Amirchian v SP99357: s52 RTA + 106(5) damages

Amirchian v The Owners – Strata Plan No 99357 [2023] NSWCATAP 286

In short

1. Section 52 of the RTA imposes obligations on landlords to ensure their property is fit for habitation, which includes the state of the common property.

2. A lot may be ‘uninhabitable’ for the purposes of section 106(5) of the SSMA if it breaches the obligations in section 52 of the RTA.

3. An owner may be entitled to damages for lost rent where an intention to rent exists, but the owner resides in the lot.

4. An owners corporation is not liable for damages under 106(5) for the ‘reasonable period’ afforded to investigate, scope, contract and complete remedial works.

Background

The appellant lot owner occupied the lot from its 2019 construction until June 2022 when she decided to sell the apartment. The apartment did not sell so the owner was advised to rent it for 12 months before reattempting to sell.

The appellant moved out of the apartment and placed her goods into storage. A rental agency agreement was not signed and the apartment was never rented.

In July 2022, there was water ingress following heavy rain. The strata managing agent was notified of the active leak, that electricity had been cut off and that the smoke alarms were no longer functioning due to the water ingress.

The appellant formed the view that the apartment could not be rented until the damage was rectified, so she resumed occupation of the lot. The owners corporation respondent estimated the repairs would take 8-10 weeks to complete.

Works commenced in September 2022 for a few weeks then stopped, resumed in December, and finished in April 2023.

The appellant sought damages for her lost rent for a period of nearly 27 weeks.

At first instance

The Tribunal dismissed the application on the grounds that:

1. there was no intention to rent the apartment on account of there being no signed agency agreement; market listing or rental agreement;

2. the evidence did not establish the claimed period of uninhabitability; and

3. no real steps were taken to rent the property, and the appellant continued to reside there.

The law

Section 52 of the Residential Tenancies Act 2010 variously provides for a landlord’s general obligations for residential premises, relevantly including an obligation to provide it in a state fit for habitation.

On appeal

The appellant argued that she was unable to meet her obligation under section 52 of the RTA, as a landlord, because the apartment was not suitable for habitation; and that there would be a necessary period where remedial works were to be undertaken so it would have been unfeasible to have tenants in possession of the lot.

The Appeal Panel upheld the appeal, finding that:

1. the decision was contrary to the accepted evidence about the appellant’s intention to rent the apartment;

2. the lack of a signed agency agreement ignored the appellant’s explanation that she would have rented the apartment but for the water damage; and

3. the Tribunal erred in its approach to calculate the relevant period of loss.

The Appeal Panel agreed with the appellant that the Tribunal overlooked the requirements that would have been imposed by reason of section 52.

The Appeal Panel substituted its own decision to the effect that:

1. the owners corporation breached its statutory duty from the July 2022 rain event, which was not discharged until April 2023;

2. once on notice of the breach, the owners corporation should have been afforded a reasonable time to investigate, scope, negotiate and enter contracts, and complete the work;

3. three months was considered reasonable, plus 10 weeks to complete the work;

4. but the works were not completed until a further 15 weeks thereafter;

5. accordingly, the respondent breached its statutory duty for 15 weeks;

6. the loss of rent was foreseeable, and the appellant is entitled to compensation for lost rent for the period of 15 weeks; and

7. those damages are to be nominally reduced by ~10% to account for the appellant residing in the lot.