02/08/2010

It is safe to say a major proportion of commercial lease disputes revolve around the air-conditioning.  It either doesn’t work or it doesn’t work well enough and the argument then quickly develops as to whose job it is to fix it.

In air-conditioning disputes the difficulty is in determining whether the works that need to be done relate to maintenance, repair or replacement. 

Landlords generally agree to provide proper working air-conditioning at the commencement of the Lease.  Often they require the Tenant to pay for maintenance.  But what about repair and even replacement of faulty parts?  Are these capital improvements that the Landlord should bear or usage charges more appropriately paid by the Tenant?

Landlords should therefore ensure that the lease fully sets out the respective obligations of both parties, and if possible makes maintenance, repair and replacement the obligation of the Tenant.  They should ensure that the air-con is in good working condition at the start of the lease and include an acknowledgement by the Tenant as to that fact.  The cost of any air-con expert required to test the air-con should be sheeted home to the Tenant.  All of these Tenant’s obligations are justified on the basis that the air-con is a service that the Tenant is using and that they should therefore pay to maintain.

Tenants on the other hand should try to ensure that most of these charges are paid by the Landlord.  They would argue that the air-con is an essential service that is being provided by the Landlord, and they would not have entered the lease had it not been available.  The Tenant would maintain that it is a capital item and that any cost involved in wear and tear should be the Landlord’s responsibility.

The winner of this negotiation will depend much on the then-current market and just how much the Landlord wants/needs the Tenant to sign up.

If the parties are in dispute, what can they do?  First of all, check the lease.  What precisely does it say about the obligations of each party.  If there’s nothing specific on air-conditioning then look at the general obligations of each party to see if there’s something that could cover it.

Tenants may be able to use other arguments if the Landlord or their agent promised that they would take care of the air-con.  Those pre-contractual promises may be enforceable.

The best way to ensure that problems don’t arise is to be very clear from the start as to whose obligation it is to look after the air-con.

Please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222 for more information.