Australia: Valuer and Retail Leases Update – failure by landlord to repair air-conditioning allows tenant to terminate lease

VCAT rules landlord's procrastination or non-performance to remedy air-conditioning was grounds for termination of lease.

In brief

In October 2018, VCAT, in Sth Melb Pty Ltd v Red Pepper Property Group Pty Ltd [2018] VCAT 1684, determined that the landlord's procrastination or non-performance to remedy the air-conditioning after repeated requests by the tenant allowed the tenant to terminate the lease.

What you need to know

If there is an obligation on the landlord to provide air-conditioning under a lease, or the tenant can rely on section 52 of the Retail Leases Act 2003 (Vic) (effectively requiring the landlord to repair and/or replace the condenser fan of the air-conditioning) a landlord should proceed to ensure that the air-conditioning is working effectively, or risk that a tenant may terminate the lease, which VCAT may allow to occur.

Background

In this case, the lease contained a clause requiring the landlord to install an air-conditioning unit. Despite several requests by the tenant to the landlord over close to 4 months, the landlord failed to remedy the air-conditioning so it was properly operative. This did not entitle the tenant to not pay rent or other costs due under the lease and the tenant was bound to pay the rent, outgoings and undertake the makegood. The issue of any damage the tenant faced was not addressed but the tenant was entitled to accept the landlord's repudiation of the lease and terminate the lease.

Conclusion

Landlords need to take notice of the case and recognise that a tenant may be entitled to terminate a lease based upon the landlord's failure to provide air-conditioning, where there is an obligation on the landlord to provide air-conditioning and, potentially, if the landlord has represented that the premises are air-conditioned. It will not simply be a case of a landlord being liable in damages to the tenant but a tenant may be entitled to terminate the lease. Where tenants have problems with air-conditioning (which is very common in my experience) a tenant will take comfort from this case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.