Fire safety in leases - when compliance determines who pays

Most fire safety disputes don’t start with a fire. They start with an invoice no one wants to pay.

Although the legal obligation for fire safety compliance usually sits with the building owner, commercial and retail leases often reallocate the cost and practical responsibility of compliance to tenants - particularly where works are said to arise from a tenant’s use, fitout or configuration of the premises.

“It’s only a few extra sensors”

From 13 February 2026, certain classes of buildings in New South Wales must have essential fire safety measures inspected, tested and serviced in accordance with AS 1851-2012. As buildings are reassessed against this standard, compliance gaps are emerging.

In one matter, a tenant’s change in use and internal reconfiguration prompted a fire engineering review. The review found the existing detection system no longer adequately covered the reconfigured area and additional coverage was required.

The dispute was not about whether the works were necessary – it was about how they were characterised under the lease.

• the tenant argued the works were a capital upgrade that permanently improved the building;

• the landlord argued the installation was required only because of the tenant’s configuration and use.

The lease allowed the landlord to recover operating outgoings – but expressly excluded capital costs.

Whether the landlord could recover the expense turned on a simple question: were these routine compliance costs arising from the tenant’s use, or broader building compliance works triggered by changing standards?

When a fitout changes the rules

In another matter, a tenant’s proposed fitout prompted a reassessment of the building’s fire safety systems. The resulting works went well beyond the tenancy, including:

• upgrades to parts of the base building system

• revised certification requirements

• additional essential fire safety measures

The tenant argued the upgrades related to the base building. The landlord argued they were only required because of the tenant’s fitout and use.

The lease allocated responsibility where tenant works caused a compliance issue, but determining whether the fitout was the real trigger required technical fire safety advice. What began as a standard fitout quickly escalated into a significant commercial dispute.

Why the “trigger” matters more than the works

In both examples, the legal analysis turned not on what the works involved, but on what caused them.

Key questions included:

• Were the works maintaining an existing system, or introducing something new?

• Were they required because of changes in standards or enforcement, or by the tenant’s specific use or fitout?

• Would the obligation have arisen anyway, or only because of what the tenant did?

That factual trigger often determines how the works are classified under the lease and who ultimately bears the cost.

Why this matters at lease drafting stage

Fire safety compliance can be reassessed at any point during a lease, including due to:

• changes referenced in the National Construction Code

• council fire safety orders

• insurer-driven compliance reviews

• tenant fitout or alterations, including changes to layout, configuration or services

• changes of use or occupancy

• tenant subdivision or subleasing of space

These triggers often arise well after a lease is signed.

Most leases draw a clear distinction between routine maintenance (often a tenant cost) and new systems or structural upgrades (often a landlord cost). In practice, those categories are rarely clear-cut.

Broad “comply with all laws” clauses, capital cost exclusions and fitout obligations can allocate risk in ways that are not immediately obvious, leaving parties uncertain about who bears the cost of compliance triggered mid-lease.

In retail leasing, statutory restrictions may further limit the extent to which capital or structural compliance costs can be passed on, regardless of what the lease says.

Fire safety risk is often underestimated at lease negotiation stage. When compliance requirements change, or when tenant works trigger reassessment, unclear drafting can expose both landlords and tenants to substantial and unexpected costs.

The issue is rarely whether the works are required. It is what triggered them and what the lease says about who must pay.

As fire safety standards continue to tighten, careful drafting and early, informed discussion between the parties about their respective obligations are the most effective ways for avoiding disputes when compliance issues arise mid‑lease.

Authors: Stella Sun & Sara Duong

Supporting partner: Melissa Potter

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.