Commercial Lease Disputes in Victoria: Rent Reviews, Make-Good and Termination 

A commercial lease dispute in Victoria is usually resolved by returning to three things: the lease, the statutory regime that applies to the premises, and the commercial consequences of acting too quickly or too late. For business owners, directors, and property investors, the immediate question is rarely whether a dispute exists. It is whether the rent review, make-good claim, outgoings demand or termination step is legally sustainable and commercially worth pursuing. 

The most common flashpoints are familiar: a market rent review that changes the economics of the tenancy, a make-good clause that becomes contentious at exit, an outgoings dispute that exposes gaps in disclosure or accounting, or alleged repudiation leading to termination. In Victoria, those issues may be governed by the lease, the Retail Leases Act 2003, the Property Law Act 1958 and, in many retail leasing matters, VCAT’s leasing jurisdiction. 

Early legal assessment matters. A landlord seeking to enforce rights, or a tenant responding to forfeiture, termination or a claim for relief against forfeiture, should understand the procedural requirements, evidentiary position and negotiation leverage before the dispute hardens. 

What Laws Govern a Commercial Lease Dispute in Victoria? 

A commercial lease dispute in Victoria is governed first by the lease, then by any statute that applies to the premises and the dispute. For retail premises, the central statute is the Retail Leases Act 2003 (Vic). For termination, re-entry and forfeiture, the Property Law Act 1958 (Vic), particularly s 146, is often critical. Many retail leasing disputes also proceed through the dispute resolution framework connected with VCAT’s retail leasing jurisdiction. 

The Retail Leases Act 2003 is particularly relevant to a market rent review, an outgoings dispute, disclosure obligations and certain renewal issues. Section 37 deals with rent reviews based on current market rent. Where the Act applies, a market rent review is not simply a commercial negotiation between landlord and tenant. The review must follow the statutory framework, including how current market rent is assessed and, if disputed, determined. The Act also regulates the recovery of outgoings, including what may be recovered and what disclosure or supporting material should sit behind retail lease disclosure obligations. 

Termination disputes require a different analysis. A landlord may have an express right to terminate or re-enter under the lease, but that right is not always immediately enforceable. Section 146 of the Property Law Act 1958 limits the enforcement of a right of re-entry or forfeiture for certain breaches unless the required notice has been served and the tenant has had the required opportunity to remedy the breach, where remedy is possible. In appropriate cases, a tenant may seek relief against forfeiture. 

Two High Court decisions remain important. In Shevill v Builders Licensing Board (1982) 149 CLR 620, the Court considered lease termination, forfeiture and the limits of damages following re-entry. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, the Court considered repudiation in a leasing context and confirmed that a tenant’s conduct may, in some circumstances, amount to a refusal to be bound by the lease. 

The practical point is that a dispute over a make-good clause, rent review, outgoings claim or termination notice is rarely resolved by one clause alone. The outcome depends on the lease wording, the statutory overlay, and the parties’ conduct before the dispute escalates. 

How Do Courts and Tribunals Assess a Commercial Lease Dispute in Victoria? 

Courts and tribunals assess a commercial lease dispute in Victoria by asking four practical questions: what does the lease say, does the Retail Leases Act 2003 (Vic) apply, has the required process been followed, and what remedy is justified by the evidence? The answer will differ depending on whether the dispute concerns a market rent review, a make-good clause, an outgoings dispute, repudiation, termination or relief against forfeiture. 

What does the lease actually require? 

The lease remains the starting point. Decision-makers will examine the rent review clause, repair and make-good obligations, outgoings provisions, default notice process and termination rights. A party’s commercial position will not usually override clear drafting. However, lease wording is read in context, including the premises, the term, the permitted use, the parties’ course of conduct and any statutory requirements that apply. 

For a high-value tenancy, small drafting differences can have substantial consequences. A make-good clause requiring reinstatement to a specific condition is different from one requiring repair to a reasonable standard. An outgoings clause that clearly identifies recoverable items is stronger than one relying on broad or uncertain language. 

Has the statutory process been followed? 

Where the Retail Leases Act 2003 applies, the statutory overlay matters. A market rent review must comply with the Act, including the framework for assessing current market rent. An outgoings dispute may turn on whether the landlord has properly disclosed, estimated, audited or substantiated the amounts claimed. 

Termination also requires care. Under s 146 of the Property Law Act 1958 (Vic), a landlord seeking to enforce a right of re-entry or forfeiture for certain breaches must comply with the notice requirements before the right becomes enforceable. If the notice is defective, premature, or unsupported by the lease, the termination strategy may be vulnerable. 

What evidence will matter most? 

The strongest leasing disputes are evidence-led. In rent review matters, relevant evidence may include comparable leases, incentives, permitted use, location, trading conditions and valuation material. In make-good disputes, the evidence often includes entry condition reports, photographs, schedules of condition, contractor scopes, expert reports and correspondence during the term. 

For outgoings, invoices, budgets, audit material, management statements, and disclosure documents are central. For repudiation or termination, the key evidence is usually the sequence of breach notices, arrears records, correspondence, payment conduct and whether the alleged breach was capable of remedy. 

When will relief against forfeiture be considered? 

Relief against forfeiture is discretionary. A court will consider the seriousness of the breach, whether it has been remedied, the tenant’s conduct, prejudice to the landlord and whether relief would produce a commercially fair result. The High Court decisions in Shevill v Builders Licensing Board (1982) 149 CLR 620 and Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 remain important when assessing forfeiture, damages and repudiation in leasing disputes. 

The practical issue is not only who is technically right. It is whether the lease, statute, evidence, and remedy align. 

What Are the Most Common Commercial Lease Disputes in Victoria? 

The most common commercial lease disputes in Victoria arise when the commercial bargain changes in value, cost or risk after the lease has been signed. For landlords and tenants, the dispute usually becomes serious when it affects cash flow, business continuity, asset value or exit strategy. 

A market rent review often becomes contentious at renewal or during an option term. A landlord may seek an increase based on stronger comparable leasing evidence, while a tenant may point to incentives, vacancy, fit-out limitations or reduced trading conditions. Where the Retail Leases Act 2003 applies, the review cannot be approached as a simple negotiation. The statutory process and valuation assumptions matter, particularly where current market rent is to be determined independently. 

A make-good clause commonly becomes an issue when a tenant is preparing to vacate, and the landlord requires reinstatement, repair or removal works. Disputes arise where the lease does not clearly identify the required condition, where fit-out works were approved during the term, or where the landlord seeks betterment rather than restoration. For higher-value premises, the cost difference between reasonable repair and full reinstatement can be significant, end-of-lease obligations or exiting a commercial lease. 

An outgoings dispute often starts with an unexpected reconciliation, a large adjustment, or insufficient supporting material. Tenants may question whether expenses are recoverable, properly apportioned, or adequately disclosed. Landlords may need to justify management fees, statutory charges, repairs, insurance, maintenance contracts and other building costs by reference to the lease and, where applicable, the Retail Leases Act 2003. 

Termination is rarely just an administrative step. A landlord considering re-entry must assess whether the breach, notice and timing support the proposed action. A tenant facing termination may need to consider whether the alleged breach is valid, whether it can be remedied, whether repudiation is genuinely made out, and whether relief against forfeiture may be available. 

In practice, the stronger position is usually held by the party that has preserved documents, followed the lease process, complied with statutory requirements and assessed the commercial consequences before escalating the dispute. 

What Should Parties Consider Before Pursuing a Commercial Lease Dispute in Victoria? 

Before pursuing or defending a commercial lease dispute in Victoria, the first strategic question is not whether the other party has acted unreasonably. It is whether the lease, statute, evidence and commercial objective support the step being taken. 

For landlords, this means testing the enforceability of the relevant clause before issuing a demand, default notice or termination notice. A claim under a make-good clause should be supported by the lease, condition evidence and a defensible scope of works. An outgoings dispute should be met with clear records, proper apportionment and disclosure material. A proposed termination should be assessed carefully against the lease and, where relevant, s 146 of the Property Law Act 1958 (Vic), because a defective process can undermine an otherwise legitimate position. 

For tenants, early assessment is equally important. A tenant disputing a market rent review, outgoings claim or termination notice should preserve correspondence, payment records, disclosure documents, inspection reports, photographs and valuation material. Where repudiation is alleged, the sequence of conduct matters. Where forfeiture is threatened or has occurred, timing may be critical to any application for relief against forfeiture. 

The commercial strategy should also be clear. Some disputes require urgent intervention to preserve possession or prevent re-entry. Others are better resolved through negotiation, expert determination, mediation, or VCAT, particularly where the relationship or premises remain commercially valuable. The strongest position is usually built before formal escalation, by identifying the legal basis, the evidence gap, the commercial risk, and the preferred outcome. 

Frequently Asked Questions 

How Should You Respond to a commercial lease dispute in Victoria? 

A commercial lease dispute in Victoria should be assessed early, before correspondence, notices or enforcement steps narrow the available options. Rent reviews, make-good claims, outgoings disputes and termination issues are often resolved by the same disciplined process: identify the lease right, test the statutory requirements, secure the evidence and decide whether negotiation, expert determination, VCAT or court proceedings best serves the commercial objective. 

For landlords, tenants, directors and property investors, the value of early advice is strategic as well as legal. Pentana Stanton Lawyers advises on commercial leasing disputes, retail lease disputes and related commercial litigation. To discuss your position, visit our commercial law service page or book a confidential consultation. 

This article is general information only and not legal advice. For advice specific to your circumstances, please contact our team.