What to do when your premises are damaged due to inclement weather

This article was published in the Hire and Rental News Magazine, May 2022 issue, page 12

With the heavy rains we experienced in New South Wales & Queensland this year, some commercial and retail tenants found themselves dealing with leaking roofs and damaged property.

When situations like this arise, what rights does a tenant have and when is a landlord responsible to pay for any damage?

Tenants will need to look at their lease to see what has been agreed in relation to damage, repair obligations and landlord’s liability.

1. Check your lease for a damage/destruction clause.

Most commercial and retail leases contain a damage/destruction clause. Under this clause, rent and outgoings will abate if premises are damaged or destroyed and cannot be used or accessed by the tenant.

The amount of abatement will usually be proportionate to the reduced useablity or accessibility of the premises. For example, if 50% of the premises cannot be used, then 50% of the rent will likely abate until the premises are restored and accessible.

Tenants are normally required to notify the landlord as soon as any damage has occurred, and under some leases, rent will not abate until the date such notice is given.

Damage/destruction clauses do not usually impose an obligation on a landlord to repair or restore premises, however normally, either party can terminate the lease if the landlord decides that it is unpracticable or undesirable to repair the damage.

Tenants should note that if the damage was caused or contributed to by the tenant, then the rights under the damage/destruction clause are unlikely to apply.

2. Can I claim compensation for any damage to my property or equipment?

In addition to claiming an abatement of rent and other monies (proportionate to the nature and extent of the damage), tenants may be able to request compensation for any damage to their property if it can be shown that the landlord is in breach of an obligation under the lease.

Tenants should check their lease to see who is responsible for structural repairs and maintenance.

Although landlords generally are responsible for the structure of the building, it is useful when negotiating a lease to include a specific obligation on the landlord to keep the building structurally sound and weatherproof. Without such a clause, it may be difficult to require a landlord to carry out repairs to prevent any future leaks (depending on the extent of damage cause by the leak).

If your lease contains a similar clause, you may be able to request compensation for damage and loss incurred by showing that the landlord has failed to keep the building structurally sound and weatherproof.

If your lease does not contain a specific obligation on the landlord, then if the leak has caused the whole or part of the premises to become unusable, you may still be able to claim compensation, or even terminate the lease if it can be shown that the landlord has breached its obligation to give ‘quiet enjoyment’.

‘Quiet enjoyment’ clauses are implied by law in all leases, whether or not there is a specific clause written in the lease. Landlords must give their tenants a right to enjoy the use of premises without substantial interference. Where a landlord has failed to repair a leaking roof, causing the premises to be damaged and unusable, this is likely to be a breach of the landlord’s obligation to give quiet enjoyment.

3. Can I terminate my lease?

Depending on the circumstances and the specific clauses in your lease, you may be able to terminate your lease depending on the extent of the damage.

It is important to note that legal advice should always be sought before attempting to terminate a lease, to ensure such termination is lawful and does not result in a repudiation of the lease by the tenant. If a tenant unlawfully terminates a lease, it may itself be liable to pay compensation to the landlord.

If you have recently experienced property damage, check your lease carefully to see what rights and remedies are available to you. Or if you are about to enter into a new lease, obtain legal advice to ensure your lease protects you in the event of future damage.