Australia: Was the rent abatement for lack of air conditioning the end of the matter?

Last Updated: 19 November 2018
Article by Matthew Rafferty

The air conditioning system in a leased premises failed as the lease was being entered into. The landlord and tenant agreed on an abatement that would apply until the air conditioning system was fixed, and the lease continued on that basis. The tenant leased a number of adjoining premises and intended to sublease them all together for use as a medical centre. The lack of air conditioning in this particular small premises meant that it was unable to be used as part of the medical centre. The tenant subleased it to accountants instead, but obtained significantly less rent. Later, the tenant claimed additional compensation for loss resulting from the failure of the air conditioning system.

Could the tenant claim additional loss, even though they appeared to have accepted an abatement as compensation for the lack of air conditioning?

Meadsview Pty Ltd v Fenton [2018] VCAT 1249

The landlord leased a small strata premises to a medical centre proprietor for a term of three years commencing on 4 March 2013, with two options to renew.

The premises used a split system air conditioning system, with the external compressor located in the car park at the rear of the building. Before the lease was executed the compressor broke down and required replacement. A dispute arose between the landlord and the Owners' Corporation about the location of the external compressor.

The dispute between the landlord and the Owners' Corporation was not resolved until after the end of the initial lease, and air conditioning was restored to the premises on 14 September 2016. The tenant exercised the option on 1 Dec 2015, even though the air conditioning system was still not working.

When the initial lease was entered into, the premises did not have an operating air conditioning system. Both parties knew about the lack of air conditioning and the issues with the Owners' Corporation, however the landlord had indicated that they were hopeful of the issue being resolved.

The dispute between the landlord and the Owners' Corporation did not resolve, it escalated. Shortly after the lease was executed the landlord notified the tenant that the dispute about the location of the compressor would need to be resolved by Court proceedings, and that the landlord proposed three possible options for the tenant in relation to the lease:

  1. Opt out of the lease and have all funds returned;
  2. Continue the lease without air conditioning, at an agreed rental amount; or
  3. Reduce the rental on the lease until the matter is rectified.

The tenant selected the third option. The landlord proposed a $20 per week reduction in rent; the tenant said they would accept a $40 per week reduction; the landlord agreed. This was approximately 10% of the rent.

The premises were not able to be used as part of the medical centre because of the lack of air conditioning. The tenant's business was to sublease rooms to medical practitioners. The sublease rents were determined by a percentage of the fees charged by those practitioners.

Instead of using the premises as part of the medical centre, the tenant subleased the premises to accountants for use as an office. The money paid by these accountants for the subleases exceeded the amount due under the headlease. The accountants installed a portable air conditioner.

Even though the accountants paid the tenant more rent than the tenant needed to pay the landlord, the tenant claimed that if the air conditioning was working they could have used the premises as part of the medical centre and sublet to medical practitioners and much higher rates.

The tenant's claim was based on the following:

  • The landlord leased to Meadsview for $21,000 per annum, reduced by approximately $2,000 until the air conditioning system was fixed;
  • Meadsview intended to lease to Medi-Admin (a related corporation that operated the medical centre) for approximately $110,000 per annum;
  • Instead, subleases were granted to accountants for approximately $23,000 per annum;
  • The tenant claims the difference between the rent they could have achieved from a sublease to the medical centre and what they actually received (approximately $87,000 per annum for 3 years).

The tenant could not be successful in this case due to a number of reasons:

  • Unclear documentation
  • No consent to sublease
  • Permitted use was "office premises"

However, their main argument was that the abatement was not intended to compensate the tenant for the lack of air conditioning for the entire lease term.

This case was complicated by unclear documentation.

The lease was to Meadsview Pty Ltd. There was a sublease of the combined premises from Medi-Admin to Melbourne Pathology. There was no document between Meadsview and Medi-Admin. The tenant claimed that they were related parties and that using Medi-Admin on the sublease was just a mistake, it should have been Meadsview. The Tribunal did not accept this.

The result of this unclear documentation was that the loss was not suffered by Meadsview, but by Medi-Admin. It was Medi-Admin that was expecting to sublease the premises to medical practitioners, and it was Medi-Admin who has not been able to do this. However, Medi-Admin has no contractual relationship with the landlord, and so cannot make a claim based on the lease.

The landlords did not consent to the subleases.

It was suggested that if they knew the premises was to be sublet at higher rent, they would have refused consent to the sublease and sought to renegotiate the rent.

In addition, the permitted use under the headlease was for office premises – the tenant had no right to sublease the premises for use as a medical centre.

Those three issues meant that the tenant could not be successful in their claim. However, the tenant's main claim was also rejected by the Tribunal.

The tenant's main claim

The tenant claimed that the agreement for the $40 abatement was only a "commercial accommodation for a temporary nuisance". The landlord was obliged by the lease to provide air conditioning. Even though the tenant had agreed to proceed without air conditioning, the tenant considered the landlord was obliged to rectify the issue within a reasonable time. After a reasonable time, the lack of air conditioning became a breach of the lease, and the tenant should be entitled to damages.

The tenant argued that the lack of air conditioning means the premises were unable to be used as intended, and the abatement was only 10% – they argued that the tenant would not have bargained away the use of the premises for a mere 10% reduction. They considered there was an implication that the landlord would have the air conditioning system operating after a reasonable time. Notwithstanding the agreement of an abatement, the tenant considered that after a reasonable time, the landlord became in breach of the lease by not providing air conditioning and damages should be payable as a result of that breach.

The tribunal rejected the tenant's argument. The words in the abatement were clear – it was for a lack of air conditioning until the matter was rectified. The tenant's claim would require the Tribunal to imply additional terms into the abatement agreement. The Tribunal considered both parties to be experienced business people and capable of negotiating for their best interests.

The tenant knew that the landlord could not provide air conditioning until its dispute with the Owner's Corporation was resolved. The Tribunal also noted that the abatement agreement did include a timeframe: "... until the matter is rectified". Implying a limit of a reasonable time would be inconsistent with this agreement. The Tribunal considered the words surrounding the grant of the abatement reflected the parties intentions, and could not find a reason to insert additional implied terms.

One final issue for the landlord: misrepresentation – while the landlord and tenant both knew that the air conditioning was not working at the time the lease was entered into, the tenant claimed the landlord misrepresented the possibility that the issues would be resolved with the Owners' Corporation. The Tribunal found no problem with this in this case because the tenants obtained more rent from subleasing to the accountants than they owed under the lease, and so had suffered no loss. The tenant did not provide any evidence of any lost opportunity.

While this case contains a number of complicating factors, the Tribunal found that the agreement by the parties for an abatement until the air conditioning issue is resolved was clear and binding. Usually, lawyers would draft such an agreement with releases in favour of the landlord making it clear that the lessee may not claim any additional compensation for the lack of air conditioning. Although the landlord has been successful in this case (at this stage) we would still recommend that agreements to provide abatement for disturbance be carefully drafted, including precise descriptions of the disturbance and its duration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions