Allied Pinnacle Pty Ltd v GR Mailman & Associates Pty Ltd [2026] NSWSC 87

A recent New South Wales Supreme Court decision has provided important clarity on the obligations that tenants face when a commercial lease comes to an end. The case of Allied Pinnacle Pty Ltd v GR Mailman & Associates Pty Ltd [2026] NSWSC 87 examined two critical questions: must a tenant remove a fit-out installed during the lease? And does the obligation to redecorate extend to external surfaces of the premises? The answers will have practical consequences for any business occupying commercial premises in NSW.

Background to the Dispute

Allied Pinnacle Pty Ltd (the tenant) had leased commercial premises in Western Sydney from August 2015 under a ten-year lease. Shortly after taking possession, the tenant undertook a significant fit-out of the premises with the approval of the then-lessor. In December 2017, GR Mailman & Associates Pty Ltd purchased the property and, by operation of section 51 of the Real Property Act 1900 (NSW), stepped into the shoes of the original lessor.

When the lease expired in August 2025, the tenant neither removed the 2015 fit-out nor repainted the exterior of the premises. The landlord claimed the tenant was obliged to do both. The tenant disagreed, and litigation followed.

In a notable twist, the landlord had in fact re-let the premises to a new tenant that included the fit-out as part of the new lease — at a higher rental. The outgoing tenant argued this meant it owed nothing for the fit-out. The court’s analysis of this point forms a key part of the decision.

Key Issue 1: Was the Tenant Required to Remove the Fit-Out?

The lease contained a clause (A2.1) requiring the tenant to hand back the premises in the same “condition” as at the commencement of the lease. The landlord argued this required the tenant to remove the 2015 fit-out and restore the premises to their original layout.

The court disagreed. Applying established principles of contractual construction — particularly those affirmed by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 and Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 — the court held that the word “condition” in clause A2.1 referred to the standard or state of repair of the premises, not their physical configuration or layout.

This is a crucial distinction. The lease required the premises to be returned in good repair and condition, but it did not require the tenant to undo structural or fit-out changes that had been approved. The court reached this conclusion by reading clause A2.1 in the context of the lease as a whole, including other clauses dealing with alterations and reinstatement (clauses A24 and B1(22)).

The practical takeaway: whether a tenant must remove a fit-out at the end of a lease depends on the specific language of the lease. A requirement to return premises in “condition” is not, without more, a requirement to remove approved alterations. Tenants and landlords who want clarity on this point should ensure their lease explicitly addresses reinstatement obligations.

Key Issue 2: Did the Repainting Obligation Extend to External Surfaces?

Clause A24.3(b) of the lease required the tenant, in the last year of the lease, to paint “all painted surfaces” with at least two coats of first-quality paint. The tenant argued this obligation was limited to internal surfaces. The court rejected this argument.

The court found that the textual distinction between “all painted surfaces” and the phrase “all internal surfaces” (used elsewhere in the clause) was deliberate. Had the drafters intended to limit the repainting obligation to internal surfaces, they would have used that narrower language. By using the broader phrase “all painted surfaces,” the clause captured both internal and external painted surfaces.

The tenant had not repainted the exterior of the premises before vacating. This was a breach of its lease obligations, and the court ordered that damages be assessed by a referee.

The lesson for tenants: redecoration clauses should be read carefully. A clause requiring repainting of “all painted surfaces” will catch external walls, doors, and other exterior elements — not just internal fit-out. The cost of exterior repainting can be significant, and failure to comply can expose a tenant to a damages claim even where the landlord subsequently re-lets the premises.

Key Issue 3: Was the Tenant’s Obligation Excused by the Landlord’s Conduct?

The tenant raised a number of defences, arguing that the landlord’s conduct had either excused or modified its obligations. These included allegations of:

• Failure by the landlord to mitigate its loss;
• Breach of implied duties of good faith and cooperation;
• Waiver and estoppel; and
• Repudiation of the lease by the landlord.

The court rejected all of these arguments. The evidence demonstrated that the landlord had acted reasonably throughout. Critically, the court found that the tenant’s own decision to withhold performance — while the parties disputed what the lease required — could not be used as the foundation for a claim that the landlord had waived, or was estopped from asserting, the tenant’s obligations.

This is an important reminder: a tenant who disagrees with the landlord’s interpretation of a lease takes a significant risk by simply refusing to perform. If the court ultimately agrees with the landlord, the tenant’s unilateral non-performance will not be excused by the dispute itself.

The Unconscionable Conduct Argument

The tenant also alleged that the landlord had engaged in statutory unconscionable conduct under section 21 of the Australian Consumer Law by insisting on its interpretation of the lease. The court dismissed this claim.

The court found that merely asserting a legitimate contractual right, even where doing so is commercially advantageous, does not constitute unconscionable conduct. The landlord had not exploited a position of vulnerability or engaged in behaviour outside the norms of acceptable commercial conduct. Given that the fit-out claim failed entirely (clause A2.1 did not require removal), the unconscionable conduct argument in relation to that issue did not arise in any event.

This is a useful reminder that unconscionable conduct under the ACL sets a high bar. A party driving a hard bargain or asserting its contractual rights vigorously will not ordinarily cross the line into statutory unconscionability.

What This Means for Your Business

Whether you are a landlord or a commercial tenant, this decision reinforces several important practical points.

For tenants:

• Read your end-of-lease obligations carefully before vacating. Obligations to redecorate or repaint may be broader than you expect.
• If you are in dispute about what the lease requires, seek legal advice before choosing not to perform. Non-performance during a dispute does not insulate you from liability if the court finds against you.
• A requirement to return premises in “condition” may not require you to remove approved alterations, but the specific wording of your lease will be determinative.

For landlords:

• Ensure your lease clearly and expressly addresses any reinstatement obligations if you want the tenant to remove fit-outs at the end of the lease.
• A redecoration clause that refers to “all painted surfaces” can capture external repainting costs — ensure this reflects your intention when the lease is drafted.
• Re-letting premises — even at a higher rent — does not necessarily extinguish your right to recover damages from the outgoing tenant for breach of lease obligations.

How We Can Help

At CML Lawyers, we act for both landlords and tenants in commercial leasing disputes across Sydney and regional NSW. Whether you are approaching the end of a lease, negotiating lease terms, or facing a claim from a former landlord or tenant, we can provide clear, practical advice to protect your position.

If you would like to discuss your lease obligations or any commercial property matter, contact our team at our Sydney CBD office on (02) 9299 2223 or our Cowra office on (02) 6342 1000.

Disclaimer:

This article is intended as general information only and does not constitute legal advice. The law in this area is fact-specific, and you should seek independent legal advice in relation to your particular circumstances.