Tenants should seek a provision that releases the original tenants from future liability once the lease is legally transferred to a new party.
- Reasonableness of Consent: Tenants should ensure that the clause states that the landlord cannot unreasonably withhold, delay, or condition consent for assignment or subletting.
- Clear Conditions: Tenants and landlords should ensure the conditions are clear, in writing, and include specific timeframes for the landlord’s response and any legal and administrative costs the landlord can charge for processing a transfer.
Resolving Retail Lease Disputes
In NSW, the NSW Civil and Administrative Tribunal (NCAT) has jurisdiction to hear most retail lease disputes under the Act. Most disputes must first be referred to mediation through the NSW Small Business Commissioner before NCAT proceedings can be commenced, providing a more efficient and cost-effective dispute resolution.
Contact Us
If you are a landlord or tenant engaged in a retail lease dispute, or simply want to understand your rights before signing, please contact us on (02) 9189 5288 and we would be happy to assist.
Olivia Guanlao & Craig Higginbotham
19 March 2026
[1] Section 32 Retail Leases Act 1994 (NSW)
[2] Section 12A(1) Retail Leases Act 1994 (NSW)
[3] Fabcot Pty Ltd v Fenwick’s Arcades Pty Ltd [1999] NSWSC 1121
[4] Section 41 Retail Leases Act 1994
[5] Krongold Corporation A(sust) Pty Ltd v Di Latte [2014] WASCA 146
