Fair’s Fair to Apply to Leases as Well

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Unfair Contract Law and Leases.

The unfair contract law currently applies only to consumer contracts. As of 12 November 2016, the unfair contract law will also apply to small business contracts and leases as well.

What is the unfair contract law, what is a small business and will it apply to your Lease for commercial premises?

A small business is a business that employs 20 or less employees, including casual employees if they are employed on a regular basis. As such, many businesses, particularly on the Sunshine Coast, are small businesses. The unfair contract law (in a very summarised nutshell) provides that certain terms in standard form contracts, including leases, (where one party has little negotiating power) may be found unfair by a Court or tribunal, and no longer be a part of the contract. Terms that enable one party, and not the other, to do certain things (such as to apply penalties or terminate the contract) are generally considered to be “unfair”. If the term is not reasonably necessary to protect the legitimate interests of the party to benefit, or if the term causes a significant imbalance in the parties’ rights, the term will be unfair.

For example, if a clause allows a landlord to terminate a lease for a breach by the tenant, but does not have a reciprocal right for the tenant to terminate for certain breaches of the landlord, the term may be considered to create a significant imbalance, and be unfair. Similarly, if a term allows a landlord to refuse to grant an exercise of option because of a long ago remedied breach, this may be considered to cause significant detriment to the tenant, and not be reasonably necessary to protect the Landlord’s interests.

If you sign a lease, renew a lease, or perhaps even vary a lease from 12 November 2016, the new law will apply to your lease, provided the price under the lease is no greater than $1,000,000 for the term. As this will apply to many leases, both landlords and tenants should be aware of this upcoming change to the laws affecting small business.

To find out more about these changes and how they may effect you or your business, contact MMLaw on (07) 5443 1800.

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Disclaimer

The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.

The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.

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