The Queensland Supreme Court has concluded that a clawback provision in an incentive deed (requiring the tenant to repay a proportion of the landlord’s fit out contribution and all rent rebates if the lease was terminated) was a penalty and therefore unenforceable.
The decision has wide application and means that, where a lease is terminated for a tenant’s default, the landlord’s remedy will usually be to sue for the cost of re-leasing the premises and lost rent rather than recovery of an up-front inducement or incentive. In light of the decision, Landlords will need to consider how to structure lease incentives and whether to persist with clawback provisions.
