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Managing Agents Beware

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By MST Lawyers

The NSW recent case of Wu v Carter [2009] NSWSC 355 places managing agents on notice that in light of the NSW decision Victorian courts will be mindful to impose a heavier burden on agents who complete condition reports on rented premises. The case involved a tenant falling 7-8 meters due to a faulty handrail on a balcony, which was deemed to be satisfactory by the managing agent on more than one inspection of the property. The Court held that the agent was 25% responsible for the faulty handrail, while the body corporate was liable for the remaining 75%.

The case concerned a development of brick units built around 1972, consisting of three levels of units above the ground floor garages. The specific unit was located on the middle level. From 1994, the unit was leased through a real estate agency which managed the tenancies. The same agency completed condition reports on the property. Condition reports were conducted when new tenants moved in and once yearly. From 1994 to 2000, these reports generally noted that the balcony was “clean”, “undamaged” and “working”.

In January 2003, the tenant signed a Residential Tenancy Agreement, in which the landlord agreed to keep the premises in reasonable repair. At that time, a condition report was completed by the agent, noting that the balcony was “clean, undamaged and working”, however the tenant was not present when it was completed. In early December 2003, the tenant was dropping material from the balcony to her husband below who was catching the items as they fell. She dropped an empty plastic milk crate to her husband, then she held the rail to see whether her husband had caught it. When she touched the rail it gave way and she lost her balance and fell over the railing to the ground. The tenant gave evidence that she only put her hands on the railing and did not put any weight down, nor did any part of her body or the crate touch the timber.

The agent gave evidence detailing that she was not qualified to certify the structural integrity of the balcony, as she is not a “builder, architect or engineer”. Notwithstanding the fact that the agent did not hold relevant qualifications to certify the structural integrity of the railing, the Court held that “[the Real Estate Agent] undertook the obligation to inspect and complete the condition report and by doing so became subject to a duty of care to the [tenant] to warn the [tenant] and/or the landlord of any dangerous defects in the premises of which it was or ought to have been aware.”

Furthermore, the Court held that the age of the railing was such that reasonable care required that a simple lay test (such as shaking the balcony) should have been performed on the railing at the time of the inspection prior to the commencement of the plaintiff’s tenancy. The agent gave evidence that it was part of her duties to do this. Had such a test been performed, the Court held that it would have resulted in undue movement in the railing or deformation or separation of the mountings such as to indicate that the railing was unsound. In the circumstances, it appeared to the Court that the Agent had not carried out the test or not performed it adequately.

The court held the Agent to be 25% liable for the tenant’s injuries, with the body corporate being liable for the remaining 75%. Wu v Carter imposes a greater level of responsibility on agents when they conduct condition reports.

Managing agents and managers of an Owners Corporation should engage suitably qualified personnel to complete a condition report of the premises to avoid being caught in litigation based on facts similar to the above case.

For more information, please contact MST Lawyers on +61 3 8540 0200.