Landlord obligations – don’t ignore them!
01 May 2019
- Business Law
Naturally, sometimes things will go wrong in rented properties. When they do, it’s important that landlords are aware of their maintenance obligations. In this article, Gene Schirripa discusses a case in the Victorian Civil & Administrative Tribunal that highlights the importance of complying with maintenance timeframes in a commercial lease.
The case – South Melbourne Pty Ltd v Red Pepper Property Group Pty Ltd (Building and Property)  VCAT 1864 – concerned a landlord’s failure to repair a faulty air-conditioning unit.
The tenant operated a Pilates studio from retail premises in Melbourne. A special condition was inserted into the lease that required the landlord to install an air-conditioning unit in the studio (recommissioning the existing roof-mounted air-conditioning unit). It was agreed that the landlord would be responsible for installing the unit, and the tenant for ongoing maintenance and repairs.
During the first year of the lease, the air-conditioning unit experienced a number of issues. Ultimately, the fan needed to be replaced. Although the tenant advised the landlord of the issues, the landlord claimed that they were the tenant’s responsibility. The tenant subsequently sought to terminate the lease.
The Tribunal held that the tenant was entitled to terminate the lease as the landlord’s obligation to provide air-conditioning was a fundamental term. Because the landlord didn’t address the issues and repair the air-conditioning unit, this amounted to repudiation. (Repudiation is the legal term that refers to the conduct of one party to a contract effectively renounces their obligations under the contract.)
The decision was overturned by the Victorian Supreme Court. The court found that there was no repair covenant in the lease, and as such, there was no ongoing obligation to repair.
The Supreme Court, in overturning the decision, set out some key principles with respect to maintenance obligations:
- Steps should be taken by the tenant to make time of the essence by giving notice of a reasonable time of repairs
- If the repair is relatively minor or simple, then failure cannot amount to repudiation
- A party not willing to perform the contract according to its terms has no right to terminate the contract for the other party’s breach. In this case, the tenant had also failed to take any steps to maintain the air-conditioning unit.
The decision does not ‘close the door’ completely on tenants seeking to establish repudiation in cases where a landlord has failed to comply with maintenance obligations, but it limits the circumstances. Ultimately, each case depends on its specific facts and terms of the lease.