A Victorian Supreme Court decision has held that landlords should ensure that residential premises are maintained in good repair, even if the property is dilapidated when the tenant goes into occupation. That this is being hailed as a “landmark” decision underscores the sometimes Dickensian approaches that still influence tenancy law.

With two states, New South Wales and Victoria, reviewing tenancy legislation, the decision is a persuasive case study on the desirability of imposing minimum standards on the condition of rental premises. There is, however, a sting in the tail, with the judge acknowledging that the conclusion could reduce the supply of very low-cost residential housing.

… there is no law against letting a tumble-down house. – Robbins v. Jones (1863) 15 CB (NS) 221, 240

What did the court decide?

In the Victorian case, Ms Shields, a disability pensioner, rented a house from Mr Deliopoulos for over five years. She was unable to afford any other property. The premises were in poor condition at the start of the tenancy and deteriorated further over time.

The catalogue of “repair issues” included holes in the floor, walls and ceilings; dampness and resultant rot; and rat infestation. The property was sinking in one corner. The condition of the property was described as “filthy” and “unusable”.

Ms Shields sought compensation for a breach of the landlord’s obligation to “ensure that the rented premises are maintained in good repair”.

… having regard to the age, character and locality of the house, would make it reasonably fit for the occupation of a reasonably minded tenant of the class who would be likely to take it. – Proudfoot v. Hart (1890) 25 QBD 42,55

Under the common law, the obligation to repair leased premises fell on the tenant rather than the landlord. The tenant had to keep the premises in good repair (defined above). To comply with this obligation, a tenant could be required to repair premises that were dilapidated at the start of the lease.

The 1975 Poverty in Australia inquiry highlighted the inadequacy of the common law rules to modern tenancy arrangements. This led to the introduction of residential tenancy legislation throughout Australia.

A landlord must ensure that the rented premises are maintained in good repair. – Section 68, Victorian Residential Tenancies Act 1997

The initial decision in the Victorian Civil and Administrative Tribunal (VCAT) confined the scope of the landlord’s duty to the condition at the start of the tenancy, irrespective of the state of repair. The VCAT decision referenced factors such as the rent payable and the tenant’s decision to stay in the property for five years (despite the fact she could not afford anything else).

On appeal to the Victorian Supreme Court, Justice Day noted that proper construction of section 68 was a matter of some public importance because Ms Shield’s matter was the latest of several cases where landlords’ repair obligations were interpreted narrowly. Holding that the obligation was “strict and absolute”, the court concluded that landlords were required to identify and rectify any defects of which they were aware or ought to have been aware.

The court also held that relating the obligations of landlords to maintain premises in good repair to the level of rent payable was inconsistent with the consumer protection focus of the legislation and with equivalent legislation in other Australian jurisdictions.

What are the implications of this decision?

While few would argue with the outcome, the decision does raise some points to ponder.

1. What measures can be taken to ensure rental properties meet an appropriate standard of repair?

All tenants should expect premises conform to minimum community standards for health, safety and energy efficiency. Yet only Tasmania and South Australia have introduced legislation that provides for minimum standards and that certain amenities – which most people take for granted, such as cooking areas, a bathroom and hot and cold water – are provided in rental properties.

In South Australia, if a tenant believes a property has serious structural damage, he or she can seek an inspection by the Housing Improvement Branch and have the property declared substandard. It is suggested such provisions should be adopted in all states and territories. The reviews of residential tenancy laws in Victoria and NSW provide an opportunity to incorporate minimum standards.

2. Will the decision, or the imposition of minimum standards, reduce supply of low-cost rental housing?

Justice Day recognised the decision could prevent owners of properties in poor repair from renting out their properties at low rent, thus further decreasing stock availability. Although a few landlords may decide to do so, in most cases the landlords’ financial realities will prevail and properties will be brought into repair.

The introduction of minimum standards in Tasmania and South Australia has been phased in to give landlords time to budget and improve properties.

3. How can we be sure that tenants receive appropriate legal advice and representation?

Could Ms Shields have succeeded in navigating VCAT, and the Supreme Court, without the assistance of Legal Aid Victoria? A self-represented tenant with few housing options, limited funds and no familiarity with the legal system would find it an onerous task to proceed against a landlord.

Less formal, low-cost processes should be examined. These should include a Housing Ombudsman, as recently suggested by the Victorian Council of Social Service (VCOSS).

Ms Shield’s experience is a timely reminder that the law , in form and in application, must ensure all tenants are provided with the basic necessities in rental properties. And, when landlords do not comply, there needs to be adequate access to justice.