Retail Lease Act update – Can a Tenant withhold paying rent?

A recent VCAT decision of AMTB Pty Ltd v Chan (Building and Property) [2025] VCAT 236 (‘AMTB’), highlights that even where there may be a “no deduction” or “no set off” clause in a lease a tenant can rely on the Retail Leases Act (RLA) to stop paying rent and set off damages from the rent payable where the landlord fails to maintain its plant and equipment or meet its other obligations.

In this case the landlord failed to maintain the lift in the premises affecting the tenant’s business and the tenant stopped paying rent. The landlord then sought to terminate the lease.

The tenant brought an injunction in VCAT to stop the landlord terminating the lease and sough to set off their damages from the unpaid rent.

VCAT ruled in favour of the tenant, granting injunctive relief preventing the landlord from evicting them and ordered the landlord’s rent arrears to be offset against the damages owed to the tenant due to the
landlord’s breach of section 52 of the RLA.

This is a departure from the traditional understanding of a landlord’s ability to rely on ‘no deduction’ or ‘no set-off’ clauses to prevent a tenant from offsetting unpaid rent with a counterclaim for damages from the landlord’s conduct.

In this case even though the lease specifically stated … “The said rent is to be paid clear of all deductions or abatements of all or any kind whatsoever and not otherwise except with the consent in writing of the Lessor…” the tenant successfully relied on section 94 of the RLA which states that any lease provision inconsistent with the RLA, is void to the extent that it seeks to override the statutory protections.

The tenant also successfully argued that the landlord’s attempt to enforce the ‘no deductions’ clause conflicted with section 52, which imposes an obligation on landlords to maintain plant and equipment.

VCAT stated that by allowing the landlord to rely on the ‘no deductions’ clause it would allow the landlord to contract out of an implied covenant under the RLA, contrary to section 94 of the RLA.

This decision does not apply to non-retail leases; however, landlords need to ensure they comply with their maintenance obligations under section 52, and be aware they may not be able to rely on the ‘no deduction’ or ‘no set-off’ clause if they fail to act.

We traditionally would advise a tenant not to withhold rent for a landlord failing to conduct maintenance or repairs but this decision doers give the tenant greater comfort and leverage if that situation arises.

It would still be wise to carefully consider the circumstances in each case and seek proper legal advice
before doing so.

The RLA is complex legislation with many VCAT decisions impacting on the relationship between landlords
and tenants.

Sanicki Lawyers act for landlords and tenants and can assist and advise as to rights and obligations under
the Act.

For advice on Retail and commercial leasing contact our Leasing Group by emailing robert@sanickilawyers.com.au or call our office on 03 9510 9888.