Guide · Commercial leases

Behind on commercial rent, and the landlord is talking about the locks

A commercial lease in arrears does not work like a home. In New South Wales the statutory notice regime that normally gives a tenant a chance to remedy a breach expressly does not cover unpaid rent, and the Conveyancing Act implies a right to re-enter once rent is a month overdue unless the lease says otherwise. So the amount of warning you get is set by your own lease. Paying or agreeing terms before re-entry is what stops it; after re-entry you are asking a tribunal for relief against forfeiture.

What the lease lets the landlord do, and when

Three documents decide this, and only one of them is the legislation. The first is the lease: almost every commercial lease carries its own default clause, and that clause usually sets out what notice the landlord must give and how long you have to fix the arrears. The second is the property statute in the state where the premises are. The third is whether your lease counts as a retail lease under that state's retail leasing Act, which is a legal test rather than a description of the shopfront.

Here is the part nobody expects. In New South Wales, section 129 of the Conveyancing Act 1919 is the provision that stops a landlord forfeiting a lease over a breach until they have served a notice specifying it and given a reasonable time to remedy it. Section 129(8) then says the section does not affect the law on re-entry or forfeiture for non-payment of rent. The protection that everybody has heard of is the one that does not apply to the arrears. The same Act implies into a lease a right to re-enter once rent has been in arrear for a month, subject to anything the lease says instead — and the NSW Small Business Commissioner's own retail tenancy guide says it without varnish: the lease may allow a tenant to be locked out without warning.

Which is why the first thing to do is not to search for your rights. It is to find the default clause in your own lease and count the days it actually gives you.

A coastal town main street with small shops and cafés along a covered footpath

You are not the first one this week

Most tenants in arrears ring their bank before they ring anyone else, and the bank says no. Not because the loan would not be repaid — because the last financials look wrong, or a lodgement is late, or there is a mark on the file, or the request is for rent and a bank would rather fund an asset. Those are the reasons a bank exists to care about. None of them says anything about whether there is equity in a property.

That gap is where HomeSec has spent since 2004. We are not here to judge how the arrears got there, and we have seen enough of them that they do not surprise us. What we look at is whether there is enough unused equity in Australian real property and whether the purpose is a genuine business one — from $20,000 to $5,000,000 against that equity. No financial statements, no credit score threshold, no interrogation. From a clean, complete scenario funds can be available in as little as 24 hours, and interest can be capitalised for up to six months, so there is nothing to pay while the business gets back on its feet.

Back to the lease, because the landlord's clock does not care where the money comes from.

What a retail lease adds, and who to ring in each state

If the lease is a retail lease, there is a dispute path built for exactly this, and it is cheap. Every state runs one through its small business commissioner or equivalent office, and the service is free or close to it.

1
New South Wales.The NSW Small Business Commissioner mediates retail tenancy disputes. Section 68 of the Retail Leases Act 1994 puts mediation before Tribunal proceedings — but section 68(3) carves out proceedings for an order in the nature of an injunction, so urgent relief is not held up by it. NCAT can grant relief against forfeiture under section 72(1)(d) of the same Act.
2
Victoria.The Victorian Small Business Commission mediates, and VCAT generally wants a certificate under section 87 of the Retail Leases Act 2003 attached to a retail claim. Its own guidance lists the exceptions: a claim only for outstanding rent, a claim for an injunction, a commercial rather than retail tenancy, or enforcing a settlement already reached at the Commission.
3
Queensland.The Queensland Small Business Commissioner runs leasing dispute mediation, which is the step before the Tribunal for a retail shop lease.
4
South Australia.The SA Small Business Commission offers a no-cost negotiation service and low-cost mediation. Its own guidance for tenants in arrears names both a lock-out and a warrant of distraint — a reminder that the remedies available to a landlord are not the same in every state.
5
Western Australia.The Small Business Development Corporation handles leasing problems, including disputes under the state's commercial tenancy legislation.

If the lease is not a retail lease, none of those Acts applies to it and the dispute belongs in a court. The commissioner's office will usually still talk to you, and a landlord who knows a mediator is involved often becomes easier to deal with.

The first 48 hours

1
Find the default clause and write the date on the front of the lease.How many days of notice, whether notice is required at all, and what has to be paid to remedy it — arrears alone, or arrears plus costs and interest. That date is the one that matters, not the one you would like.
2
Put a written proposal to the landlord before that date.Dated, specific, and realistic: what you can pay now, what you can pay weekly, and when the arrears clear. A landlord with something to accept behaves differently from one who has heard nothing.
3
Ring your state's small business commissioner.Free or low-cost mediation, and for a retail lease it is the step that has to happen anyway. It also creates a record that you tried.
4
If you have already been locked out, get a lawyer today.Relief against forfeiture is discretionary and it gets harder with every week the premises sit empty. Do not force your way back in, and do not remove anything: both make the argument worse.
5
Work out what the premises are actually worth to the business.Fit-out you cannot move, a licence tied to the address, foot traffic, a phone number customers have. If those are most of the business's value, the arrears are worth clearing. If they are not, read the next section before you borrow anything.

When clearing the arrears is the right answer, and when it is not

Borrowing to clear rent arrears makes sense when the premises are the business. A fit-out that cost more than a year's rent, a licence attached to the address, a location customers come to — lose the lease and you lose all of it, and the arrears are cheap by comparison. It makes sense when the arrears came out of a bad quarter that has passed, and when there is a real exit: a property to sell, a refinance waiting on the arrears being gone, a contract that settles.

It does not make sense when the rent is more than the site can carry at any realistic turnover. If the arrears have built steadily for a year, the problem is not a cash flow gap, it is the rent, and funding it buys a few months and a larger debt. The conversation to have then is about a negotiated surrender or an assignment — and that is a conversation for a lawyer and a mediator, not a lender. And if nobody connected to the business owns real property with equity in it, borrowing against property is not available to you at all; the mediation service and a lawyer are the whole of the answer, and they are free or nearly so.

This page explains what a lease and the state legislation permit. It is general information, not legal advice: what applies to your lease is a question for a lawyer, and your state's small business commissioner is the authority on the dispute process. If the business itself is no longer viable, a registered liquidator is the person to ask.

If the number was not the whole problem

Rent arrears are one of the few problems where a week makes the difference between a business that keeps its premises and one that does not. The money is often already there, in a property, just not in a form a landlord will wait for.

If you are reading this because money is tight, it may be that what you actually need is fast business finance — and HomeSec can lend with very few qualification criteria. All you need is sufficient equity in real estate and a business purpose: no financials, no valuation, no credit score threshold, funded in as little as 24 hours from a clean, complete scenario. Best of all, the first six months can come with no requirement to make any payment.

That's the HomeSec Advantage.

Questions people ask alongside this one

Can a landlord really change the locks without telling me first?

In some states, on some leases, yes — and that is the part people do not expect. In New South Wales the Conveyancing Act's notice regime, which normally gives a tenant the chance to fix a breach before the lease can be forfeited, expressly does not apply to unpaid rent. The Act also implies into a lease a right to re-enter once rent has been in arrear for a month, unless the lease says otherwise. The NSW Small Business Commissioner's own retail tenancy guide puts it plainly: the lease may allow a tenant to be locked out without warning. So the document that decides how much notice you get is your lease, not the legislation.

What is the difference between a retail lease and a commercial lease here?

It decides which protections you have, and it is a question of state law rather than of what the premises look like. A lease that falls inside a state's retail leasing Act picks up a dispute-resolution path through that state's small business commissioner and, in New South Wales, the Tribunal's power to grant relief against forfeiture under section 72(1)(d) of the Retail Leases Act 1994. A plain commercial or industrial lease does not sit inside that Act, and the dispute goes to a court instead. Worth establishing early, because it changes who you ring.

Do I have to go to mediation before I can do anything?

For a retail lease, mediation through the state's small business commissioner is generally the step before a tribunal — but not before urgent relief. Section 68(3) of the Retail Leases Act 1994 (NSW) says the mediation requirement does not apply to proceedings for an order in the nature of an injunction. Victoria is similar: VCAT requires a section 87 certificate from the Victorian Small Business Commission for most retail claims, and not where an injunction is sought. If you have been locked out, that carve-out is the one that matters.

I have already been locked out. Is the lease over?

Not necessarily, and this is the moment to get a lawyer rather than a locksmith. A tenant can ask for relief against forfeiture — an order that puts the lease back — and in New South Wales the Tribunal can grant it in a retail lease dispute. It is discretionary, it is much easier to argue when the arrears can be paid, and it gets harder the longer the premises sit empty or the landlord re-lets them. Do not force entry: it damages the argument you are about to make.

Is it better to tell the landlord I cannot pay, or to say nothing?

Tell them, in writing, before the date in the lease. A landlord who has a dated proposal in front of them has something to accept, defer or counter, and most would rather have rent late than an empty shop and a re-letting cost. Silence is read as abandonment, and it is the thing that turns a payment problem into a possession problem. It also matters later: if you end up asking a tribunal for relief, a written attempt to fix it is part of the story.

Can HomeSec fund rent arrears?

Rent arrears are a business purpose, so yes, where there is enough unused equity in Australian real property to support it — lending runs from $20,000 to $5,000,000 against that equity. What the credit team does not ask for is financial statements, up-to-date lodgements or a credit score, because none of those answer the only question that matters at this speed, which is whether the equity covers the loan. Every application is assessed and nothing is approved in advance. If the business is leasehold and nobody connected to it owns property, this is not the answer, and we will say so on the first call rather than the fifth.

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See if you qualify in sixty seconds

Three short questions, no credit check to apply and no financial statements. A Lending Manager reads it and calls you back with a real answer — not a call centre, not an algorithm.

That's the HomeSec Advantage.

See if you qualify Call 1300 93 83 87Mon–Fri, 8:30am – 5:30pm Melbourne time

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Reviewed by Paul Stone, Joint Chief Executive