ACT Commercial Late Fees: Default Interest and Breach of Lease

In the Australian Capital Territory (ACT), commercial landlords are not restricted by the strict consumer protection laws that ban late fees in residential tenancies. However, charging purely punitive flat "late fees" is still rare and legally precarious under broader contract law. Instead, the standard industry practice relies on Default Interest clauses.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Activating breach clauses and charging default interest requires careful adherence to the lease. Always consult an ACT commercial solicitor. Information last verified: March 2026.

Default Interest Clauses

Rather than a $50-per-day fine, a well-drafted ACT commercial lease will include a Default Interest clause. If rent (or outgoings) remains unpaid after the due date, this clause allows the landlord to charge daily interest on the outstanding amount.

• The Rate: The interest rate must be specified in the lease and must be reasonable. It is typically expressed as a percentage above the Reserve Bank of Australia (RBA) cash rate or a specific bank's benchmark rate (e.g., "3% above the Westpac benchmark rate").
• Enforceability: If the rate is excessively high (e.g., 20% above the cash rate), an ACT court may deem it an unenforceable "penalty" clause designed merely to punish, rather than a genuine attempt to recover the cost of the delayed financing.

Grace Periods and Rent Demands

Commercial leases generally require rent to be paid "in advance" on the 1st of the month, without formal demand.

• Grace Periods: Most leases incorporate a grace period (e.g., 7 or 14 days) after the due date before default interest applies or formal eviction procedures can commence.

Responding to Rent Arrears

If an ACT commercial tenant continually fails to pay rent, charging default interest is secondary to addressing the breach. The landlord should:

1. Communicate: Contact the tenant immediately upon the rent being missed.
2. Issue a Notice of Default: If the grace period expires, issue a formal written notice (often referred to as a Section 122 Notice under property law principles). This notice must:
   • Specify the exact amount of rent and default interest owed.
   • Demand payment within a reasonable timeframe (e.g., 14 days).
   • Warn that failure to pay may result in the lease being terminated.
3. Dispute Resolution: Under the Leases (Commercial and Retail) Act 2001, disputes are generally handled in the ACT Magistrates Court. Landlords are strongly encouraged to utilize mediation and negotiation rather than attempting risky "self-help" evictions (locking the tenant out without a court order).

Drawing from the Security Deposit

If a tenant is significantly in arrears, the lease will usually permit the landlord to draw down the outstanding rent (and accrued default interest) directly from the tenant's Bank Guarantee or cash security deposit. The landlord must generally notify the tenant before doing so, and the lease will usually require the tenant to "top up" the deposit within a certain timeframe to restore the original security balance.

How Landager Helps

Landager’s commercial ledger automatically flags late rent payments across your ACT portfolio. Our system eliminates manual math errors by calculating rolling default interest based on the specific benchmark rate defined in your lease, automatically applying it to the tenant's next invoice.

Back to ACT Commercial Lease Laws Overview.