Western Australia Commercial Maintenance Obligations

Unlike residential tenancies where the landlord bears a statutory duty to maintain habitability, commercial maintenance obligations in Western Australia are determined primarily by the lease agreement. For retail leases governed by the Commercial Tenancy (Retail Shops) Agreements Act 1985 (effective 1 September 1985), specific statutory protections apply. Most retail lease disputes must be referred to the Small Business Commissioner for mediation under Section 25C before an application can be made to the State Administrative Tribunal (SAT). The allocation of repair responsibilities between landlord and tenant is one of the most heavily negotiated aspects of any commercial lease.

Retail Shop Leases

For leases covered by the Retail Shops Act, the landlord has certain obligations regarding the common areas and the building structure. Landlords must provide a disclosure statement and a tenant guide at least 7 days before a retail lease is entered into (Section 6). Under Section 12(1) of the Act, any lease provision requiring a retail tenant to pay for capital expenditure (such as structural repairs or asset replacement) is void and unenforceable.

Landlord Responsibilities (Typical)

• Structural elements: Roof, external walls, foundations, load-bearing walls.
• Common areas: Shared corridors, car parks, lifts, escalators, landscaping, and amenities.
• Base building services: Fire safety systems, main electrical boards, central air conditioning (for enclosed shopping centres).

Tenant Responsibilities (Typical)

• Internal fit-out: Shopfronts, internal walls, flooring, ceiling tiles, and lighting within the tenancy.
• Tenant-installed services: HVAC units serving only the tenancy, specialised plumbing or electrical.
• Cleanliness and presentation: Keeping the premises clean and maintaining the shopfront appearance.

Outgoings and Maintenance Costs

The costs of maintaining common areas and base building services are typically passed through to tenants as outgoings (proportioned by the tenant's floor area percentage). For retail leases, landlords are required to provide an annual budget estimate before the start of each accounting period and an audited statement of actual operating expenses within 3 months of the period's end (Section 12). The disclosure statement must detail these outgoings at least 7 days before the lease is entered into (Section 6).

Non-Retail Commercial Leases

For non-retail leases (office towers, industrial warehouses, etc.), the allocation depends entirely on the lease structure. Maintenance and outgoings remain largely a matter of contract, where 'triple net' structures allowing the pass-through of all costs, including capital items, are generally permitted.

Net Leases

In a net lease, the tenant assumes responsibility for most or all maintenance, including:

• Interior and exterior maintenance.
• HVAC servicing and replacement.
• Roof and structural repairs (in a true triple-net lease).

Gross Leases

In a gross lease, the landlord typically handles all maintenance and factors the cost into a higher base rent.

Modified Gross Leases

The most common commercial lease structure in WA—the landlord handles structural and common area maintenance, while the tenant maintains the interior of their premises.

Make-Good Obligations One

of the most important—and most frequently disputed—maintenance clauses in a commercial lease is the make-good obligation. This defines how the tenant must return the premises at the end of the lease.

Common make-good requirements include:

• Strip-out: Removing all tenant fit-out, fixtures, and signage.
• Restoration: Returning the premises to base building condition (often called "vanilla shell").
• Repair: Fixing any damage caused during the tenancy.

Negotiation Tips

• Define "base building condition" precisely: Ambiguity leads to disputes.
• Include a cap on make-good costs: Tenants often negotiate a dollar cap or an option for the landlord to accept a cash settlement instead of physical restoration.
• Consider a condition report: Conduct a joint inspection at lease commencement to document the premises' condition for future reference.

Best Practices for WA Commercial Landlords

1. Draft the maintenance clause with specificity: Avoid vague terms like "maintain in good order." Instead, specify exactly which systems, surfaces, and structures each party is responsible for.
2. Require preventative maintenance plans: For HVAC and other complex systems, require the tenant to engage a licensed contractor for regular servicing and provide evidence of compliance.
3. Budget for capital expenditure: Under Section 12(1) of the Retail Shops Act, any provision requiring a retail tenant to pay for capital expenditure is void. In non-retail leases, structural replacements (e.g., a new roof) may ultimately fall to the landlord depending on the lease terms and tenant negotiation.

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