Can I withhold rent under a commercial lease?
Usually not, even when the landlord is clearly at fault. This guide explains the general rule, the narrow cases where the law allows it, how set-off and no deductions clauses work, and safer ways to press a claim.
The general rule: rent stays payable
Under a commercial lease, the tenant’s obligation to pay rent generally does not depend on the landlord performing its own obligations. If the landlord fails to repair, or the premises are not what was promised, the tenant usually keeps paying and claims damages, rather than holding back the rent. Withholding rent without a clear legal basis is a breach of the lease, and it can lead to:
- a default notice, re-entry and termination of the lease;
- a claim for the arrears, interest and, under many leases, the landlord’s costs;
- a call on the bank guarantee or deposit, and on any guarantors;
- under a retail lease, losing the right to exercise an option, where the landlord has notified the default in writing and it is not remedied, or has notified persistent defaults; and
- in some cases, a claim for damages for the rest of the term if the lease ends.
Being right about the landlord’s breach does not, by itself, make withholding lawful.
When the Retail Leases Act allows withholding
The Retail Leases Act 2003 (Vic) gives a retail tenant an express right to withhold rent where the landlord did not give the disclosure statement it had to give before the lease was entered into.
- The tenant may give the landlord written notice no earlier than 7 days and no later than 90 days after entering into the lease.
- The tenant may then withhold rent until the statement is given, and is not liable for rent from the date of the notice until it is given.
- The tenant may also end the lease within 7 days after receiving the statement.
The same remedies apply on a renewal if the landlord does not give the renewal disclosure statement, with the tenant’s notice due within 90 days. A statement that is given but is misleading, false or materially incomplete gives a different remedy: a right to end the lease within 28 days, subject to the landlord’s right to object. It is not a right to withhold rent. See disclosure statements and our guide to the Retail Leases Act.
Two related rights are often confused with withholding:
- Urgent repairs. Under a retail lease, a tenant who arranges urgent repairs in the circumstances the Act allows is entitled to be reimbursed the reasonable cost by the landlord. That is a right to reimbursement. Whether the cost can be deducted from rent depends on the lease and the points below. See the landlord’s repair obligations.
- Damaged premises. Whether rent abates when the premises are damaged is a separate question. See rent abatement when the premises are damaged.
Set-off
Set-off lets a tenant with a money claim against the landlord reduce what it pays by the amount of that claim. In equity, a claim for damages that is closely connected with the lease, such as a claim that the landlord has breached its repair obligations, may be set off against rent. Whether set-off is available, and for how much, depends on the claim, the evidence and the lease.
A tenant relying on set-off takes a risk. If the claim fails, or is worth less than the rent held back, the tenant is in arrears and in breach.
"Without deduction" clauses
Many leases say rent is payable “without deduction”, “without set-off” or “clear of all deductions”. In Victoria, a clear clause of this kind has generally been held to exclude equitable set-off. The tenant must pay the rent in full and pursue its claim separately. The clause does not stop the tenant claiming damages from the landlord; it stops the tenant taking them out of the rent.
Retail leases: an arguable exception
For retail leases, there is an argument that a no-deductions clause cannot stop a tenant setting off damages for the landlord’s breach of its statutory repair obligation. Under the Act, the landlord is responsible for maintaining the structure, fixtures, plant and equipment, and the Act makes a lease provision void to the extent that it is contrary to or inconsistent with the Act.
In AMTB Pty Ltd v Chan [2025] VCAT 236, the tenant of a second-floor nightclub stopped paying rent after the building’s lift had been unreliable or out of action for months, and claimed its trading losses as damages. The lease required rent to be paid clear of all deductions. VCAT accepted that it was arguable that the Act makes such a clause void to the extent it would stop a set-off of damages for breach of the landlord’s repair obligation. It granted an interlocutory injunction stopping the landlord from ending the lease and re-entering until the final hearing. VCAT had taken a similar view in 2009 under the earlier retail leasing Act.
This was an interlocutory decision. VCAT decided only that the argument was arguable, not that it is right. Until the point is decided at a final hearing or by a court, a retail tenant should not assume it can withhold rent on this basis.
If the landlord serves a default notice
A tenant who holds back rent because it says an abatement or set-off applies cannot assume the landlord’s default notice is invalid. The Supreme Court has held that a default notice under a retail lease was not invalid merely because it claimed the full rent without allowing for an abatement the tenant said it was entitled to. A tenant who receives a default notice should respond within its time, and consider an urgent application to VCAT before the notice expires. See locked out by your landlord.
Safer ways to dispute the rent
- Put the claim in writing. Tell the landlord what is wrong, when it started, how it affects your business and what you say it is worth.
- Pay under protest. Pay the rent in full, stating in writing that you do so under protest and reserve your claim. You stay out of default while you pursue the claim.
- Agree an interim arrangement in writing. A temporary reduction, a rent-free period, or payment of the disputed amount into a trust account, documented so that it binds both sides.
- Mediation. Under a retail lease, most disputes go to mediation at the Victorian Small Business Commission before VCAT can hear them, and many settle there.
- Apply to VCAT or a court for damages, for an order that the landlord carry out its obligations, or, if a default notice has been served, for an urgent injunction.
How we help
- Advice on whether you can lawfully withhold or reduce rent under your lease.
- Written claims to the landlord, and payment under protest done properly.
- Negotiating an interim rent arrangement or a settlement.
- Mediation at the Small Business Commission, and VCAT applications, including urgent injunctions.
- For landlords: responding to a tenant’s set-off claim and enforcing the rent.
Start with a free 15-minute phone call. For other work, we quote in writing before we start.
Common questions
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Generally no. The rent usually stays payable, and the remedy is a claim for damages or an order for the repairs. Under a retail lease, VCAT has accepted as arguable that a no-deductions clause cannot stop a set-off of damages for breach of the landlord’s repair obligation, but the point has not been finally decided.
That the rent must be paid in full, without the tenant subtracting amounts it says the landlord owes it. Clear clauses of this kind have generally been held to exclude set-off, although the tenant can still claim those amounts separately.
Where the landlord did not give the disclosure statement it had to give, and the tenant has given written notice between 7 and 90 days after entering into the lease. The tenant can then withhold rent until the statement is given.
Get advice before any default notice expires. Paying the undisputed rent, putting your claim in writing and, if needed, an urgent application to VCAT can protect the lease.
Law referred to
- Retail Leases Act 2003 (Vic) ss 17(3), 26, 27, 52 and 94.
- AMTB Pty Ltd v Chan (Building and Property) [2025] VCAT 236; C & A Delaveris Pty Ltd v Bretair Pty Ltd [2009] VCAT 1663.
- Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168.
- Club Fogolar Furlan Melbourne v Paramount Investments Group Pty Ltd [2024] VSC 208.
Last reviewed: October 2026, by a Victorian solicitor with a current practising certificate. This page is general information about Victorian law as at October 2026. It is not legal advice about your lease.
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