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ARTICLE · 06 JUNE 2023

Clawback Of Incentives Remains An Issue

Vincent Young
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The clawback of incentives and their enforceability remains a live issue with the courts treating clawback clauses as a penalty in certain circumstances.

AustraliaReal Estate and Construction
Vincent Young
Vincent Young

The clawback of incentives and their enforceability remains a live issue with the courts treating clawback clauses as a penalty in certain circumstances. This was recently reinforced in Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd (No 2) [2023] NSWSC 60 (Alamdo).

In the context of commercial leasing, consideration should be given to what would constitute a penalty versus a genuine pre-estimate of damage for the purposes of enabling a landlord to lawfully claw back a proportion of an incentive where a tenant is in breach of its leasing obligations.

Market for incentives

The vacancy rates in the Sydney commercial leasing market continue to increase with an average vacancy rate across premium to B Grade space at around 11.3% and many industries downsizing their CBD office space needs either because of business restructuring or space utilisation restructuring.

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