Versus (Aus) Pty Ltd (the Tenant) leased retail premises located in Church Street, Brighton from A.N.H. Nominees Pty Ltd (the Landlord). The Tenant operated a lingerie business from the premises from June 2006 until the Tenant vacated in May 2011.
The premises was affected by water and moisture ingress which resulted in excessive mould within the premises. Notwithstanding that the Tenant vacated the premises, it renewed the lease in May 2011 in full knowledge of the defects on the understanding that rectification works would be undertaken by the Landlord. It was accepted that the condition of the premises probably existed prior to the Tenant’s entry into the lease and in any event, was known to the Tenant when it renewed the lease. There was no positive obligation on the Landlord to remediate the mould contained in the lease.
The Tenant asserted that the Landlord was required to remediate the premises pursuant to s 52 of the Retail Leases Act 2003 (Vic) (Retail Legislation) and additionally, obliged to remediate the premises in order to provide the Tenant with quiet enjoyment failing which, the Landlord would be in repudiation of the Lease. The Tenant claimed in the alternative that the Landlord was liable for compensation under s 54 of the Retail Legislation or from a claim of estoppel.
The Tribunal held that a breach of s 52 of the Retail Legislation does not occur where a landlord refuses to rectify a latent defect unless that defect manifested during the term of the lease. The burden of proof is on a tenant. In this instance, the Tenant did not prove that the defect occurred after the lease commenced/was renewed.
The Tribunal held that in the absence of a breach of s 52 of the Retail Legislation or a breach of a term in the lease, the Landlord did not breach a covenant of quiet enjoyment by failing to remediate the mould where it was likely to have been present in the premises when the lease was entered into or renewed. Likewise, a covenant to provide quiet enjoyment does not apply in respect of defects existing at the commencement date of the lease.
On the Tenant’s alternative claim, the Tribunal found that the Tenant was not entitled to compensation under s 54(2)(e) of the Retail Legislation on the basis that the damage to the premises would have been reasonably apparent to the Tenant when entering into or renewing the lease.
However, the Tribunal held that the Landlord was liable to pay the Tenant compensation arising from estoppel for loss of profit, loss of good will and for damage to the Tenant’s property on the basis that the Landlord represented to the Tenant that the Landlord would carry out works to remediate the premises and the Tenant relied on that representation to its detriment.
Date delivered: 11 May 2018
Property type: Retail
Michael Mercier, Associate