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Commercial Leases - Who is responsible for the Air Conditioning?


Date Published: 29 May '23

Commercial Leases – Who is responsible for the Air Conditioning?

Do you know who is responsible for the air conditioning in your commercial lease? Landlord or Tenant? Here we break down the basics of this common dispute.

What to do before you sign a lease and take possession?

When entering into a commercial lease, ensure the responsibilities of the Landlord and Tenant are clearly stated with regards to the repairs and maintenance of air conditioning.

  • Have the air conditioning checked by an expert and get a condition report before you sign the lease and take possession.
  • Is the air conditioning working and has it been serviced recently?
  • Is it sufficient to service the premises and your usage type?
  • Is it under warranty and with service history records?
  • Both parties sign the condition report and ensure any repairs are completed before the lease commences.

If the lease is a retail lease, Tenants have greater protection under the Retail Shop Leases Act.

During the lease

Where the premises are provided with air-conditioning, it is common for a standard commercial lease to include ongoing service and maintenance costs as the Tenant’s responsibility and capital expenses as a Landlord’s cost.

Regular maintenance of the air conditioning unit and keeping service records will reduce business disruption and meet the relevant obligations under the lease. It will also be a key source for reference if a dispute arises in the future.   

  • “Maintenance” is the taking of some action to delay wear and tear, or deterioration or breakage of an item.
  • Set up a service contract with a reputable licensed contractor
  • Ensure the air-conditioning unit is serviced quarterly or as agreed in the lease
  • Request a life cycle report from the service contractor
  • Keep good records of all service reports for the term of the lease. 

If you, as the tenant, installed the air conditioning unit, all responsibility will remain with you unless a specific agreement has been reached with the landlord regarding this.

Who pays if the unit fails? 

The landlord would generally be responsible for the cost of any major repairs or replacements needed for the air conditioning unit.

Service records are proof of regular maintenance of the air conditioning unit and can be important evidence to show that the Tenant has fulfilled their obligations under the lease. The Tenant can demonstrate that they have taken reasonable steps to maintain the unit and that any issues that have arisen are not a result of neglect or misuse by the Tenant. 

The Tenant can be held responsible for any costs that may arise if they have failed to meet their maintenance obligations under the lease.

End of Life Cycle

As a unit is coming to the end of its life, you will often see more regular breakdowns and repairs needed.  It is at this stage that you should be opening discussions with the Landlord about replacing the unit.  Ideally, the replacement is planned and scheduled before the unit completely fails to ensure you are not left without air-conditioning for an extended period.

If you pay outgoings to the Landlord for building expenses, monitor these charges to ensure you are not unfairly burdened with the costs of maintaining an outdated or inefficient unit.  You are within your rights to request the replacement of the unit if this starts to occur.

Don’t ignore irregularities with the efficiency of your air conditioning unit, particularly during the summer months. Waiting for your next scheduled service could lead to disastrous effects on your business if the unit fails in the interim, leaving your premises uncomfortably hot and potentially causing damage to equipment or products.

If your air conditioning unit requires major repairs or replacement, it is important to advise your landlord in writing immediately, including any relevant documentation provided by your service contractor. This will help to expedite the matter and provide a clear record of your communication and any action taken. The landlord has an obligation to attend to major repairs or replacement of building fixtures in a timely manner.

If you are without air-conditioning for an extended period of time, you can request the landlord provide portable units to help maintain a comfortable environment.

It’s also beneficial to be aware of any rent abatement provisions in your lease. Some leases will include the ability to stop paying part or all of your rent if particular events occur. Failure to provide air-conditioning to the premises is a common inclusion where a rent abatement clause exists.

Tips to prevent disputes

  • Undertake a full condition inspection report of the premises including the air-conditioning unit prior to taking possession. 
  • Agreed repairs should be completed before the lease commences.
  • Ensure the lease contains clear obligations and well-defined standards for the repair and maintenance of the premises, including the air conditioning unit.
  • Ensure that your outgoings accurately reflect your share of the costs if the unit supports multiple premises. Ask the Landlord to provide supporting records to demonstrate how the shared costs are calculated.
  • Maintain regular servicing of the air conditioning unit with a licenced contractor as required under the lease and keep good records.
  • By addressing air conditioning problems promptly and communicating with your landlord, you can ensure that your air conditioning unit remains in good working order.

If a dispute arises

If you are in dispute with the Landlord, what can you do? 

Always check the lease first to clarify the obligations of each party.

If the lease does not contain a specific clause pertaining to air conditioning, it is important to look at the general obligations of each party to determine if there are any provisions that could cover the issue.

You should never sign a lease without understanding all of its terms and conditions. If you don’t understand what you are agreeing, to seek advice from a legal professional or a tenant advocate. 
A legal professional is trained and licensed to practice law and can provide legal advice and representation to tenants in negotiating and drafting lease agreements. A tenant advocate is a professional who specialises in representing tenants and their rights. They have extensive knowledge of tenant-landlord laws and regulations and can help tenants negotiate tenant-friendly terms in a lease. Tenant advocates provide support and assistance to tenants in resolving disputes with landlords and are focused on ensuring tenants are treated fairly.

If you are a tenant and need assistance with a Landlord dispute or have concerns about your rights under your lease, contact the tenant advocates at Thrive Commercial on 0432 771 275 or book a free call at https://www.thrivecommercial.com.au/.


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