Archive for July, 2012

Can the landlord pass on the costs of complying with the Building Act?

Some of Melbourne’s finest legal minds are spending long hours trying to solve the question of whether a landlord can recover from a tenant the costs of complying with the landlord’s obligations under the Building Act 1993 (Act) and regulations.

Much of the debate concerns s 251  which provides that:

“(1)      If the owner of a building or land is required under this Act or the
regulations to carry out any work or do any other thing and the owner does not carry out the work
or do the thing, the occupier of that building or land or any registered mortgagee of the land or the land on which the building is situated, may carry out the work or do the thing.

(2)        An occupier may-

(a)        recover any expenses necessarily incurred under subsection (1) from the owner as a debt due to the occupier; or

(b)        deduct those expenses from or set them off against any rent due or to become due to the owner.


(6)        This section applies despite any covenant or agreement to the  contrary.”

Underlining added


In my  the view the effect of s.251 is that if the owner is required by the Act or the regulations to carry out any work or do any other thing and does not carry out the work or do the thing:

(a)        the tenant can do the work that the landlord was obliged to do and  recover the costs from the landlord owner as a debt; and

(b)        the tenant can set-off the costs of doing the work that the landlord owner was obliged to do against the rent; and

(c)        the usual rent covenant that rent must be paid “without deduction” will not assist the landlord if it fails to comply with s.251 and the tenant does the work that the landlord was obliged to do (Chen v Panmure Hotel Pty Ltd[1]). 

However, s 251 does not answer the question whether a building owner can recover from the tenant the owner’s costs of complying with its obligations under the Act and regulations. In other words, can the tenant be obliged to pay the owner’s costs of complying with the Act and regulations when s 251 has not been enlivened?

Section 39 of the Retail Leases Act 2003 (2003 Act) permits a landlord to recover outgoings from the tenant by appropriately drawn provisions in a lease. Section 41(1) of the 2003 Act makes void a provision in a lease that requires the tenant to pay an amount in respect of capital costs. Thus it is clear that the tenant could never be required to pay an amount in respect of capital works.

In my view, if s 251 is enlivened by the owner failing to do works that it was required to do under the Act and the tenant does that work, the owner cannot, pursuant to provisions in a lease, recover from the tenant the costs that the owner pays to the tenant under s 251.

But where 251 of the Act has not been enlivened and the owner seeks to recover from the tenant the costs that it has incurred in complying with the Act, it is not clear to me why the landlord should not be able to recover those costs from the tenant. Proponents of the view that the landlord cannot recover the costs will refer to Café Dansk Pty Ltd v Shiel[2] where Deputy President Macnamara (as his Honour then was) held that a landlord could not recover from the tenant the costs of complying with s 52 of the 2003 Act. In my view there are good arguments as to why Café Dansk is not correct, but even if it be assumed that the decision is correct the logic applied in Café Dansk does not necessarily apply when considering the Act. The Act and the 2003 Act are directed at different things. The Act is concerned with ensuring the safety of persons using buildings; its provisions are directed solely to that end; and it says nothing about the ultimate allocation of the costs of complying with the Act while the 2003 Act,  and s 52 in particular, is remedial leglislation concerned with restoring the balance of rights as between landlords and tenants. In my view it is not at all clear that there is anything in the Act that rebuts the presumption that an Act is not to be construed as taking away existing common law rights unless the legislative right to do so is clear[3]. I am not convinced that it is clear that Parliament intended to take away the contractual right to pass on the costs of compliance.    


[1] [2007]VCAT 2463

[2] [2009]VCAT 2009.

[3] Pearce, D.C and Geddes, R.S, Statutory Interpretation in Australia, 7th ed, LexisNexis, 2011, paragraphs 5.27, 5.28 and 5.35.



Consequences of repeal of Fair Trading Act

In yesterday’s post I stated that the Fair Trading Act 1999 had been repealed effective 1 July 2012 and replaced with the Australian Consumer Law and Fair Trading Act 2012.  Many commercial disputes brought in VCAT were “consumer and trader” disputes within the meaning of s.107 of the FTA. Chapter 7 of the new Act preserves the “consumer and trader” dispute regime.  Note should be taken of s.3(2) which provides that unless the contrary intention appears the words and expressions used in the new Act have the same meaning as they have in the Australian Consumer Law. This means, for example, that in deciding whether a dispute is a “consumer and trader” dispute recourse will have to be had to the definition of “goods” and “services” in s.2 of the Australian Consumer Law.

Section 8 of the new Act provides that the “Australian Consumer Law text” applies as a law of Victoria.  The expression “Australian Consumer Law Text” is defined in s.7 as meaning, among other things, schedule 2 to the Competition and Consumer Act 2010 (Cmlth), being the Australian Consumer Law. Thus, when considering, for example, a potential claim for misleading or deceptive conduct recourse must be had to s.18 of the the Australian Consumer Law and not to any provision in the new Act VCAT has jurisdiction to hear and determine disputes under the Australian Consumer Law and thus the full suite of remedies available under the Australian Consumer Law can be utilized in VCAT. See: s.224 of the ACLFTA.

Readers should also note that the Landlord and Tenant Act 1958 will be, but has not yet been, repealed by the ACLFTA with the consequence that the law concerning uncollected goods left in premises at the termination of a lease remains in Part IVA of the Landlord and Tenant Act. When Part IVA  is repealed Part 4.2 of the ACLFTA will be the statutory source of the law in Victoria concerning uncollected goods.

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Farewell to the Fair Trading Act

The Fair Trading Act 1999 was repealed on 1 July 2012 and replaced by the Australian Consumer Law and Fair Trading Act 2012.  Some parts of the ACLFTA have not yet come into force including Part 4.2 (disposal of uncollected goods), Part 5.2 (liability of accommodation providers), s.234  (repeal of Disposal of Uncollected Goods Act 1961), s.235 (repeal of Carriers and Innkeepers Act 1958, s.236 (repeal of Landlord and Tenant Act 1958). Under the ACLFTA VCAT retains its jurisdiction to hear and determine ‘consumer and trader’ disputes (Chapter 7) with the consequence that VCAT will continue to be able to hear and determine disputes between landlords and the guarantors of the tenant’s obligation under a lease.

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