28/10/2010

In June 2010, the Supreme Court handed down a decision imposing the obligation on a landlord of commercial premises to install “essential services” based on an express obligation to maintain those services.

In Workcare Management v Gajic Holdings [2010] NSWSC 919, Rein J held a landlord liable for damages to a tenant where the landlord failed to provide essential services to the building.  The consequence was that the tenant received compensation for rent paid during the period where essential services were not adequately provided to the building.

The plaintiff’s case was based on:

1.    absence of toilets;
2.    absence of hand basins;
3.    absence of hot water;
4.    absence of air-conditioning; and
5.    inadequacies in fire fighting and fire safety equipment.

The plaintiff argued that the building was incomplete and unusable until all services had been completed to the building.

The plaintiff alleged that representations were made by the landlord during the negotiation of the lease that the building would be complete by a certain date and the lease provided that the landlord would “maintain essential services” but the lease did not expressly state that the landlord must install essential services.

The questions to be determined by the Court were:

1.    was the building lacking essential services?
2.    was the absence of essential service a breach of the lease?
3.    was the plaintiff entitled to damages for that breach?
4.    how much damages?

The Court held in favour of the plaintiff based on:

“a promise to maintain essential services entails a promise to install the essential services.  If I am wrong in that conclusion, I regard it as appropriate to imply a term to that effect…”

and

“my conclusion is that the premises have not been shown to be usable as a commercial tenancy in the period between March, which is when the rent started, and now, and accordingly that the plaintiff is entitled to offset against the rent as damages the amount of the rent.”

The conclusion was that the tenant would be compensated for rent paid as damages for the landlord breaching its obligations to provide essential services.

If you have any questions in regard to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.