Australia: E-Alert: Risk of lease terms being unfair and unenforceable

Last Updated: 1 April 2019
Article by Adam Raleigh

The Federal Court’s declaration in the recent case of Australian Competition and Consumer Commission (ACCC) v Servcorp Limited [2018] FCA 1044 that certain terms in office rental contracts were unfair and void is a warning for all landlords whose leases (or other forms of rental agreements) fall under the consumer unfair contract terms regime imposed by the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010  (Cth).

Servcorp Limited and two of its subsidiaries (Servcorp) provided serviced office spaces and virtual office services to customers.  The ACCC commenced formal action against Servcorp claiming that certain terms in Servcorp’s standard contract were unfair and void under the ACL.

Unfair and Void Terms

The Federal Court declared (by consent with the parties) that various terms in Servcorp’s contract were unfair and void including the following:

  1. Termination:  The right of Servcorp to terminate the services contract at any time by giving one month’s notice without cause and without a requirement to pay compensation, or providing a reciprocal right.
  2. Cost of Services:  The requirement to pay charges at a rate stipulated by Servcorp from time to time which included the right to vary the price without any requirement to act fairly or reasonably.
  3. Forfeiture of Security Deposit: The forfeiture of a security deposit if a refund had not been requested within a specified time rather than imposing a positive obligation to return the security deposit.
  4. Automatic Renewal: The automatic continuation of the services contract for the duration of the original term if either party did not give notice to terminate at a new service fee as determined by Servcorp.
  5. Indemnity and Limitation of Liability: The limitation that Servcorp had no liability in relation to theft, loss, or damage unless as a result of gross negligence or willful misconduct.
  6. Notice: A termination notice was only deemed to have been served on Servcorp if a confirmation of termination letter was received from Servcorp.

Consequences for Servcorp

The Court ordered that Servcorp:

  • establish and implement a program which had the purpose of ensuring compliance with ACL and required Servcorp to procure any relevant employees and agents, participate in and administer the compliance program; and
  • pay the ACCC’s costs of $150,000.00.

When does ACL Apply

The ACL’s unfair contract terms regime applies if a contract was entered into on, or after, 12 November 2016 and the following requirements are satisfied:

  • the contract is a “small business contract” which is a contract:
    • for the supply of goods or services;
    • where at least one party is a business that employs less than 20 people; and
    • where the upfront price payable under the contract does not exceed $300,000, or does not exceed $1 million if the duration is more than 12 months);
  • the contract is a “standard form contract” which is presumed to be the case, unless proven otherwise, taking into account factors such as the following:
    • whether there is an unequal bargaining power;
    • whether there is any reasonable opportunity of negotiation;
    • whether the terms of the contract are tailored to the characteristics of one party or to the particular transaction; and
    • the contract includes “unfair terms” which:
      • will cause a significant imbalance of rights and obligations;
      • are not reasonably necessary to protect the legitimate interests of the party which will be advantaged by the term; and
      • will cause detriment to a party if relied upon.

Consequences for Landlords

Variations of the above unfair terms are often included in leases and property rental agreements.  Additionally, it is common to see in leases other similar cases of potentially unfair terms.

Recently, the Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 (Cth) (which was passed on 18 October 2018) has increased the power of the ACCC (and the Australian Securities and Investments Commission) to perform more extensive investigations to determine whether a contract term is unfair.  The ACCC is proactively investigating further opportunities of exercising its powers and applying the unfair contract terms regime.

As a result, legal advice should be obtained in the preparation and negotiation of leases and rental agreements which may be considered to be “standard form consumer contracts” and “small business contracts” to ensure that terms are compliant and enforceable.

It is also a timely warning to review relevant precedent leases for potentially unfair terms to avoid an investigation by the ACCC and to avoid such terms being unenforceable.

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.

Adam Raleigh
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
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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