Repudiation of a lease means a breach so serious that a party is entitled to treat the agreement as terminated. The Victorian Supreme Court has recently commented on the principle of repudiation in a case concerning a dispute over a poorly performing air conditioning unit in a fitness centre (Red Pepper Property Group Pty Ltd v S 3 South Melb Pty Ltd [2019] VSC 41).
The lease made the tenant responsible for maintenance of the unit with the landlord responsible for capital repairs. The unit performed poorly and the tenant began losing customers. The tenant abandoned the lease and the landlord, in attempting to enforce their rights under the lease, was held to have repudiated the lease by the Victorian Civil and Administrative Tribunal.
However, the landlord was successful on appeal. The Supreme Court held that the Tribunal had incorrectly construed the landlord’s obligations with regard to the requirement to install a unit to service the property. The obligation to install air conditioning to service the premises was not a continuing obligation and the landlord’s capital repair obligation was not an essential term of the lease. The Tribunal had also incorrectly applied the doctrine of repudiation. A contract cannot be terminated by a party unwilling to perform its own obligations such as the tenant not entering a maintenance contract.
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