Guide to Managing Industrial Strata

Managing an industrial strata property in NSW is more complex than most landlords anticipate. Unlike residential property, there is no single piece of legislation that governs the relationship between landlord and tenant - commercial leases are largely contractual, meaning your rights and obligations depend heavily on what's written in the lease itself. Getting it right from the start, and staying on top of things throughout the tenancy, makes the difference between a smooth investment and a costly, stressful experience.

This guide is written for landlords of industrial strata property in metropolitan Sydney - whether you've just settled on a new off-the-plan unit, purchased an existing tenanted property, or are preparing to lease a property for the first time. It covers the full lifecycle of a tenancy from handover through to vacation, and everything in between.

Remember - this is not legal advice. Always consult your solicitor and accountant before making decisions related to your investment property.

Risks: Underestimating the complexity of commercial property management and assuming it works the same way as residential.

Tips: Read the lease in full before doing anything else. If you don't understand something in it, ask your solicitor - not just your property manager.

Managing the property yourself versus appointing a professional property manager is a core decision that affects your workload, costs, and risk profile. Self-management means you handle invoicing, rent collection, inspections, maintenance coordination, record keeping, lease enforcement, and dispute resolution. It saves you the management fee (typically 5–7% of gross annual rent) but requires significant time, knowledge of the lease, and a systematic approach to compliance and documentation. A professional property manager handles these responsibilities on your behalf, reducing your day-to-day burden but at a cost. The key question: do you have the time, knowledge, and discipline to manage it yourself, or is the fee worth the peace of mind and professional oversight?

Risks: Self-management: missing deadlines, poor record keeping, inconsistent lease enforcement, and exposure to disputes. Appointing a manager: ongoing costs, and potential misalignment between your expectations and their actions.

Tips: If self-managing, invest in a good system for tracking rent, maintenance requests, and correspondence. If appointing a manager, clearly document your expectations in writing and review their performance regularly.

Commercial property managers and residential property managers operate in fundamentally different environments. Residential managers are trained in tenancy law, bond lodgement, notice requirements, and residential-specific regulations. Commercial property managers work with business tenants, complex lease structures, net vs gross outgoings, lease enforcement, and commercial dispute resolution. They understand industrial zoning, strata schemes, capital works, and the nuances of commercial leases which can span dozens of pages with bespoke terms.

If you appoint a property manager, ensure they have commercial experience - ideally industrial strata experience. A residential property manager may not understand your obligations under a net lease, how to properly charge outgoings, or how to enforce lease clauses. This mismatch can lead to disputes, missed opportunities to recover costs, and poor tenant relationships.

Risks: Appointing a residential property manager to a commercial tenancy and having them mishandle lease enforcement, outgoings, or disputes. Poor communication between you and the manager about lease-specific obligations.

Tips: Ask prospective property managers about their commercial and industrial strata experience upfront. Request references from other industrial property owners. Clarify in writing what you expect them to manage and how they'll handle disputes.

Your lease is the foundation of your relationship with the tenant. It defines rent, outgoings, maintenance responsibilities, inspection rights, dispute resolution, and termination conditions. Before signing a tenant in, read the entire lease carefully - don't assume you understand it or that it matches what the agent told you. Many landlords discover mid-tenancy that they've misunderstood a critical clause, or that the lease doesn't protect them the way they expected.

Key sections to focus on: rent amount and review mechanisms; which party pays for what (maintenance, insurance, utilities, strata levies); notice periods for inspections and termination; breach remedies; outgoings recovery (if any); and dispute resolution clauses. If anything is ambiguous, get your solicitor to clarify it before the tenant moves in - changing terms mid-lease is difficult and often requires mutual agreement.

Risks: Misunderstanding lease terms and discovering mid-tenancy that you can't recover costs you thought were covered. Failing to identify problematic clauses before signing the tenant in.

Tips: Have your solicitor review the lease before you sign a tenant in, even if it's a standard form. Ask the property manager (if you have one) to walk you through the key obligations. Keep a written summary of who is responsible for what.

A net lease and a gross lease represent fundamentally different arrangements for how costs are recovered from the tenant.

Gross lease: The tenant pays a fixed rent amount, and the landlord covers all outgoings - strata levies, building insurance, council rates, water, utilities, maintenance, and repairs. The landlord bears the cost risk if outgoings rise. Gross leases are simpler to administer but offer less cost recovery and more financial uncertainty for the landlord.

Net lease: The tenant pays base rent plus a share of outgoings - strata levies, insurance, rates, and sometimes maintenance. Outgoings can be recovered in two ways: either via an annual budget estimate with year-end reconciliation, or on a pass-through basis where invoices are charged to the tenant as they are received. Net leases shift cost risk to the tenant but require careful tracking to ensure accurate recovery and avoid disputes.

Most industrial strata leases in NSW are net leases, where the tenant reimburses you for their share of common property costs. Understanding which model your lease uses - and which recovery method applies - is critical, as it affects your cash flow, your administrative burden, and your exposure to cost increases.

Risks: Confusing net and gross lease terms and discovering you can't recover costs you assumed were covered. Gross leases leaving you exposed to rising outgoings. Net leases requiring rigorous tracking to avoid disputes.

Tips: Confirm in writing whether your lease is net or gross, and which recovery method applies. If net, understand the recovery mechanism and who calculates outgoings. Budget conservatively for outgoings increases year-on-year.

Outgoings are the shared costs of running the building - strata levies, building insurance, council rates, water, and common area maintenance. In a net lease, the tenant reimburses you for their share. Understanding how to budget, track, and recover outgoings accurately is critical to avoiding disputes.

Budgeting outgoings: At the start of each year, estimate the year's outgoings based on the previous year's actual costs and anticipated changes. Divide by 12 (or your invoice frequency) and invoice the tenant regularly. At year-end, reconcile actual costs against the budget. If you've over-recovered, credit the tenant; if under-recovered, invoice the difference. This method gives predictable monthly invoices but requires disciplined year-end reconciliation.

Charging on an actual basis: Invoice the tenant as invoices arrive from the strata manager or service providers. This is simpler administratively but creates unpredictable invoices for the tenant and can lead to disputes if large bills arrive unexpectedly.

Keep detailed records of all outgoings invoices, payments, and tenant reimbursements. If the lease specifies a particular recovery method, follow it precisely - deviating can expose you to disputes.

Risks: Poor budgeting leading to significant year-end adjustments. Charging outgoings inconsistently or without proper documentation. Tenant disputing the outgoings amount because records are unclear.

Tips: Use a spreadsheet or accounting software to track outgoings monthly. Send the tenant a detailed outgoings statement annually showing what was charged and why. If using a property manager, ensure they provide you with regular outgoings reports.

Capital works and maintenance are treated differently under most leases, and the distinction affects who pays and how.

Maintenance refers to routine repairs and upkeep - fixing a tap, repainting walls, replacing worn equipment. Maintenance keeps the property in its current condition. Generally, the tenant is responsible for maintenance within their unit, including routine upkeep of air conditioning systems (split systems, built-in systems), hot water systems, roller door motors, and other equipment installed for their use. The landlord (or strata scheme) covers common property maintenance. This distinction should be clear in the lease.

This is why the condition report at handover is critical - you should document the working condition of all equipment when the tenant takes possession. If you're self-managing, request maintenance records from the tenant periodically to ensure they're servicing equipment to the standard required under the lease, which is generally to manufacturer specifications. Poor maintenance by the tenant can lead to premature failure and disputes about who bears the replacement cost.

Roof and structural repairs require particular attention. In strata schemes, the roof is typically common property managed by the strata scheme, so repairs fall to the scheme and are recovered via levies. However, if the tenant caused damage through negligence or unauthorised modifications, they may be liable - but be aware that as the owner, you will ultimately be held responsible by the strata scheme regardless of what the tenant did. This can be a costly nightmare, particularly if unauthorised modifications are never discovered until after the tenant vacates and the bond has already been released. Inspections during the tenancy are not the norm in commercial leases and will depend on what the lease permits - however if your lease does allow for them, try to time them to coincide with the building's routine fire safety inspection to minimise disruption to the tenant. For freestanding warehouses or single-occupancy industrial buildings, the lease should clearly define who is responsible for the roof and structural elements - this is critical as these costs can be substantial and may fall to the landlord as structural obligations.

Capital works are major upgrades or replacements - new roof systems, structural repairs, major HVAC systems, replacing electrical infrastructure. Capital works improve or extend the life of the building and typically fall to the landlord or strata scheme. However, some leases allocate capital costs to tenants if the work directly benefits their unit. The lease should spell this out clearly. Additionally, strata schemes can impose special levies for capital works - understand your exposure before signing the tenant in.

Risks: Confusion over who pays for roof or structural repairs leading to costly disputes. Strata special levies arriving unexpectedly with no mechanism to pass them to the tenant.

Tips: Review the lease carefully and ask your solicitor to clarify capital works and structural repair responsibility. For freestanding properties, ensure the lease is explicit about roof and structural obligations. Monitor strata communications for planned capital works so you can budget ahead.

Before handing the property over to the tenant, there are several things you should have in order. Working through this checklist before handover day avoids last-minute scrambling and protects you if disputes arise later.

• Lease fully executed by both parties
• Bond and first month's rent received and receipted
• Condition report completed and signed
• All keys, access devices, remotes, and security codes documented and ready for handover
• If you were previously owner-occupying the property, ensure your own utility accounts have been disconnected prior to handover. It is the tenant's responsibility to arrange their own utility connections before or upon taking possession.
• Confirm strata manager has been notified of the new tenancy
• Compliant public liability insurance certificate of currency received from tenant
• Landlord insurance in place (optional)
• All equipment (AC, roller doors, hot water) confirmed as operational
• Any agreed works or fitout items completed prior to handover

Risks: Handing over without completing the checklist and discovering later that key items were missed - leading to disputes about condition, missing keys, or unresolved maintenance issues.

Tips: Do not hand over keys until bond and first month's rent have cleared. Keep a signed copy of the checklist on file.

The condition report is one of the most important documents in a tenancy. It records the state of the property at the time of handover - walls, floors, ceilings, equipment, fittings, and any existing damage - and forms the basis for comparing the property's condition at the end of the lease. Without a thorough condition report, disputes about bond deductions and make good obligations become very difficult to resolve.

The report should be completed before the tenant takes possession, ideally with photos and video to support written descriptions. Note the working condition of all equipment - AC systems, roller doors, hot water systems, lighting - as well as the general condition of the unit. The tenant must sign the report acknowledging receipt. They should be given a defined period - typically 7 days - to contest any items in writing. After that deadline, the report stands as agreed.

It's important to understand that if the tenant notes certain items on the condition report after taking possession, this does not mean those items need to be fixed. The condition report simply records the state of the property at handover - it is not a defects list or a works order. Unless rectification of a specific item was explicitly agreed to in the lease or in a separate written agreement, the landlord is under no obligation to act on items noted by the tenant.

Risks: An incomplete or unsigned condition report leaving you with no evidence to support bond deductions or make good claims at the end of the lease. Tenants noting items after the fact and later claiming they were pre-existing defects.

Tips: Be thorough and objective - document everything with photos and video. Keep the signed report on file for the entire duration of the tenancy and beyond. If you're using a property manager, confirm they complete the condition report themselves rather than leaving it to the tenant.

The bond is a security deposit held against the tenant's obligations under the lease - typically used to cover unpaid rent, damage beyond fair wear and tear, or failure to meet make good obligations at the end of the tenancy. Unlike residential tenancies, commercial bonds (excluding retail leases, which have different rules) in NSW are not lodged with a government body - they are held by the landlord or their property manager in a trust account. The bond amount is typically equivalent to three months' gross rent, though this is negotiable. Bonds can be provided as a cash bond (paid via EFT into the agent's or landlord's trust account) or as a bank guarantee issued by the tenant's bank.

First month's rent is payable before or at handover - keys should not be released until both the bond and first month's rent have cleared. Confirm payment method with the tenant in advance and ensure funds have cleared - not just been transferred - before handing over.

Keep a clear paper trail for both payments: issue a receipt for the bond and first month's rent, and record them separately in your accounts. The bond must be returned to the tenant at the end of the lease, less any legitimate deductions - so keeping it clearly separated from your operating funds is important.

Risks: Releasing keys before funds have cleared. Mixing bond funds with operating funds and losing track of what's owed to the tenant at the end of the lease.

Tips: Issue receipts immediately upon receiving bond and first month's rent. Hold cash bonds in a dedicated trust account. Document any deductions clearly and in writing at the end of the tenancy.

At handover, provide the tenant with all keys, access cards, remotes, fobs, and security codes required to access the property. Document everything - how many sets were provided, what each item accesses, and who received them. Have the tenant sign a receipt confirming what was handed over. This is critical at the end of the lease when you need to confirm everything has been returned.

If the property is in a strata scheme, the tenant may also need access devices for common areas such as car parks, shared amenities, or building entry points. Coordinate with the strata manager to arrange these before handover day.

If the tenant wants to change locks or add additional security during the tenancy, this should be subject to landlord approval and must be addressed in the lease. Any changes must be reversed at the end of the tenancy, or the tenant must provide the landlord with a full set of new keys - the landlord must never be locked out of their own property.

Risks: Not documenting what was handed over and having disputes at the end of the lease about missing keys or unreturned access devices. Tenant changing locks without landlord knowledge or approval.

Tips: Keep a signed record of all items handed over at the start of the lease. Cross-reference this list at the final inspection. Factor in the cost of replacing locks or access devices if items are not returned into your bond deduction process.

Under most commercial leases, the tenant is required to hold a current public liability insurance policy for a minimum specified amount - typically $20 million for industrial properties. This protects both the tenant and the landlord in the event of injury or property damage occurring within the tenanted premises. Before handing over, obtain a certificate of currency from the tenant confirming the policy is in place, that it covers the correct premises, and that the coverage amount meets the lease requirements.

The certificate of currency should be renewed annually - diarise the expiry date and request an updated certificate before it lapses. A lapsed policy is a breach of the lease and should be treated as such.

Be aware that the tenant's public liability policy covers their activities within the premises. It does not cover the landlord's exposure for common property or structural issues - that is the responsibility of the strata scheme's insurance or your own landlord insurance.

Risks: Tenant operating without valid public liability insurance, exposing you to liability if an incident occurs on the premises. Failing to track policy renewals and allowing coverage to lapse unnoticed.

Tips: Whether receiving the initial certificate at handover or a renewal certificate during the tenancy, always check the following before accepting it: the policy is in the name of the entity that signed the lease; the property address is correctly listed; the owner is noted as an interested party; and the coverage amount meets the minimum specified in the lease. Diarise the expiry date and request renewal certificates proactively - do not wait for the tenant to provide them.

Landlord insurance is optional but worth serious consideration. It provides coverage for risks that fall outside the tenant's public liability policy and the strata scheme's building insurance - including loss of rent, tenant default, malicious damage, and legal costs associated with disputes or evictions. For industrial strata, the strata scheme's building insurance covers the structure and common property, but it does not cover your exposure as an individual landlord.

Policies vary significantly - read the fine print carefully and understand exactly what is and isn't covered. Key things to look for: loss of rent coverage (if the tenant defaults or the property becomes uninhabitable); tenant damage coverage; and legal expense coverage for lease disputes or eviction proceedings.

Tenant contents insurance is a separate matter entirely. The landlord's insurance and the strata scheme's building insurance do not cover the tenant's contents, stock, equipment, or fitout inside the unit. It is strongly recommended that you encourage your tenant to take out their own contents insurance before taking possession. This is particularly important in industrial properties where water leaks - from roofs, pipes, or neighbouring units - are not uncommon. If a tenant's stock or equipment is damaged and they don't have contents insurance, they may attempt to withhold rent or pursue the landlord for compensation, even where the landlord is not at fault. Having the tenant adequately insured avoids these disputes before they start.

Risks: Assuming the strata scheme's building insurance covers your individual exposure as a landlord. Tenant sustaining contents damage and attempting to withhold rent or hold the landlord liable in the absence of their own insurance.

Tips: Shop around and compare policies specifically designed for commercial landlords. Confirm with your insurer that the policy covers industrial strata specifically. At handover, recommend in writing that the tenant obtains contents insurance - and keep a record that you made that recommendation.

Early access requests are common - tenants often want to access the property before the lease commencement date to move equipment, commence fitout, or prepare the space. While this seems harmless, it carries real risk. If the tenant or one of their contractors is injured during early access, or if damage occurs to the property, the question of liability becomes complicated - the lease hasn't commenced, the tenant's insurance may not yet be active, and you may find yourself exposed.

If you do agree to early access, put it in writing via an early access licence or supplementary agreement. This is a separate short-form document that sits alongside the lease and should cover: the permitted access dates and times; what activities are permitted (e.g. fitout works, moving of equipment) and what is not; confirmation that the tenant's public liability insurance is active and covers the early access period; that the tenant accepts all risk during the early access period and indemnifies the landlord against any claims arising from it; that no tenancy is created by the early access - possession does not pass until the lease commencement date; and that rent does not commence until the agreed lease start date unless otherwise specified.

Risks: Granting early access without a formal written agreement, exposing yourself to liability for injury or damage before the lease has commenced.

Tips: Never grant early access without a written early access licence in place. When in doubt, have your solicitor prepare or review the licence before granting access.

Handover is the moment you formally transfer possession of the property to the tenant. It should only occur once all pre-handover checklist items have been completed - bond and first month's rent cleared, condition report signed, insurance certificates received, and all keys and access devices ready. Do not hand over early as a favour to the tenant if these items are outstanding - once the tenant has possession, your leverage diminishes significantly.

At handover, walk through the property with the tenant, go through the condition report together, and hand over all keys, access devices, and security codes. Provide the tenant with any relevant documentation - strata by-laws, emergency contact details, strata manager contact, and any equipment manuals. Confirm the rent commencement date, invoice frequency, and payment method in writing at this point if not already documented in the lease.

For new off-the-plan properties, handover may also involve coordinating with the developer or builder if defects or incomplete works are still being resolved. Keep a clear record of any outstanding items and who is responsible for rectifying them.

Risks: Handing over before all checklist items are complete. Failing to walk through the property with the tenant and missing the opportunity to confirm condition and equipment operation together.

Tips: Treat handover as a formal process - not a casual key drop. Document the handover with a signed handover form noting the date, items handed over, and any outstanding matters. Keep a copy on file.

Once the tenant is in possession, you'll need to invoice them regularly for rent and any outgoings. Rent is typically invoiced monthly in advance - confirm the invoice frequency, due date, and payment method in the lease. Outgoings are invoiced either monthly as part of a budget estimate or as invoices are received, depending on the recovery method agreed in the lease.

Every invoice should clearly state: the property address, the period the invoice covers, the amount, the due date, and your bank account details. GST treatment depends on your entity structure and whether you are GST-registered - consult your accountant early to confirm what invoices should look like and whether GST applies. Some accountants will prepare and issue invoices on your behalf, which can streamline the process and ensure compliance.

When payment is received, issue a receipt immediately. The receipt should state: the date received, the amount, which period the payment covers, the payment method (EFT, cheque, etc.), and your reference number or property address. Keep the original receipt with the tenant and file a copy for your records. If you are using a property manager, confirm they are issuing compliant invoices and receipts and maintaining accurate payment records.

Keep meticulous records of all invoices issued and payments received - this becomes critical if arrears or disputes arise later. Reconcile your rental income monthly and follow up immediately if a payment is missed - do not let arrears build up before acting.

Risks: Issuing non-compliant invoices causing confusion or payment delays. Poor record keeping making it difficult to identify arrears or resolve disputes.

Tips: Consult your accountant on the correct invoice format and GST treatment for your entity structure. Use accounting software to automate invoicing and track payments. Reconcile monthly and follow up on missed payments immediately.

Most commercial leases include rent review mechanisms that allow the rent to increase at specified intervals - typically every one to three years. At this stage the lease is already signed, so the key task is to understand which review mechanism applies under your lease and administer it correctly when the review date falls due.

Fixed increases: Rent increases by a fixed dollar amount or percentage at each review date - e.g., 3% per annum. These are simple to administer and predictable for both parties.

CPI (Consumer Price Index) reviews: Rent increases in line with the CPI - the Australian Bureau of Statistics' measure of inflation. It is critical that the CPI calculation is applied exactly as specified in the lease - the lease will define which CPI index to use, which quarter to reference, and how to calculate the increase. Do not assume; read the lease carefully and follow the formula precisely.

Market reviews: Rent is reassessed based on current market rates for similar properties in the area. This can result in significant increases if the market has moved, but it requires evidence - comparable leases, agent advice, or valuations. Market reviews are the most contentious review type and often lead to disputes if the tenant disagrees with the assessed market rate. Your lease should specify how disputes over the market rate are to be resolved.

Risks: Misapplying the rent review formula specified in the lease. Market reviews without a clear dispute resolution process leading to prolonged disputes.

Tips: Diarise all rent review dates at the start of the tenancy. For CPI reviews, follow the lease formula precisely and keep a record of your calculation. For market reviews, obtain independent evidence of comparable rents and provide this to the tenant in advance - transparency reduces disputes.

If your lease uses the annual budget method for outgoings recovery, you'll need to reconcile actual costs against the budget at the end of each outgoings period - the timing of which is determined by the lease. Most commonly this falls on the anniversary of the lease commencement date, but always refer to your lease for the exact reconciliation period.

This is the annual true-up - comparing what the tenant paid throughout the period against what was actually spent. If you over-recovered, you owe the tenant a credit or refund. If you under-recovered, you invoice the tenant for the shortfall.

The reconciliation should be supported by documentation - copies of all invoices received from the strata manager, council, insurer, and any other outgoings providers. Present the tenant with a clear reconciliation statement showing each outgoing item, the budgeted amount, the actual amount, and the resulting adjustment. Give the tenant reasonable time to review and query the statement before payment is due.

For the following period, use the reconciled actuals as the basis for the new budget estimate - adjust for any known increases such as strata levy rises or insurance premium changes.

Risks: Poor record keeping making it impossible to produce an accurate reconciliation. Tenants disputing the reconciliation because supporting invoices were not kept. Large adjustments causing cash flow issues for the tenant and potential disputes.

Tips: Keep copies of every outgoings invoice throughout the year - do not wait until reconciliation time to gather them. Send the reconciliation statement promptly after the period ends and allow a reasonable payment period for any shortfall. If using a property manager, confirm they are maintaining outgoings records and will prepare the reconciliation on your behalf.

If your industrial property is part of a strata scheme, you will need to maintain a working relationship with the strata manager. The strata manager is appointed by the Owners Corporation to administer the scheme - they manage common property maintenance, building insurance, levy collection, by-law enforcement, and AGM/EGM administration. They work for the Owners Corporation, not for you individually, but as a lot owner you have the right to communicate with them and raise issues.

As a landlord, you are responsible for paying strata levies on time - these are your obligation, not the tenant's, unless your lease specifies otherwise. If your lease allows you to recover levies from the tenant as an outgoing, ensure you are passing the correct amounts through. Keep copies of all levy notices and confirm payments are up to date.

Notify the strata manager when a new tenancy commences and when it ends. You can provide them with the tenant's contact details for day-to-day building access matters, however be aware that strata managers generally do not communicate directly with tenants - they will typically refer the tenant back to the property manager or owner. This means you cannot simply delegate strata-related issues to either the strata manager or the tenant and expect them to be resolved. As the lot owner, you remain the primary point of contact and responsibility for ensuring strata matters are dealt with appropriately.

Stay engaged with strata communications - read levy notices, meeting agendas, and minutes carefully. Decisions made at AGMs and EGMs can affect your outgoings, capital works obligations, and property value. If you can't attend meetings, consider appointing a proxy.

Risks: Assuming the strata manager will handle tenant issues directly and finding that nothing gets resolved. Ignoring strata communications and being caught off guard by special levies, by-law changes, or capital works decisions.

Tips: Set up a dedicated email for strata communications so nothing gets lost. Attend AGMs where possible - decisions made there directly affect your investment. If your tenant is causing issues with the strata scheme, address it promptly before it escalates to a formal by-law breach notice.

Every strata scheme has a set of by-laws that govern how lots and common property can be used. As a landlord, you are responsible for ensuring your tenant complies with the by-laws - even if you are not the one occupying the property. If your tenant breaches a by-law, the Owners Corporation will issue the notice to you, not the tenant, and you will be held accountable.

Common by-law issues in industrial strata include: unauthorised use of common property (e.g. storing goods in common areas or car parks); noise and operating hours restrictions; waste disposal; unauthorised structural modifications or fitout works; and parking. Before signing a tenant in, review the by-laws carefully and ensure the tenant's intended use is permitted. Provide the tenant with a copy of the by-laws at handover and include a clause in the lease requiring them to comply.

If the Owners Corporation issues a by-law breach notice against your lot, take it seriously and act promptly. Speak to the tenant, identify the breach, and require them to rectify it in writing within a reasonable timeframe. If the tenant fails to comply, you may need to issue a formal breach notice under the lease.

Risks: Tenant breaching by-laws without your knowledge, resulting in notices and potential fines directed at you as the lot owner. Failing to provide the tenant with the by-laws at handover and having no basis to enforce compliance.

Tips: Include a by-law compliance clause in the lease and provide the tenant with a copy at handover - get them to sign acknowledgement of receipt. If you receive a by-law breach notice from the Owners Corporation, act on it immediately - do not ignore it or pass it to the tenant without following up.

Routine inspections during a commercial tenancy are not standard practice in the same way they are in residential property management. Whether you have the right to inspect the property during the tenancy - and how much notice you must give - depends entirely on what the lease says. Do not assume you have the right to inspect without checking the lease first.

If your lease does permit routine inspections, they should be conducted professionally and with adequate written notice to the tenant as specified in the lease. Be respectful of the tenant's business operations - an industrial tenant may have staff, customers, or sensitive operations on site. Inspections should be purposeful, not intrusive.

The most practical approach, if inspections are permitted, is to time them to coincide with the building's annual fire safety inspection - this minimises disruption to the tenant and gives you a legitimate reason to access the property. Use the opportunity to check the condition of the unit, confirm equipment is being maintained, and identify any potential by-law issues or unauthorised modifications.

Document every inspection with photos and a written report. Keep these on file - they form part of your overall tenancy record and can be invaluable if disputes arise at the end of the lease about the condition of the property.

Risks: Accessing the property without the right to do so under the lease, exposing yourself to claims of trespass or breach of the lease. Missing unauthorised modifications or maintenance issues that only become apparent at the end of the tenancy.

Tips: Check the lease before arranging any inspection. Give written notice as required. Time inspections to coincide with fire safety inspections where possible to minimise tenant disruption.

During the tenancy, maintenance and repair responsibilities are split between the landlord and tenant as defined in the lease. As a general rule, the tenant is responsible for maintaining the interior of their unit and the equipment within it, while the landlord is responsible for structural elements and common property (via the strata scheme). However, the lease is the final word - always refer to it before making assumptions about who is responsible for what.

When a maintenance issue arises, the tenant should notify you or your property manager in writing. Respond promptly - ignoring maintenance requests can damage the landlord-tenant relationship, and in some cases a failure to act on a legitimate landlord obligation can give the tenant grounds to withhold rent or seek compensation. Triage the issue first: is it the tenant's responsibility or yours? If it's the tenant's, advise them in writing. If it's yours, arrange for it to be rectified in a reasonable timeframe.

For common property issues - roof leaks, structural defects, shared services - raise these with the strata manager promptly and follow up. Keep the tenant informed of progress. Remember that as the lot owner you are ultimately responsible for ensuring the issue is resolved, even if the strata scheme is the one that needs to act.

One of the most frustrating aspects of managing an industrial strata property is when a maintenance issue falls on the strata scheme to resolve. Unlike issues within your lot where you can act immediately, common property repairs must go through the strata manager, be assessed by the Owners Corporation, and in many cases require committee or general meeting approval before works can be commissioned. This process can take weeks or even months - and in the meantime the tenant is living with the problem. Tenants who are dealing with a roof leak, a defective common area door, or a shared services failure will quickly lose patience, and in some cases will attempt to withhold rent until the issue is resolved. Even experienced property managers find it difficult to drive urgency through a strata scheme. The best approach is to escalate in writing, follow up regularly, keep the tenant informed of progress, and document everything - if a dispute arises later about rent withholding, your paper trail showing that you acted promptly and persistently will be critical.

Keep a maintenance log for the property - record every request received, who is responsible, what action was taken, and when it was resolved. This record is invaluable if disputes arise at the end of the tenancy.

Risks: Failing to respond to maintenance requests promptly, giving the tenant grounds to withhold rent or seek compensation. Assuming an issue is the tenant's responsibility without checking the lease first.

Tips: Respond to all maintenance requests in writing, even if just to acknowledge receipt and advise next steps. Keep a maintenance log throughout the tenancy. If using a property manager, confirm they are triaging and documenting all maintenance requests.

Good record keeping is the backbone of effective property management. Without it, you have no way to prove what was agreed, what was paid, what was communicated, or what condition the property was in at any given point in time. In a dispute - whether over arrears, bond deductions, maintenance obligations, or lease breaches - your records are your evidence.

At a minimum, keep the following on file for the entire duration of the tenancy and for a reasonable period after it ends: the signed lease and any amendments or supplementary agreements; the condition report with photos and video; all correspondence with the tenant (emails, letters, text messages); all invoices issued and receipts for payments received; outgoings invoices and reconciliation statements; maintenance requests and records of action taken; inspection reports; insurance certificates of currency; and any breach notices or formal communications.

Store records in a way that is organised, accessible, and backed up. Paper files work, but a digital system is more practical - use a folder structure that mirrors the tenancy timeline so you can find documents quickly when needed. If you are using a property manager, confirm what records they maintain on your behalf and request copies of key documents regularly.

Risks: Poor record keeping leaving you unable to support your position in a dispute. Losing documents after the tenancy ends when you may still need them for bond deductions or legal action.

Tips: Develop a consistent filing system from day one and stick to it. Back up digital records regularly. Keep records for at least six years after the tenancy ends - this covers the limitation period for most contract claims in NSW.

Most commercial leases include one or more options to renew - giving the tenant the right to extend the lease for a further term at the end of the initial term. Options are exercised by the tenant, not the landlord, and must be exercised strictly in accordance with the lease - typically by written notice within a specified window before the lease expiry date. If the tenant misses the option exercise window, the right to renew may be lost.

As a landlord, diarise the option exercise window well in advance - both the opening and closing dates. If the tenant has not exercised their option as the deadline approaches, you are not obligated to remind them, but it is good practice to communicate with them about their intentions so you can plan accordingly. If the tenant does not exercise their option, you are free to re-lease the property on new terms or to a new tenant.

When an option is exercised, the new lease term commences on the agreed terms - typically the same conditions as the existing lease, with rent adjusted in accordance with the review mechanism specified for the option term. Check the lease carefully for any conditions attached to the option - for example, some leases require the tenant to not be in breach at the time of exercising the option.

Risks: Missing the option exercise window and creating uncertainty about the tenancy. Allowing a tenant to exercise an option when they are in breach - check your lease for any conditions that may invalidate the exercise.

Tips: Diarise option dates at the start of the tenancy. When an option is exercised, confirm it in writing and document the new rent and term. If you are unsure about the option terms or conditions, consult your solicitor before responding to the tenant.

As a landlord, you will have tax and GST obligations that depend on your ownership structure, how the property is used, and your individual circumstances. This guide is not the place to go into specifics - tax is complex, highly individual, and the rules change. What we will say is this: engage a good accountant with commercial property experience before your first tenant moves in, and keep them involved throughout the tenancy.

Key areas to discuss with your accountant include: whether you need to be registered for GST and how it applies to your rent and outgoings invoices; how rental income is treated for income tax purposes and what expenses you can deduct; land tax obligations in NSW and how they apply to your ownership structure; and any implications of how the property was purchased or how it is held.

Good record keeping - covered in the previous section - is essential for meeting your tax obligations. Keep all invoices, receipts, and financial records organised and accessible.

Risks: Getting tax or GST treatment wrong and facing unexpected liabilities, penalties, or disputes with the ATO. Not understanding your obligations until it's too late to act.

Tips: Engage an accountant with commercial property experience early. Don't assume your personal tax accountant understands commercial property - ask them specifically. Review your obligations at the start of each financial year and whenever your circumstances change.

A notice of breach is a formal written notice issued to the tenant when they have failed to comply with an obligation under the lease. Common breaches include non-payment of rent, failure to pay outgoings, non-compliance with strata by-laws, unauthorised modifications, failure to maintain equipment, or misuse of the premises. Issuing a notice of breach is a critical step in the enforcement process - without it, you may not be able to terminate the lease or pursue legal action later.

The notice must be issued in accordance with the lease - check the required form, content, and method of delivery. Most leases require the notice to be in writing, specify the nature of the breach, and give the tenant a reasonable period to remedy it. The remedy period varies but is commonly 14 days for most breaches. Keep a copy of every notice issued and record how and when it was delivered.

Do not issue breach notices casually or without proper grounds - a poorly drafted or unwarranted notice can damage the landlord-tenant relationship and potentially expose you to a counter-claim. Equally, do not delay issuing a notice when a breach is clear - the longer you wait, the harder it becomes to enforce your rights.

Risks: Failing to follow the notice requirements in the lease, invalidating the notice and weakening your position. Delaying action on a breach and allowing it to escalate into a more serious dispute.

Tips: Keep a breach notice template on file that mirrors the requirements of your lease. Issue notices promptly when a breach occurs and document delivery. If you are unsure whether a breach has occurred or how to respond to it, consult your solicitor before acting.

Rental arrears are one of the most common issues in property management and need to be addressed promptly. The longer arrears are allowed to accumulate, the harder they are to recover. As soon as a payment is missed, act - do not wait until the next invoice is due or give the tenant the benefit of the doubt for weeks before following up.

The process for managing arrears should be escalating and documented. Start with a polite reminder - a phone call or email - as soon as a payment is overdue. If payment is not received within a few days, follow up in writing. If the arrears continue to grow, issue a formal notice of breach as required under the lease. Keep a record of every communication - dates, method, content, and response.

Be cautious about entering into informal payment arrangements with tenants in arrears. If you agree to accept partial payments or defer rent without a written agreement, you may inadvertently waive your right to strict enforcement under the lease. If a payment arrangement is necessary, document it in writing with clear terms - amounts, dates, and consequences of default.

If arrears reach the point where the tenant is unable or unwilling to pay, you may need to consider termination of the lease and recovery action. The bond provides some protection but may not cover the full amount owed - particularly if the tenant has been in arrears for an extended period.

Risks: Allowing arrears to accumulate before acting, reducing your ability to recover the full amount. Informal payment arrangements that are not documented in writing, weakening your legal position.

Tips: Diarise rent due dates and reconcile payments immediately. Follow up on the first day a payment is missed. Document all communications with the tenant about arrears. If the situation escalates, engage your solicitor early - don't wait until the arrears are unrecoverable.

Disputes between landlords and tenants are not uncommon, and how you handle them can make the difference between a resolution and a costly legal battle. Common disputes in industrial tenancies include: disagreements over maintenance responsibilities; outgoings charges and reconciliations; rent review amounts; bond deductions; make good obligations; and alleged breaches of the lease by either party.

The first step in any dispute is to attempt to resolve it directly with the tenant. Communicate clearly and in writing, set out your position with reference to the relevant lease clause, and give the tenant an opportunity to respond. Many disputes arise from misunderstanding rather than bad faith - a clear, calm, written explanation referencing the lease often resolves things quickly.

If direct communication fails, check your lease first - many commercial leases include a specific dispute resolution mechanism that must be followed before either party can escalate to legal action. This may include a requirement to attempt mediation, engage an expert, or follow a specific notification process. Follow whatever the lease prescribes. If the lease does not specify a process, consider engaging a mediator or seeking assistance from a dispute resolution service before escalating to legal action. Mediation is faster and cheaper than litigation and often produces a workable outcome for both parties. Keep records of all communications throughout the dispute - if the matter does escalate, your paper trail will be essential.

Arrears disputes deserve special mention. In practice, many tenants will withhold rent during a dispute of any nature - whether the dispute is about maintenance, outgoings, or something else entirely. In most cases, withholding rent during a dispute is a breach of the lease in its own right, regardless of the merits of the underlying dispute. The tenant's obligation to pay rent generally continues until the matter is formally resolved. If a tenant withholds rent, treat it as arrears and follow the arrears process accordingly while simultaneously addressing the underlying dispute. Document everything carefully - your paper trail showing that you acted reasonably will be critical if the matter escalates.

Commercial lease disputes generally do not go to NCAT - they are typically resolved through negotiation, mediation, or the NSW Supreme Court depending on the nature and value of the claim. NCAT may be relevant where the dispute involves common property issues within a strata scheme. This is covered in more detail in the following sections.

Risks: Escalating disputes unnecessarily through poor communication or failure to reference the lease. Tenants withholding rent during a dispute, which compounds the problem and may constitute a separate breach.

Tips: Always communicate in writing during a dispute. Reference the specific lease clause that supports your position. Seek legal advice early if the dispute is significant - getting proper advice at the outset is far cheaper than fixing a mistake later.

Terminating a commercial lease due to breach is a serious step and must be handled carefully. Getting it wrong - either procedurally or substantively - can expose you to significant liability. Before taking any steps toward termination, seek legal advice.

Most commercial leases allow the landlord to terminate if the tenant has breached the lease and failed to remedy the breach within the period specified in a notice of breach. The process typically involves: identifying the breach; issuing a formal notice of breach in accordance with the lease; allowing the tenant the prescribed remedy period; and if the breach remains unremedied, issuing a notice of termination. The lease will specify the required form and content of these notices - follow them precisely.

Some breaches are so serious that they may entitle the landlord to terminate immediately without a remedy period - for example, abandonment of the premises or insolvency of the tenant. Again, the lease will define what constitutes a repudiatory or fundamental breach. Do not attempt to terminate on these grounds without legal advice.

Once a lease is terminated, you may re-enter the premises and take possession. However, re-entry must be done lawfully - do not simply change the locks without following the correct legal process. Unlawful re-entry can expose you to a claim by the tenant even if they were in breach.

Risks: Terminating the lease incorrectly and exposing yourself to a wrongful termination claim. Attempting to re-enter the premises without following the correct legal process.

Tips: Never attempt to terminate a lease or re-enter premises without legal advice. Keep a complete record of all breach notices, communications, and remedy periods. Engage your solicitor at the first sign that termination may be necessary - early advice is far cheaper than fixing a wrongful termination claim.

Understanding which tribunal or court handles your dispute is important - taking action in the wrong forum can waste time and money.

NCAT (NSW Civil and Administrative Tribunal) handles disputes relating to strata schemes - including common property issues, by-law breaches, and disputes between lot owners and the Owners Corporation. If your dispute involves a strata matter - for example, the Owners Corporation failing to maintain common property, or a by-law enforcement issue - NCAT is the appropriate forum. NCAT is generally faster and less expensive than court proceedings.

NSW Supreme Court is the appropriate forum for commercial lease disputes between landlord and tenant - including arrears recovery, termination disputes, make good claims, and breach of contract matters. Commercial lease disputes are contractual in nature and fall outside NCAT's jurisdiction. Depending on the value of the claim, the Local Court or District Court may also be appropriate for smaller matters.

Before commencing proceedings in either forum, ensure you have followed any dispute resolution process required by the lease. Courts and tribunals expect parties to have made genuine attempts to resolve disputes before litigating. Failure to do so can affect costs orders against you.

Risks: Filing in the wrong forum and having your matter dismissed or delayed. Commencing proceedings without first exhausting the dispute resolution process in the lease.

Tips: Always seek legal advice before commencing any proceedings. Your solicitor will advise you on the correct forum, the strength of your claim, and the likely costs and timeframes involved.

Legal action is a last resort - it is time-consuming, expensive, and uncertain. Before committing to litigation, weigh the likely cost of proceedings against the amount in dispute and the prospects of recovery. Winning a judgment is one thing; recovering the money from a tenant who has no assets or has vacated is another matter entirely.

This is why tenant screening at the application stage is so important. A good commercial agent will conduct thorough reference checks on prospective tenants - including business history, financial standing, and references from previous landlords. They will also look at whether the tenant or its directors have existing assets such as property, which gives you some comfort that a judgment, if it comes to that, can actually be enforced. Cutting corners on tenant selection to fill a vacancy quickly is a false economy - a bad tenant can cost far more than a short vacancy period.

If you do proceed with legal action, engage a solicitor with commercial property and leasing experience. Provide them with your complete file - the lease, all correspondence, invoices, receipts, breach notices, and any other relevant documents. The strength of your case will depend heavily on the quality of your records, which is why documentation throughout the tenancy is so important.

Common claims in commercial leasing disputes include: recovery of unpaid rent and outgoings; bond deductions and make good costs; damages for breach of lease; and costs of re-letting the property after a tenant default. Your solicitor will advise you on the merits of each claim and the best approach.

Be aware that legal proceedings can take months or even years to resolve, particularly if the tenant defends the claim or counterclaims. Factor this into your decision to proceed. In some cases, a negotiated settlement - even at a discount - is a better outcome than a lengthy and costly court battle.

Risks: Committing to legal action without a realistic assessment of the costs and prospects of recovery. Poor records undermining your case at the critical moment. Skipping proper tenant screening and finding yourself with a tenant who has no recoverable assets.

Tips: Engage a solicitor with commercial leasing experience. Be realistic about the costs and timeframes involved. Consider whether a negotiated settlement is a better outcome before committing to litigation. Maintain complete and organised records throughout the tenancy - they are your best asset in any legal proceedings.

Make good obligations require the tenant to return the property to an agreed condition at the end of the lease. What "make good" means depends entirely on what the lease says - it could mean removing all fitout and reinstating the premises to their original condition, or it could simply mean returning the property in a clean and well-maintained state. Read the lease carefully and understand exactly what is required well before the lease expiry date.

Common make good requirements in industrial leases include: removing all fixtures, fittings, and equipment installed by the tenant; patching and repainting walls; removing signage; repairing any damage caused during the tenancy; and ensuring all equipment is in working order. If the tenant has made structural modifications - additional mezzanines, partition walls, electrical upgrades - the lease may require these to be removed and the premises reinstated to their original state.

However, it doesn't always work that way. Some leases include provisions that give the landlord the right to elect to keep certain improvements rather than require the tenant to remove them. For example, if the landlord approved the installation of a mezzanine during the tenancy, the lease may include a clause allowing the landlord to notify the tenant that they wish to retain it at the end of the lease - saving the tenant the cost of removal and leaving the landlord with a valuable improvement. This works both ways - the tenant may also have obligations to remove things the landlord does not want left behind. The key point is simple: always refer to the lease. The make good provisions will tell you exactly what applies in your situation.

As the lease approaches expiry, communicate with the tenant about their make good obligations early - don't wait until the last week of the lease. Give them a clear written reminder of what is required and by when. If the tenant fails to complete make good works, you may be able to deduct the cost from the bond or pursue them for the shortfall. Document the final condition of the property thoroughly with photos and video at the outgoing inspection.

Risks: Failing to communicate make good requirements to the tenant early enough, leaving insufficient time for works to be completed before the lease expires. Tenant completing inadequate make good works and disputing your right to deduct costs from the bond.

Tips: Review the make good clause in the lease well before expiry and provide the tenant with a written reminder at least 3 months out. Conduct a pre-expiry walkthrough with the tenant to identify outstanding works. Document everything with photos at the final inspection.

The final inspection is your opportunity to compare the condition of the property at the end of the lease against the condition report completed at handover. It should be conducted on or around the last day of the lease, ideally with the tenant present. Document everything with photos and video - go through the property methodically and note any damage, incomplete make good works, missing items, or equipment that is not operational.

Before the inspection, review the original condition report and your inspection photos from the start of the tenancy so you have a clear baseline for comparison. Fair wear and tear - the gradual deterioration that occurs through normal use - is generally not recoverable from the tenant. Damage beyond fair wear and tear, incomplete make good works, and missing items are recoverable, either from the bond or through legal action if the bond is insufficient.

Confirm at the final inspection that all keys, access devices, remotes, and security codes have been returned. Cross-reference against the handover record from the start of the tenancy. If items are missing, the cost of replacement can be deducted from the bond.

Once the inspection is complete, provide the tenant with a written summary of any items identified and your intention to make deductions from the bond if applicable. Give them a reasonable opportunity to respond before finalising any deductions.

Risks: Conducting the final inspection without the original condition report as a reference, making it difficult to establish what has changed. Failing to document the final condition thoroughly and losing the ability to support bond deductions.

Tips: Always conduct the final inspection with the original condition report in hand. Bring a camera and be thorough. If significant works are required, obtain quotes before finalising bond deductions so you can justify the amounts claimed.

Once the tenant has vacated and the final inspection has been completed, you can process the bond release. If there are no deductions - the property has been returned in good condition, all rent and outgoings are paid, and make good obligations have been met - release the bond promptly. Holding onto the bond longer than necessary without legitimate grounds creates unnecessary tension and may expose you to a dispute.

If deductions are required, provide the tenant with a written statement itemising each deduction, the amount claimed, and the basis for the claim. Support each deduction with evidence - quotes, invoices, or photos from the final inspection. Give the tenant a reasonable opportunity to respond before retaining the deducted amount. If the tenant disputes your deductions and agreement cannot be reached, the matter may need to be resolved through the courts.

If the bond is held as a bank guarantee, follow the redemption process specified in the guarantee document - this typically involves making a formal written demand to the issuing bank. The process differs from a cash bond so make sure you understand the steps involved well before the lease ends.

Be aware that if the bond is insufficient to cover the full amount owed - whether for arrears, make good costs, or damages - you may need to pursue the tenant for the shortfall through legal action.

Risks: Retaining bond funds without proper justification, exposing yourself to a dispute. Bond being insufficient to cover the full amount owed and having to pursue the tenant for the shortfall.

Tips: Process bond releases promptly once the tenancy is finalised. Document all deductions clearly and retain supporting evidence. If deducting from a bank guarantee, familiarise yourself with the redemption process well before the lease ends.

Holding over occurs when a tenant remains in occupation of the premises after the lease has expired - either because they did not exercise their option in time, the lease has ended and no new lease has been agreed, or the parties are still negotiating a renewal. How holding over is treated depends on what the lease says and the circumstances of the situation.

Most commercial leases include a holding over clause that specifies what happens if the tenant stays beyond the expiry date. Typically, the tenant holds over on a month-to-month basis on the same terms and conditions as the expired lease, with rent adjusted to market rent for the holding over period. During this time, either party can generally terminate the arrangement by giving one month's notice - though as always, check the lease as the required notice period may differ.

Holding over provides short-term flexibility for both parties while a new lease or exit is negotiated, but it is not a long-term solution. The reduced security of tenure for the tenant can also make it harder to enforce certain lease obligations. As a landlord, be cautious about allowing holding over to continue indefinitely - if you want the tenant to stay, formalise a new lease as quickly as possible. If you want them to leave, issue the appropriate notice to vacate in accordance with the lease and seek legal advice if they refuse to go.

Risks: Allowing holding over to continue without a plan, creating uncertainty about the tenancy and your ability to re-let or sell the property. Tenant refusing to vacate after the holding over period, requiring legal action to recover possession.

Tips: Monitor lease expiry dates carefully and begin discussions with the tenant about renewal or vacation at least 6 months before expiry. If holding over occurs, formalise the situation as quickly as possible - either with a new lease or a formal notice to vacate. Always check the lease for the correct notice period and requirements. Seek legal advice if the tenant refuses to vacate.

Managing an industrial strata property may not sound complicated, but it does require discipline, attention to detail, and a willingness to act promptly when issues arise. The landlords who avoid costly disputes are almost always the ones who read their lease thoroughly, keep good records, communicate in writing, and don't let problems fester.

The most important things to take away from this guide are: know your lease inside out; engage the right professionals - a good commercial property manager, an experienced solicitor, and an accountant who understands commercial property; and always act promptly when something goes wrong. If you are self-managing, staying engaged is even more critical - there is no property manager acting as a buffer between you and the tenant, so the responsibility for monitoring rent, chasing arrears, tracking review dates, and responding to issues falls entirely on you. If you have appointed a property manager, stay involved - review their reports, ask questions, and don't assume everything is being handled correctly just because someone else is managing it.

Industrial strata in metropolitan Sydney remains a strong asset class with solid demand from business tenants. With the right approach to property management, you can protect your investment, maintain a positive relationship with your tenant, and maximise the returns from your property over the long term.

If you'd like guidance or have questions about managing your industrial strata property, feel free to reach out to us at industrialproperty.ai - we're here to help.