The tenants' new weapon - s.251 of the Building Act 1993

Please note for members of the public or practitioners in the legal profession where English is your second language a translation key in all languages of the world is available on this blog to assist you. The plain English blog without translation facilities is located at  http://roberthaypropertybarrister.wordpress.com



Recently I have attended a number of mediations at which tenants have invoked s.251 of the Building Act 1993 as part of the bargaining process. Section 251 affords tenants a powerful weapon. Section 251 provides that:

(1) If the owner of a building or land is required under this Act or the
      regulations to carry out any work or do any other thing and the owner does not carry out the work or do       the thing, the occupier of that building or land or
      any registered mortgagee of the land or the land on which the building is
      situated, may carry out the work or do the thing.

(2) An occupier may-

   (a)  recover any expenses necessarily incurred under subsection (1) from
        the owner as a debt due to the occupier; or

   (b)  deduct those expenses from or set them off against any rent due or to
         become due to the owner.

.....
(6) This section applies despite any covenant or agreement to the contrary.

      The effect of s.251 is that if the owner is required by the Act or by the Building Regulations 2006 to           keep premises in a specified state:

(i)  the owner cannot contract out of those obligations by, for example, including provisions in a lease that            make the tenant liable to repair the particular items (Chen v Panmure Hotel Pty Ltd [2007] VCAT            2463);

(ii)  a tenant can do the work that the landlord was obliged to do and recover the costs from the landlord             owner; and

(iii) a tenant can set-off the costs of doing the work that the landlord owner was obliged to do against the             rent.

The usual rent covenant that rent must be paid "without deduction" will not avail the landlord if it fails to comply with s.251 and the tenant does the work that the landlord was obliged to do.

Regulations 1212-1217 require the owner to maintain essential safety measures for a specified class of building built before 1 July 1994.

Regulations 1201-1211 require the owner to maintain essential safety measures for the same classes of buildings built after 1 July 1994.

Regulation 1217 requires the owner of a building to maintain essential safety measures in a state that enables them to fulfil their purpose. 

Under regulation 1205 the owner of a building or place of public entertainment must comply with a maintenance determination regarding a building built after 1 July 1994. 

Regulations 1202 and 1213 define essential safety measures. Regulations 1208 and 1214 requires an owner of a building to prepare an annual essential safety measure report.

Section 251 imposes more significant obligations on a landlord than those implied into leases by s.52 of the Retail Leases Act 2003.

Before entering into a commercial lease both landlords and tenants should consider the effect of s.251 of the Act.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Further elaborations on s.52 of the Retail Leases Act

There is a translation key(widget) this blog for ease of reading for non-English speaking members of the public or professionals. http://roberthaybarrister.blogspot.com.au/



Section 52 of the Retail Leases Act 2003 implies into a retail premises lease a term that:

"The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into -

(a)     the structures of, and fixtures in, the retal premises lease; and

(b)     plant and equipment at the retail premises; and

....." (s.52(2))

In Savers INC (ARB 075 452 185) v Herosy Nominees [2011] VCAT 1160 the  tenant claimed that the landlords of two premises that the tenant operated as a single shop had failed to maintain the premises in good repair: in particular it was alleged that the roof, drainage and floors had fallen into poor repair and caused consequential damage within the premises.

Breaches of the leases and s.52 of the Retail Leases Act 2003 were alleged. The tenant sought orders that the landlords undertake repairs.   The leases (and earlier leases to which the landlords and tenant were parties) contained terms that obliged the landlords to undertake certain repairs to the premises; these terms were more onerous than those imposed by s.52 (“the good repair and condition terms”).

The landlords contended that s.52 limited their obligations - that is because of  s.94 of the Act it was not possible to “contract out” of s.52 and the good repair and condition terms were either contrary to or inconsistent with s.52 and therefore void.

The Tribunal rejected this argument. It was also argued that s.52 did not extend to that that part of a building “including common areas (such as the roof or perhaps the sub-floor) that is not part of the premises demised to the lessee”.

The Tribunal rejected this submission on the basis that a “canny landlord”  could attempt to get around s.52 by expressly excluding areas such as the external structure from the definition of demised premises but at the same time impose a separate obligation upon the tenant to maintain those exterior parts of the building which did not form part of the demise.

Because the good repair and condition terms had appeared in earlier leases the Tribunal was able to determine what state the premises should have been in and it was this standard that was applied in determining what the condition of the premises were when the lease was entered into for the purpose of s.52; the landlords could not take advantage of their failure to comply with the good repair and conditions terms by seeking to rely on the condition the premises were in fact in when the lease was entered into.

The Tribunal also held that an agreement to settle a dispute between a landlord and a tenant was not “contemplated by section 94”; it appears that the Tribunal was saying that s.94 cannot be relied upon to void a provision in terms of settlement.

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/