By Jeremy Quah

18 January 2018

The responsibility for repair to retail premises which is damaged or in some way dilapidated can often become a source of contention between the landlord and tenant in a commercial or retail lease.

Damage to business premises can have a significant impact on a tenant’s business, particularly if the damage results in part or the whole of the premises being rendered unusable for a period of time.

At the same time, tenants have often felt powerless against a landlord who either refuses to repair or who is slow in bringing repairs to premises, whilst facing the burden of meeting monthly rental payments for fear of defaulting on their lease obligations.

Section 52 of the Retail Leases Act 2003 (the “Act”), if the Act applies, sets out that the obligation is on the Landlord to maintain the structure and services of a building. Perhaps less well known, however, is the fact that as a result of relatively recent decisions in the Supreme Court and VCAT, in addition to other rights which the Tenant may have under the Act, Tenants may also have a right to terminate the lease in circumstances where a continued failure of a landlord to meet these obligations constitutes a repudiation of the contract.

In the decision of Hann-Woodlock v ADMR Pty Ltd [2011] VCAT 1776, Senior Member Walker held that the landlord’s failure to undertake work it had agreed to do before the tenant took possession resulted were a repudiation of the lease insofar as they constituted “numerous and extensive breaches in both time and effect” and ultimately demonstrated an intention “not to carry out some of the obligations imposed on it by the lease and to carry out the others only in a manner substantially inconsistent with those obligations”.

In a more recent decision in the Supreme Court of Victoria, Justice Croft held in Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2015] VSC 515 (1 October 2015) that the failure of the landlord to repair and refurbish premises affected by flooding and mould in a timely manner constituted a repudiation of a lease.

Accordingly, landlords should be aware that over and above their obligation to repair damage of a capital nature that the manner in which they fulfil such obligations can also be significant. An unreasonable delay in attending to repairs can constitute repudiatory conduct in certain circumstances which a tenant can rely on to bring an end to the lease in addition to a claim for damages.

Tenants, on the other hand, should be aware that where a landlord is dragging their feet on attending to repairs, they may have more leverage than they think to bring a resolution to their problem.

In either circumstance, a detailed analysis of the facts in the context of the Act and the various VCAT and Supreme Court authorities will be required in order to establish either party’s rights.

 

To that extent, if you are a landlord or tenant in need of advice in this regard, please contact Jeremy Quah or a member of our Property Team.

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