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Landlords and Real Estate Agents Beware

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There seems to be some confusion between what repairs a landlord is liable for and what repairs a tenant is liable for. To add to this confusion is the fact that the answer to this question will depend on what the lease says and whether the lease is a commercial lease or a retail lease. It is important that landlord’s and real estate agents are aware of the differences to avoid making the wrong recommendation leaving a landlord out of pocket.

Source of Liability for Repairs

Repair obligations come from three sources: the lease provisions, common law and legislation. Leases are generally categorised as either commercial or retail and who is responsible for what repairs will depend on which type of lease you are dealing with.

Retail Leases

Section 52 of the Retail Leases Act 2003 (“the Act”) provides that the landlord is responsible for maintaining the premises in a condition that is consistent with the condition of the premises when the retail premises lease was entered into. The Act provides that this obligation specifically relates to the repair and maintenance of:

1. the structure of, and fixtures in , the retail premises and

2. plant and equipment at the retail premises and

3. the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage and other services

By way of example, a landlord is responsible for maintaining the following:

  • the roof of the premises
  • the physical structure (ie. floors, walls, brickwork) and
  • the air-conditioning (if it is described as a landlord’s installation)

However, there is a distinction between who is responsible for maintaining and who actually pays the costs associated with such maintenance.

Section 52(3) limits a landlord’s obligation to repair. It provides that the landlord is not responsible for any repairs caused as a result of misuse by the tenant or if the tenant is entitled to or required to remove the thing at the end of the lease.

There is difficulty with the wording of section 52(2) because when a lease is renewed, the condition of the premises at the commencement of the lease will be the condition at the commencement of the latest renewal of the lease which highlights the importance of condition reports for both landlords and tenants.

In relation to urgent repairs, the Act is clear and provides that a tenant may arrange for urgent repairs for those repairs for which the landlord is responsible under the Act or the lease to be carried out if the repairs are necessary to fix damage that has a substantial effect on the tenant’s business at the premises and the tenant is unable to get the landlord or the landlord’s agent to carry out those repairs. This provision requires the tenant to take reasonable steps to contact the landlord and the landlord’s agent.

While the landlord is responsible to arrange and carry out repairs under section 52(2), the cost of those repairs, other than capital costs and the cost of urgent repairs, may be passed onto the tenant if they have been specified in the lease as recoverable outgoings under the lease. Again, this highlights the importance of checking the lease document itself and understanding the parties’ obligations.

In Summary:

  • a landlord cannot seek to recover capital costs from a tenant for the maintenance of a building or plant and equipment in the building (Section 41 of the Act)
  • a landlord is responsible for maintaining the structure of the premises in the same condition as at the start of the lease
  • the landlord is responsible to maintain any plant and equipment in the premises or any fixtures and fittings relating to services in the premises, where the tenant cannot remove those items at the end of the lease but the cost of such repairs (if not capital costs) can be recovered by the landlord against the tenant
  • where the tenant carries out any urgent repairs, for which the landlord would be responsible, then the tenant can recover that cost from the landlord and the landlord cannot seek to charge that cost back to the tenant under an outgoings provision in the lease

Commercial Leases

Generally speaking, commercial leases require tenants to carry out certain repairs but there are exemptions. Unless the need for the repairs is caused by the tenant, repair obligations will not usually extend to structural repairs or repairs required by fair wear and tear.

Where premises are in need of repair and it is not the tenant’s responsibility under the lease, the general legal position is that the landlord is not obliged to carry out those repairs in the absence of an express term in the lease requiring the landlord to do so.

Nonetheless, there are statutory requirements which require a landlord to effect repairs. While the common law is reluctant to imply an obligation on the landlord to repair or maintain leased premises, a prudent landlord needs to take into consideration the obligations and requirements of the common law principle of negligence, the Wrongs Act 1958 (Vic), the Occupational Health and Safety Act 2004 (Vic) and the Building Act 1993 (Vic).

What can you?

Many repair disputes can be avoided by ensuring that condition reports in respect of the lease premises are prepared and signed off by the parties at the commencement of a lease, at the renewal of a lease, on the assignment of a lease and, most importantly, at the expiry of a lease.

Also, to clarify which party is liable for repairs, the lease should always firstly be checked and then you should seek legal advice in relation to the particular issue.

Author: Evelyn Marcou