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QUESTION: Who is responsible for lost rent if tenants move out while the lift is being upgraded for approximately 10 weeks? – TC
ANSWER: This is very tricky, because on the one hand the lift repairs would have to be seen as an improvement to the property on the other there is temporary but serious reduction in amenities.
If tenants break a lease early without good reason, they are liable to pay the rent until such times as a suitable replacement tenant is found.
Are the lift repairs ‘good reason’? Did they require level access? Was the apartment on the tenth floor or the third?
The best way to handle this may be via a third party. In the first instance the landlord could encourage the tenant to run a case to have their lease revoked through Fair Trading. The landlord could then run his own case to have the OC compensate him.
But owners throughout the building will be suffering – the only difference is that the landlord can put a price on it.
However, if Fair Trading or the CTTT decide he is entitled to compensation, that would probably be claimable against the building’s insurance.
What do you think?
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The landlord should be careful here. Frequently lift repairs are carried out because they are essential repairs. Owner's Corporations have a statutory obligation to undertake these repairs. Old lifts may not comply with safety codes etc. It is not a good idea to encourage (implictly or explicitly) a tenant to break a lease as the landlord may find themselves liable for doing that. All the owners will benefit from a new lift and this is an important consideration – you can't claim the benefit without the cost. This would be taken into account as well as the owner's own actions: Did the landlord say anything at the general meeting that approved the works? They will have been on notice. Did they landlord then give notice of the lift repairs to the tenant or did they decide to say nothing? Did they offer a rent reduction (which can be offset by a rent increase once the new and better lift is installed)? Be cautious before opening up this matter when you stand to benefit from the property improvement.
The landlord should bear in mind that as an owner it is their obligation under the Act to keep the lift in good repair, as with all other parts of the common property. Where the repair or replacement is essential that falls within their own obligation so, yes, best to work this out amicably with the tenant. The owner cannot seek compensation from the Owner's Corporation for something that is their responsibility to begin with. The owner will have been on notice from the owners meetings. I'm sure a considerate landlord would offer some reduction when they knew about this, they could check with other owners what had been offered as everyone in the building will be going through this, but the tenant should bear in mind that in the case of a significant improvement in service afterwards there might also then be a rent increase! You are quite right about the timetable. This is the key point. Your questioner mentions “approximately 10 weeks”. Is that just a guess by the Owners Corporation or is there a contract with the lift company? A responsible owner's corporation will have a entered a contract, possibly with a liquidated damages clause if the timetable overruns. The owner should (1) check if there is such a contract with the lift company and (2) ask if there is a contract timetable to which they can be held. The question of compensation to the owner could only arise if the contract timetable is not met for some reason of inefficient management.
Jimmy, in your first comment above, which I notice you also published in the Herald, you say “The landlord could encourage the tenant to run a case to have their lease revoked through Fair Trading. The landlord could then run his own case to have the owners corporation compensate him.”
In the SMH article you have (properly) corrected this by pointing out the O/C has an obligation to repair the lift and so the landlord cannot seek compensation from the O/C for something they are duty-bound to do.
However, your advice could be (mis)construed as advice to the landlord to procure the tenant to break the lease in order to create an apparent need for compensation. If the landlord tried to run such a case that could be considered to be an abuse of process, even a fraud, and the landlord may saw (in defence) that your column had advised him or her to do that as an available course. Surely you did not mean that?
I think you are right, though, to point out the best course is for the landlord to seek to negotiate a sensible reduction with the tenant and ensure the lift works run to schedule as much as possible.
I suspect the landlord won't win this one, as landlords are required by the Residential Tenancies Act 2010 to provide premises that are “fit to live in” and nor may a landlord withdraw utilities or “other services” except to avoid danger. A flat on a high floor, or even a low floor depending on age/health of tenant, may be seen as “unfit to live in” and certainly subject to a “withdrawal of services.” high floor flat all of a sudden without a lift may be seen as “unfit to live in” and a withdrawal of services, even if this is not the fault of the landlord. The tenant is likely able to terminate the tenancy for breach of the agreement, or to request a rent reduction for excessive rent (without a lift) – even if lift maintenance is unexpected and to avoid danger (a permitted withdrawal of services) the landlord is still not providing premises fit to live in, and still charging excessive rent in the circumstances. Unfortunately this is not the tenant's problem. The o/c is required to keep the lifts in good repair – if not responsible for loss of rent, presumably they wouldn't want to be responsible for loss of life (and a massive amount of compensation/insurance claims that have bankrupted o/c's in the past)… Perhaps unwanted advice to a landlord, but their best approach may be to accept that loss of rent is going to happen whether they like it or not – try to keep the tenant with less rent so they stay for the duration – rather than leaving, and finding that a new tenant cannot be found due to no lift. Maybe landlords insurance for the future is worth considering?