Part 6 – Strata Renting
For landlords, renting out a strata unit is entirely different from renting out a house because a strata unit is part of a strata community.
Repairs and tenant behaviour are special hazards when renting out a home unit.
This newsletter sets out the rules about repairs and tenant behaviour for strata owners.
REPAIRS
What damage is the owners corporation’s responsibility?
The strata building is owned and governed by the strata owners corporation (the body corporate), not the landlord. The landlord owns the airspace inside their part of the building.
And so it is the owners corporation, and not the landlord, which is responsible for maintenance and repairs to the building and to insure the building.
During a storm, water penetration through the roof, windows, or the balcony doors might damage carpets, furniture, clothes, cupboards and paintwork. The owners corporation must repair the roof, gutters and downpipes; and pay for the damage caused by the water ingress to the landlord’s fixtures and tenant’s goods.
Sometimes, water will start dripping down from the ceiling because something is overflowing or flooding in an upstairs apartment. It could be a burst water pipe, a burst hot water heater, blocked drains or floor wastes, or a defective waterproofing membrane. The owners corporation must repair and compensate the owner and the tenant for the damage caused.
A home unit, villa or townhouse can be damaged in other ways. Smoke from a nearby fire might discolour paintwork. Floors may crack from rusting balcony railings or steel reinforcement (this is called concrete spalling or concrete cancer). Defective services to the property – electrical wiring, gas pipes, communication lines and water pipes and drains – are the owners corporation’s responsibility to repair up to where they poke through the wall.
What is the owners corporation’s responsibility to repair?
Section 62 of the Strata Law states - An owners corporation must properly maintain and keep in a state of good and serviceable repair the common property (i.e. the building). The owners corporation is responsible to repair the damage to the building, and pay compensation, no matter that it is not at fault.
Illustration: In the NSW Court of Appeal decision of The Owners SP 35042 v Seiwa Australia Pty Ltd [2007], the owners corporation was ordered to pay the landlord $150,000 as compensation for loss of rent for 30 months until the repairs were completed. The premises were a top floor penthouse in North Sydney with a roof top terrace. It was vacant because it was not habitable until repairs to the membrane and the steel railings around the roof top terrace were completed.
The owners corporation pays for the repairs out of its administrative or sinking fund.
The owners corporation takes out strata insurance to cover damage by storm and tempest, fire, flood, vehicle impact, and so forth. Strata insurance usually pays for the cost of drying or replacing carpets, patching and painting walls and ceilings, replacing ruined kitchen cupboards and built-ins (if made of particleboard, they swell with water), and compensates tenants for damaged goods.
Many landlords take out landlords insurance to cover damage which is not covered by strata insurance, such as fire and water damage caused by accident inside the four walls of the home unit.
Is the landlord at risk if the repairs are not carried out quickly?
In a perfect world, all that a landlord needs to do is to pass on the tenant’s request for repair to the strata manager, and the repair will be carried out quickly.
Landlords cannot use the excuse that the owners corporation is slow in looking after the repairs to do nothing, because the landlord is responsible under the Tenancy Agreement to make sure that the premises are fit to live in and kept in a reasonable state of repair (clauses 18.1 & 18.3). If the owners corporation is too slow, the landlord must organise the repairs themselves, and obtain reimbursement later, to limit tenant claims for rent reduction.
What is a reasonable time frame for repairs? The Residential Tenancy Law states that serious roof leaks, a gas leak, a dangerous electrical fault, flooding or serious flood damage, serious storm or fire damage, failure of the gas, electricity or water supply are all urgent repairs, and must be fixed within 14 days (sections 62 & 64).
What rent reduction and compensation is a tenant able to claim?
A tenant can claim a rent reduction until the damage is repaired. This is called a rent abatement. The tenant can also claim compensation for damaged goods from the landlord.
Illustrations – Tribunal Decisions
|
The cause of the damage and the repair |
The rent reduction and compensation |
| 2010/240 The water mains broke in an adjoining unit and flooded the home unit. Contractors immediately suctioned the carpet, installed fans, and later on, re-laid the carpet and re-painted the walls and skirtings. | A rent reduction of 75% totalling $1,000.91 was awarded. Compensation of $1,000 for inconvenience, distress and embarrassment was awarded; for the period the premises were affected: 23 December to 18 January. |
| 2012/139 Rainwater leaked through the ceiling in one corner of the lounge room. The owners corporation repaired the roof. | A rent reduction of $30 pw was limited to 7 weeks because the tenant had not given access for repairs when requested. |
| 2012/400 Water leaked through the ceiling of the master bedroom and en suite from a burst pipe in the apartment upstairs. The owners corporation repaired the pipe and replaced the ceiling. Two months later, water leaked from an overflowing bath. The owners corporation again repaired the ceiling. Six weeks later, it repaired another pipe. | A rent reduction for loss of amenity of the rooms of $3,479.82 was awarded, being 15% of the rent for four months until the tenant vacated. Compensation of $3,002.45 was awarded to replace the water damaged electric blanket, quilt and bed linen and $3,650 being 50% of the cost of a king bed ensemble, which was at least two years old. |
Some loss of rent cover is included in the standard strata insurance policy.
Landlords are not responsible for each and every loss. In Tribunal Decision 2011/489, the strata insurance compensated the tenant $9,000 for furniture, clothing and other goods destroyed when the premises was flooded with water rising from the floor waste and the shower waste in the bathroom. The tenant claimed against the landlord for the cost of hotel accommodation, distress and inconvenience (which the strata insurance did not cover) arguing a breach of the requirement to keep the premises in good repair. The Tribunal rejected this claim because the landlord did not cause or know that there was a problem.
Is a tenant able to end the lease early if the building is under repair?
What if the landlord knows that major remedial building work is about to commence on the outside of the block of units and does not let the tenant know when signing the lease?
In Tribunal decision 2012/450, the work was to take several months. It started with scaffolding the home unit building which prevented use of the balconies; the noise, disturbance and paint fumes made it impossible to work from home; and during the day, the workmen blocked access to the driveway to vehicles.
The Tribunal said that the landlord’s failure to let the tenant know that the building work was about to commence was a breach of clause 14.2 of the lease which gives the tenant quiet use and enjoyment. The tenant was entitled to terminate the lease. The tenant was awarded a refund of 30% of the rent from the date the work commenced until the lease ended for loss of amenity – inability to use the premises and the driveway during the day, and the balcony at all.
The experienced landlord will warn the tenant that building repair work is no the horizon and offer a rent reduction to keep their tenant while the building is under repair, to defray the special strata levy the landlord will need to pay to fund the work.
TENANT BEHAVIOUR
Tenants must comply with the strata by-laws as well the lease
Some tenants do not know how to behave! They park in visitor car spaces, they party loudly late at night, they dump rubbish anywhere except in the bins provided, they do ‘wheelies’ on the lawn, they have yappy dogs as pets.
Both the Residential Tenancy Law and the strata by-laws contain rules for tenant behaviour.
Landlords must give their tenants a copy of the strata by-laws within 7 days of signing the lease. Landlords who fail to do so might leave themselves exposed to tenant claims.
In Tribunal decision 2009/410, the tenant moved into a home unit with his dog, after being assured by the landlord’s agent that the building was “pet friendly”, even though the strata by-laws prohibited the keeping of animals . The landlord did not give the tenant a copy of the strata by-laws.
The owners corporation took legal action against the tenant to remove the dog. The tenant moved out. The Tribunal awarded the tenant $3,723, payable by the landlord, as compensation for breach of the promise of quiet enjoyment in the lease.
Should a landlord intervene when tenants are misbehaving?
What should a landlord do when they receive a complaint about tenant misbehaviour?
The experienced landlord will issue a warning to their tenant if the complaint is about excessive noise, damage or is pet related, because they know that tenants misbehaving in these ways might mean that they are causing damage to the property.
If the warning is ignored, the landlord might terminate the lease, even though the owners corporation could also deal with the tenant misbehaviour as a breach of a strata by-law.
In Tribunal decision 2012/416, the tenant had been smoking in the garbage room in breach of the non-smoking by-law. The strata manager complained to landlord’s agent, who in turn asked the tenant to sign an undertaking to cease smoking. The tenant did not sign, or cease. The landlord went to the trouble and expense of terminating the lease based upon a non smoking clause in the lease, probably to keep a good relationship with the other owners.
Should a landlord leave it to the owners corporation to enforce the strata by-laws directly?
Generally, a landlord will avoid terminating the lease for tenant misbehaviour, so long as the rent is paid on time and the premises are kept neat and tidy. Tenancy Law is too vague and the time and trouble of terminating the lease and going to the Tribunal is impracticable for a landlord.
On the other hand, owners corporations prefer that the landlord deals with tenant misbehaviour. The logic is that the landlord has the power to evict the tenant under the Tenancy Agreement, while the owners corporation can only make the tenant comply with the strata by-laws.
The experienced landlord will leave strata issues such as noise, parking in visitor spaces and dumping of rubbish, for the owners corporation to deal with directly with the tenant because the strata by-laws are better designed to cover these kinds of issues.
What if the tenant complains about a neighbour’s behaviour?
In Tribunal decision 2012/400, the tenant complained of raucous and loud noise from the occupants of an upstairs apartment. The noise was coming through the polished wooden floorboards. The floor was original, not a modern floating floor laid with acoustic underlay. The Tribunal said that the landlord had not taken all reasonable steps – requesting that rugs be placed over the boards was not enough; the landlord should have requested the owners corporation to enforce the strata by-law dealing with floor noise. As a result, the landlord was ordered to refund 20% of the rent to the tenant, being $3,699.81 for the five months that the noise disturbance had continued.
The Landlord’s Guide to Renting has been produced by Cordato Partners Lawyers, as part of its Property Law practice. It contains a brief outline of the Tenancy Law.
Because it is a general guide, is not intended to be relied upon for any specific tenancy situation. For those situations professional advice should be obtained.
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