Thursday, December 8, 2016

Running repairs? The cost of longer term tenancies: part 2

Last week on The Brown Couch we talked about how much it could end up costing tenants who sign up to a longer term lease in exchange for taking on responsibility for repairs and maintenance – if such a model for long fixed term tenancies is taken up by the Government.

One aspect we didn’t touch on was the question of what kind of repairs tenants might be liable for in this scenario, and how exactly liability would be set out?



Commercial tenancies have been suggested as an example of how this might be determined.

In commercial tenancies responsibility for repairs and maintenance of a premises is generally set out in the lease – though not always. The lease should outline what repairs a tenant is and isn’t expected to pay for. Clauses are commonly drafted to imply that the tenant has responsibility for the general repair and maintenance of premises, but exclude responsibility for repairs related to ‘fair wear and tear’, structural repairs or costs relating to capital expenditure (for example replacing air-conditioning units). If these are excluded they are not the tenant’s responsibility, but they are also not automatically the landlord’s responsibility. They are only the landlord’s responsibility if this has also been specifically outlined in the lease.

Not surprisingly perhaps, repairs and maintenance are a common area of dispute in commercial leases.

If tenants in private rentals were expected to take on repairs in exchange for longer term tenancies, we would certainly hope there were clear limits set on what repairs they were responsible for.  But we foresee that under an arrangement similar to those made in commercial tenancies a whole lot of confusion and disputes regarding repairs could arise. We can imagine many disagreements over where ‘general’ repair and maintenance ends and structural begins.

The first comment we received on our first discussion in this series spoke broadly to this concern. Anonymous told us:
I once rented a property where I was responsible for the first $20 worth of repairs (a number of years ago now). This caused no end of drama e.g. electrician visit of $87 was $20 mine, rest landlord but replacing washes was solely my problem as cost of washers was less than $20. Never again. It was 6 years of arguments.
Even where it seemed the terms were set out quite clearly (tenant responsible only for “the first $20 worth of repairs”) the result was: “6 years of arguments”.

Currently under the Residential Tenancies Act 2010 the landlord is responsible for providing and maintaining the rental premises in a 'reasonable state of repair'. They don’t, however, have to fix any damage caused by the tenants. Already many disputes arise between tenant and landlord because the landlord claims that the tenant is in some way responsible for the problem. Disagreements commonly come up around issues like vermin, mould and guttering – either the landlord claims the tenants caused it, or that they failed to notify them soon enough or take adequate measures to ‘mitigate’ the problem (i.e. take steps to limit the extent of the problem and subsequent costs of any repair or replacement).


Where a tenant becomes responsible for the general repairs and maintenance of a property, we're worried landlords might similarly try to push 'structural' repairs on tenants on the basis they are a result of the tenants failing to meet their end of the bargain and keep up with the general repairs and maintenance required.

Tenants, under such a model, might also become vulnerable to arguments around ‘waste’. 'Waste' as a legal concept refers to any permanent damage done or allowed to a property by a person who is legally in possession of it, and where the damage or harm has diminished the value of the property. A landlord can seek compensation for 'waste', and this can include the cost of restoring the property to its original condition after any changes have been made, even if these changes were intended as improvements.

Currently we believe an action for damages because of 'waste' is unlikely to succeed against a tenant covered by the provisions of the Residential Tenancies Act 2010, largely because of the landlord’s current obligations around repairs and maintenance. This wouldn't necessarily be the case if long fixed term tenancies were offered that varied or shifted the obligations relating to repairs to tenants.

We mentioned in our previous post that many private rental tenants are already facing very high housing costs. They may not be able to attend to repair and maintenance issues as they occur, or even perhaps during the duration of the lease.

In this situation, in addition to seeking compensation to undertake any required repairs at the end of a tenancy, a landlord might also take an action for damage on the basis of ‘waste’.  So they could seek further compensation (that might, for example, cover significant structural repairs) claiming the tenant’s failure to attend to repairs in a timely manner had led to a diminishment in value of their property. However a landlord also may be able to seek termination of an agreement during the lease, on the basis that that the tenant has failed to meet their obligations to undertake repairs and maintenance work.

If the Government really wants to improve security for tenants there is a much easier way (and yes, we've talked about this before) - they need to look at changing the current provisions in NSW tenancy legislation that mean tenants can be evicted for no reason. Because it's clear the costs of long fixed term tenancies are just too high.


2 comments:

  1. Considering the landlords are having their cake and eating it too, not doing repairs and benefiting from negative gearing, I think,"Whoa! The groundwork basics have to be done first!" Firstly, there is no minimum standard to rental properties, secondly, where is the legality in real estate agents renting out properties that have not been approved for rental, and thirdly, the collusion between landlords and real estate agents in renting out dumps in the first place. Where is their responsibility?! Where is their accountability?!

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