Under section 52 of the Retail Leases Act 2003 (VIC) (the ‘Act’), landlords have positive obligations to effect structural repairs to the premises. In the recent case of Versus (Aus) v ANH Nominees Pty Ltd [2015] VSC 515, the Court held that a failure by the landlord to comply with section 52 would amount to a repudiation of the lease. As a tenant, this is good news – it means that the landlord will have to take you more seriously when it comes to maintaining the structural integrity of your premises or they risk breaching the lease. Below, we will explore this case in more detail and outline its relevance to the interpretation of section 52 in Victoria.

What Happened?

The tenant initially undertook an assignment of a retail lease for a shop premises trading as a giftware store. The tenant then underwent fit-out works to transform the premise into a retail store to sell upmarket lingerie.

Upon carrying out the fit-out works, the tenant noticed that the premises had rising damp and water damage issues. The tenant notified the landlord’s agent on numerous occasions to rectify this.

Throughout the lease term, the premises suffered damages such as flood damage and the landlord never resolved the original damp and water damage issue.

As a result of the state of structural disrepair of the premises, the tenant was unable to trade and sued the landlord for damages under section 52 of the Act.

Landlord’s Structural Repairs Covenant

In Victoria, section 52 of the Act provides that a landlord has the responsibility for maintaining the condition of the following elements of retail premises:

  • Structure;
  • Fixtures;
  • Plant and equipment; and
  • Any appliances, fittings and fixtures provided by the landlord which relates to basic amenities (such as gas, electricity, water, drainage and other services).

They must maintain its condition in a manner consistent to when the parties first entered into the retail premises.

In the past, landlords were able to circumvent this provision by renewing a lease. This loophole exists because the wording of section 52 states that the landlord must comply with this structural repairs covenant (promise) on the date the retail premise was “first entered into.” The landlord could escape responsibility as the premises were arguably in a state of structural disrepair at the date the lease was renewed (“first entered into”).

The Decision

Justice Croft’s recent decision in this matter has turned that proposition on its head. He held that a landlord cannot avoid liability to repair and maintain a retail premises under section 52 of the Act because the tenant has exercised its option to renew a lease.

Justice Croft rationalised that the condition of the premises when it was ‘first entered into’ was referring to the state which the landlord was responsible for maintaining. Any other interpretation of section 52 would allow the landlord to take advantage of their wrongdoing.

The significance of this case is the new interpretation of section 52 under the Act. If the landlord fails to carry out structural repair works in compliance with the Act, the landlord is taken to have repudiated the lease by failing to repair and maintain the premises.

Key Takeaways

Landlords should understand the obligation section 52 imposes on them to keep the premises in a tenantable condition. Failure to do so can result in the tenant taking action against the landlord and even claiming they have repudiated the lease. Tenants should also understand their rights under the lease – if it’s silent on the point of structural repairs, the Act will prescribe these provisions in the Agreement.

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Questions? Get in touch with our commercial leasing lawyers on 1300 544 755 or fill out the form on the page.

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