Due to the recent widespread flooding in Queensland, landlords and tenants should consider a review of their leases to establish their rights and obligations under their lease where damage has occurred due to flooding.
Most, if not all, leases will contain provisions relating to damage or destruction of premises and the subsequent actions which are to be taken by the parties to the lease if such damage or destruction occurs, in this case due to flooding.
A lease will generally specify the obligations of each party in circumstances where premises are damaged by an event beyond the control of the tenant and landlord (for example Brisbane’s recent floods).
Landlords and tenants should be aware of the covenants in their lease which dictate what will happen where these events render the premises or building substantially unfit for the occupation and use by the tenant or substantially inaccessible.
Matters to be aware of:
We recommend that landlords and tenants review their leases and make themselves familiar with the following issues:
- Potential rent abatement available to tenants, including triggers for abatement, notice provisions and the mechanisms for making an abatement claim.
- The landlord’s ability to restrict or prevent the tenant from accessing the premises or building and the rights of each party following the restricted access period.
- The impact of damage and destruction on outgoings and other payments.
- Subsequent termination rights of each party if the premises or building are not restored/repaired in accordance with the terms of the lease including an understanding of the phrase “unfit”.
- The landlord’s ability to elect not to rectify the damage or destruction.
- Timeframes and notice periods for issuing a damage notice or other election notices under the lease.
- The parties will also need to consider whose insurer will be responsible for repairs or “pay-outs.” Generally the landlord’s insurer will be responsible in relation to the building and premises. The tenant’s insurer will be responsible for contents and possibly the fit out. Such responsibilities will of course be subject to the parties’ respective insurance policies.
- The impact of damage or destruction on related agreements between the parties such as car park, access and storage licences.