Landlord liable to pay compensation under s.54 of Retail Leases Act

Tenants commonly complain about water entering leased premises and affecting their use and enjoyment of a tenancy. In National Hospitality Group Pty Ltd v Regal Hotels Pty Ltd [2013] VCAT 413 a landlord was held to be liable to pay compensation to a tenant under s.54 of the Retail Leases Act 2003 despite there being no defects in the leased premises.

The tenant complained on many occasions to the landlord about water entering the premises. The tenant sued for damages relying, among other provisions, s.54 of the Act.

Section 54 implies into a lease a requirement that the landlord pay reasonable compensation to the tenant for loss or disruption suffered by the tenant because the landlord fails to, among other things, take reasonable steps to prevent or stop signficant disruption with the landlord’s control to the tenant’s trading at the premises.

Despite the cause of the water entering the premises being damage to storm water drains outside the leased area and there being no defects in the premises, the Vice President, Judge Jenkins held that the landlord was liable to pay the tenant damages of $35,000.

Judge Jenkins held that the landlord was liable to pay compensation under s.54(2) of the Act because it had “breached the covenant of quiet enjoyment by failing or refusing to take steps which were reasonably available to it”, the breach being that the landlord had not kept the tenant informed of progress or investigations or provide it with any reports or advice and did not engage its own engineering or plumbing consultant to give advice and undertaken appropriate investigations.

It is respectfully submitted that the decision shows a misunderstanding of the covenant of quiet enjoyment and imposes obligations on landlords that are not supported by the Act. Pursuant to a provision in the lease the tenant also entitled to an abatement of rent for the period when the premises was unfit for use.