Grace v Metrocity Realty
[2012] QCAT 663
| CITATION: | Grace and Ors v Metrocity Realty and Ors [2012] QCAT 663 |
| PARTIES: | Nicholas Mark Grace Sasha Flint Rory Grant Tiago Oliveira Michael Pfundt Selvin Kwong Elisabeth Hoyt (Applicants) |
| v | |
| Metrocity Realty King Long Lor Ngo Tran Lor (Respondents) |
| APPLICATION NUMBER: | MCDT162-12 |
| MATTER TYPE: | Residential tenancy matters |
| HEARING DATE: | 16 October 2012 |
| HEARD AT: | Brisbane |
| DECISION OF: | Jeremy Gordon, Adjudicator |
| DELIVERED ON: | 21 November 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. Upon the first applicant Nicholas Grace, providing the tribunal with the written undertaking referred to in paragraph 2 of this order, he shall be entitled to an order that King Long Lor and Ngo Tran Lor pay to him the sum of $24,419.70. 2. Nicholas Grace is required to undertake to the tribunal in writing to hold any monies received in satisfaction of the order made in this matter on trust for himself and for the other applicants in such shares as may be agreed between himself and them or as is fair having regard to the periods of the tenancies and to the share of the rent, and to distribute those monies accordingly. 3. Liberty to any of the applicants to apply to the tribunal to enforce the undertaking given by Nicholas Grace or to determine any issue between them as to the correct share to be paid to them. 4. The rental bond held by the Residential Tenancies Authority under reference 3640908-1 be paid as follows: $725 to the tenants named as parties to the bond and $1,275 to Metrocity Realty (to be held by them and paid out as directed in paragraph [100] of the Reasons below). 5. Metrocity Realty and King Long Lor and Ngo Tran Lor are ordered to pay costs of $1,010.75 incurred by Nicholas Grace. |
| CATCHWORDS: | Minor civil dispute – residential tenancy – house partially or wholly unfit – decrease in amenity or standard – time limits applying to such claims and to compensation claims – rent decrease – manner of calculation – illegal height downstairs – whether agent liable to refund Residential Tenancies and Rooming Accommodation Act 2008, ss 94, 185, 419 Fine v Geier [2003] QSC 073 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Nicholas Grace, representing himself and all other applicants |
| RESPONDENT: | King Long Lor, Ngo Tran Lor and Kylie Jackson with two assistants for the agents |
REASONS FOR DECISION
A seriously neglected large Queenslander in Highgate Hill offered cheap and convenient rented accommodation for a number of people between 8 March 2009 and 30 November 2011. At first, the condition of the property was poor but acceptable. As time progressed, due to the failure of the owners to respond to the tenants’ complaints or to carry out obvious preventative maintenance, the house deteriorated badly until it became unfit to live in. Eventually the occupiers left.
The people who were tenants from time to time[1] now sue the owners (Mr and Mrs Lor) and the real estate agents (Metrocity Realty) for compensation and for a reduction in rent over the whole period because of the poor state of the premises.
[1] Except for Mr Oliveira who was never a tenant.
The claim has been amended and its final form is dated 8 May 2012. Also in issue in this case are the following matters: whether a personal injury claim can be brought in QCAT; the time limits which apply to compensation for breach and rent decrease claims; how a decrease in rent may be calculated; if a tenant lives downstairs which is not legal height and this area becomes unfit to live in, whether a decrease in rent is appropriate for that part of the property; whether the agents or just the owners should be ordered to pay any refund in rent; and what should happen to the rental bond (the respondents say there were rent and water arrears).
Claims for personal injury – outside QCAT’s jurisdiction
There are two claims for personal injury. One is a claim by Mr Grace for lost income arising from a back injury he is alleged to have suffered when the owner asked him to move a staircase on 7 August 2010.
The second claim is brought by Mr Grace and by Mr Pfundt. They claim damages for ear infections which they developed allegedly because of mould growth at the house. And they claim loss of earnings arising from the same.
QCAT does not have jurisdiction over personal injury claims even if they arise from a breach of a residential tenancy agreement. This is because such claims are within the comprehensive framework for dealing with such claims in the Personal Injuries Proceedings Act 2002. QCAT is not part of that framework. Mr Grace’s claim in respect of his back injury is solely for loss of income. But this is a personal injury claim as well. I shall make no order in respect of these parts of the claim.
The formal tenancies
The tenancy periods and the tenants according to the signed tenancy agreements and variations were:
8 March 2009 to 7 March 2010: Nicholas Grace, Selvin Kwong and Michael Vincent.
8 March 2010 to 8 August 2010: continued as periodic
9 August 2010 to 8 Jan 2011: Nicholas Grace, Selvin Kwong, Elisabeth Hoyt, Rory Grant and Lonneke Bevan.
9 January 2011 onwards: continued as periodic
from 20 April 2011 by variation: Nicholas Grace, Rory Grant, Sasha Flint and Michael Pfundt.
Generally throughout this period several others lived at the house but were not formally tenants.
Description of the house and its problems during the period
There were six rooms and a bathroom upstairs, divided by a hall which ran the length of the house as is found in some traditional Queenslander styles. Judging from the external photographs of the house, the external sleep-out or veranda area of the house was covered over and built in to provide more accommodation in the house. The six rooms upstairs were a kitchen/dining room and the other five rooms were bedrooms. There was a wash basin in each bedroom which was a hangover from a time when Mr and Mrs Lor let out the property as rooming accommodation.
Downstairs, the house was partially built in and a living area had been created. This work had either been done by Mr and Mrs Lor or by previous owners. There was a bedroom which also included a kitchenette, and a bathroom. The bedroom had a floor to ceiling height of 2.1m whereas it should have been 2.4m, and the bathroom floor had a ceiling height of 1.8m whereas it should have been 2.1m. These height requirements are in paragraph 3.8.2.2 of the Building Code of Australia – housing provisions. Mr Grace lived downstairs until 23 December 2010 when he moved out because his room had deteriorated so much. From that time no one lived downstairs at the property, because of its condition. I consider below how his occupation of this room affects the claim for compensation and/or rent reduction and whether the question of illegality affects the claim.
The main problem with the house was water ingress causing rot and deterioration of the timbers, the external cladding, the ceilings and walls and interior decoration. In the nature of things, it would only be during rain that the roof problems manifested themselves – during dry weather this would not happen. So after each attempt to repair leaks there would be a period of time when the tenants would not know whether or not the repair had been effective. The continued dampness in the house caused serious mould growth to develop and spread.
I am only concerned in this claim with the period 8 March 2009 to 30 November 2011. The problems in the house caused by water ingress over that period can be divided into three main areas – the front and left of the house, downstairs, and the rear of the house.
The front and left of the house
On Thursday 2 April 2009 one of the tenants reported to the agent water entering the kitchen/dining room which was a room at the front of the house. The evidence shows that this problem had occurred earlier, but it had got worse. Two days later one of the owners, Mr Lor, attended the property to inspect the problem. On 28 April 2009 on a routine inspection it was noted that the vinyl floor covering in the kitchen was lifting from the floor and was sinking under foot. On my finding this was caused by the same problem. The tenants reported at that time that the kitchen flooded with even a small amount of rain. I do not accept the owners’ claim that this problem was fixed quickly.
Jones Roofing inspected the problem on 2 June 2009 and identified the need to replace badly rusted guttering and that the curved roof at that point was in a poor state of repair. Despite this, Jones Roofing were not instructed to do the work. On 9 August 2009 another contractor quoted for the guttering replacement work, but this other contractor was not immediately instructed to carry out the repairs either. In fact no repairs were attempted until 17 February 2010, when work amounting to $3,142.50 was carried out to the gutters and downpipe work, and some roof repairs and repairs to the wooden cladding were done.
So the roof and gutter was leaking badly from about March 2009 until this particular repair was done on 17 February 2010. Over this time the tenants were complaining about the problem frequently, and the agent appreciated the urgency of the matter.
This leak caused considerable damage to the front of the house both inside and out. Rainwater had run down the walls of the left hand side of the house at the front causing the external wood to deteriorate badly with rot and mould growth. It can be seen on the DVD provided by Mr Grace that the cladding was no longer attached to the house in some areas.
No serious attempt was made to deal with the internal damage caused by this leak and in the inspection of 1 July 2010 the kitchen ceiling was found to be bowing considerably and had developed holes. Mould had grown and spread on the door and on the walls of the kitchen/dining area and on the French doors, a problem which continued until early 2011. The tenants found that each time they cleared the mould growth it re-appeared, suggesting that the problem may have been exacerbated by further leaks from this area of the roof. Following requests by the tenants the owners attended with a builder on 1 February 2011. On this visit, the roofing contractor expressed the opinion that the cause of this was water coming down the side of the house. This shows that the repair carried out on 17 February 2010 had not totally fixed the problem. It was not fixed until 11 March 2011.
The exterior of the house in this area was never repaired and it worsened, so that by November 2011, a pane of glass in the kitchen window fell away because of the deterioration in this window.
The middle bedroom to the left of the house was occupied by Michael Pfundt. This room also suffered from a leak in the roof which had been present for a while and which caused mould growth in the room and outside it in the hall. During a downpour of rain in the first week in November 2011 the leak became obvious and was reported to the agents. It caused the ceiling boards to droop downwards into the room. This was not fixed before the tenants left on 30 November 2011.
Mr Pfundt had also had a problem with his floor. A hole appeared in his floor because of deterioration of the woodwork. What had happened was that the leaks from the roof and gutters at the front left hand side of the house had resulted in water getting caught within the structure of the house and tracking under his floor.
The problems on the front left hand side of the house were probably also responsible for dampness and mould growth in the ceiling of the bedroom on the front right hand side of the house. The agents were aware of this problem but were of the erroneous belief that it was due to poor ventilation and therefore the tenant’s responsibility. So they did nothing about it. The woodwork in this bedroom continued to deteriorate because of the dampness in the house and because of water ingress, and on an inspection on 18 November 2010 a large area of rot was uncovered in the woodwork. Until the roof repair carried out on 11 March 2011, the problem in this room could not be dealt with permanently. The mould growth in this room was eventually cleaned away by one of the tenants and Mr Grace moved into this room in early April 2011. On these findings, I do not accept the owners’ evidence that the mould growth in this room was cleaned by them promptly.
Downstairs
The leaks from the roof and gutters at the front of the house caused serious problems in the room under the property in which Mr Grace resided. The water which was tracking into the floors of the rooms above (in particular Mr Pfundt’s room) was also damaging the ceilings of Mr Grace’s room and causing serious rot and mould growth in that room.
Mr Grace tried to remove this mould but it kept returning. It was dense and extensive, and eventually Mr Grace decided he could not live there any longer. On 23 December 2010 he moved out. At that time he could not move upstairs because all the rooms were occupied by others. Hence he lived elsewhere for about four months, yet continued to pay his share of the rent on the house.
Rear of the house
There was a broken downpipe at the rear of the house and this, possibly also with other defects, resulted in further long term problems both inside and outside the rear of the house. There was such rot in the window frame of the bathroom that by 28 April 2009 a pane of glass had fallen away. It also resulted in paint peeling from the ceiling in the bedroom at the rear of the house on the left. These problems were noted in an inspection on 2 September 2009. This problem was still present on 25 May 2010 when the tenants informed the agents of water ingress in the rear left bedroom during rain in the corner of the kitchenette area and under the door in the bedroom part of the room, and also at the inspection on 1 July 2010 when it was described as “ceiling leaks”.
By July 2010 a wooden panel had come away from the exterior of the rear of the house, and the inspection on 18 November 2010 noted drooping ceiling panels and a stiff rear door which did not close properly. There was mould growth in the bathroom which is at the rear of the house on the right, and in early 2011 there was evidence of mould on the toilet door ceilings and walls. The cause of these problems was not dealt with during the tenancy nor was any work done to remedy the result of the problem. By the time of the tenants’ departure on 30 November 2011 the ceiling panel previously noted to be drooping down had got worse, exposing a large hole in the ceiling, there were parts of the decoration falling away and there was water damage to the electrical fittings on the ceiling.
Other problems
On 7 October 2011 the tenants reported that there was no electrical power in the bedrooms. They asked an electrician to attend the premises and he informed them that the electrical supply was unsafe, mainly because of a loose backing board to the switches and fuses. He said that if the board fell away then this would be a fire hazard.
After the tenants reported the problem to the agents, an electrician attended from Platinum Electrical Services. He restored the power by tightening some connections on the switchboard. There is a letter dated 20 March 2012 from the general manager of Platinum (not the electrician who attended that day). The letter says that the electrician inspected the electrics at the property and reported to the owner potential hazards which required attention including the need to upgrade the switchboard. These were set out in a quote given to the owner. This quote is not in the papers and so I cannot see the extent of the work advised at that time.
The tenants’ evidence is that this electrician described the electrics as “basically a death trap”. This is contrary to the letter from the general manager which goes on to say that the electrician did not consider the problems to be an immediate danger to persons or property so this is why the electricity was not disconnected.
I accept the evidence given by the tenants on this matter. It was the substantial cause of their decision to leave the premises soon afterwards, it is recorded in the contemporaneous documents, and I think what was said by this electrician would have stuck in their mind.
So why did the electrician not disconnect the supply? Platinum’s letter explains that instead of cutting off the power, the electrician immediately discussed what was required directly with the owner and provided a quote for the work. I can only assume that Platinum was expecting immediately to be engaged to carry out the work, and this is why they did not cut off the power. In that light, the comments in the letter that it was not an “immediate danger” would appear to be a retrospective justification for this approach.
The letter explains that in fact Platinum was not engaged to do the remedial work. It is significant that the work was done not until after the tenants left, despite its urgency. I do not accept the owners’ evidence that it was done a week later. Therefore the electrical system remained a hazard and the tenants were justified in leaving the premises when they did. It is my finding therefore that the electricity installation at the premises became unsafe and was unsafe on 7 October 2011 or just before this date.
Other problems with the electrics occurred throughout the period with which I am concerned, generally connected with rot in the wood and decorative boards causing power switches to become loose or wiring to be exposed.
The steps to the rear of the house down to the back yard were another substantial problem. The problem was known to the owners since 2008. During the period with which I am concerned they became a danger, and by 6 November 2011 the railing had come away from the building and they could not be used at all.
There were many other issues in the house of a more minor nature.
Not all the problems with this house referred to above appear in the agents’ inspection reports. The reason for this was that on the inspections the tenants refused access to certain parts of the premises. It seems to me on the balance of probabilities that the reason for this was because there were more than five people living in the house at any one time, and they wanted to hide this. The agents were aware that more than five people were living there in December 2008. At about that time the fire authority intervened and the agents instructed the tenants to reduce the number of occupiers down to five.
Mould reports
All Aces Services inspected the premises on 30 November 2011 and took samples from the “bottom bedroom and kitchen” which was the living area below. These were analysed by NSJ EnviroSciences Pty Ltd trading as MouldLab who produced a report. High mould concentrations were found which they said constituted a health risk.
Xsteam Clean Pty Ltd also inspected at about this time and reported a strong pungent, dank smell due to dampness and mould growth. They said the mould growth could not be permanently treated until leaks and holes in ceilings had been repaired. They opined that the premises were not fit for human habitation for health and safety reasons. Judging from the emailed report, this refers to the whole house not just the lower part of the house.
CG Plumbing reported that there was mould growth in the kitchenette ceiling of the living area below, and a “strong toxic smell coming from the water damaged area”.
Basis of the claim for compensation or rent reduction
In respect of each tenant, the owner must ensure at the start of the tenancy that:
(a) the premises are clean; and
(b) the premises are fit for the tenant to live in; and
(c) the premises are in good repair; and
(d) the lessor is not in breach of a law dealing with issues about the health or safety of persons using or entering the premises.
While the tenancy continues the owner must –
(a) maintain the premises in a way that the premises remain fit for the tenant to live in; and
(b) maintain the premises in good repair; and
(c) ensure the lessor is not in breach of a law dealing with issues about the health or safety of persons using or entering the premises.
These obligations are in every tenancy agreement by virtue of section 185 of the Residential Tenancies and Rooming Accommodation Act 2008 (the Act).
Time limit for compensation claim
There is a 6 month time limit to bring claims for compensation. This is provided in Division 3 of the Act which gives the tribunal jurisdiction over various types of application. One of those is under section 419 about breach of agreements. Under that section a tenant may apply to the tribunal claiming that there has been a breach of a residential tenancy agreement. Section 419(3) provides that the application must be made within 6 months after the tenant becomes aware of the breach.
In fact the clock stops not when bringing the claim in QCAT, but upon referring the claim for conciliation to the Residential Tenancies Authority[2] if this is earlier. In this case there were two references to the RTA. The first was on a date sometime before 13 January 2012, but this reference was limited to the issue of rent arrears, garden maintenance and cleaning on exit. It was not a reference to the RTA on the issue of the condition of the premises during the tenancy. A later reference to the RTA was made in respect of those matters after the proceedings were commenced. This reference was required by QCAT in its order on 9 May 2012.
[2] See section 417 of the Act.
This means that the date of the original application in QCAT, 24 January 2012, is the date to take for the stopping of the 6 months’ time limit, at least for the claim brought by the applicants at that time (Nicholas Grace, Sasha Flint, Rory Grant, Tiago Oliveira and Michael Pfundt) against the respondents at that time, Metrocity Realty. Complications arise in considering how the 6 months time limit applies to the claims brought by the other tenants (Selvin Kwong and Elisabeth Hoyt) because they were joined later, on 9 May 2012, and to the claims brought against Mr and Mrs Lor because they were added as respondents on 21 March 2012. The time limit might apply on the date of the original claim in QCAT (under the doctrine of relation back), or it might be when they were joined as parties.
There is also a complication in that the date when the 6 month clock starts would be different for each tenant because they did not become tenants all at the same time. For example Mr Pfundt became a tenant on 20 April 2011 so his 6 months’ clock cannot start until then. Mr Grace on the other hand first became a tenant on 23 December 2008, so in respect of some of the problems with the house his 6 months’ clock would start then.
Another difficulty with these time limits is that in order properly to consider them the precise breach of the tenancy agreement needs to be identified very carefully. For example, it might be thought that on being notified of water ingress to the rear of the property, the owner had an obligation to fix this problem within a reasonable time. On this basis, the 6 months’ time limit therefore would start upon a particular tenant’s knowledge that this reasonable time had passed without any remedial work having been done. However, it might be that the obligation to remedy the water ingress arose earlier than this, because the owner has an obligation to ensure that the premises are in good repair at the start of a tenancy. So if there was any particular disrepair at the start of the tenancy of a particular tenant, the 6 month time limit for that tenant would start when the lack of repair became apparent to that tenant.
It might also be more correct to regard what happened in this case, not as individual breaches of the owners’ obligations, but as one single continuing breach of a failure to ensure that repair work and regular preventative maintenance was carried out at the premises. The tenants would be aware that this was happening from an even earlier stage.
A further difficulty arising with these time issues is that only Mr Grace gave evidence at the hearing and made paper submissions. There are emails from some of the other tenants in the papers. But in respect of most of them and in respect of most of the defects in the property, deciding when they first knew of the owner’s breach would require the application of much inference of fact.
Happily, it is unnecessary to try to resolve these difficult practical issues. Apart from the personal injury claims which I cannot deal with, no tenant seeks compensation beyond the amount of rent paid for the property, nor is any tenant claiming compensation for any special loss. This means that the assessment of compensation for breach of the tenancy agreement would be the same as any reduction of rent which I award. And as I have found below, the reduction of rent claim has no time limit. For these reasons, I have not tried to resolve this claim as a claim for compensation for breach. Instead I have resolved it as a claim for rent reduction.
Basis of the claim for rent reduction
Section 94 of the Act deals with rent reduction. It reads as follows:
94 Rent decreases
(1) This section applies if the premises—
(a) are destroyed, or made completely or partly unfit to live in, in a way that does not result from a breach of the agreement; or
(b) no longer may be used lawfully as a residence; or
(c) are appropriated or acquired compulsorily by an authority.
(2) This section also applies if—
(a) services, facilities or goods to be provided to the tenant under the agreement are no longer available or are withdrawn other than because the tenant failed to meet the tenant’s obligations under the agreement; or
(b) the amenity or standard of the premises decreases substantially other than because of malicious damage caused by the tenant.
(3) The rent payable under the agreement decreases accordingly or, if an order for a decrease in the rent is made by a tribunal, to the extent stated in the order.
(4) A tribunal may make an order for a rent decrease only if—
(a) the tenant applies to the tribunal for the order; and
(b) if this section applies because of subsection (1)—the premises are partly unfit to live in.
Does the 6 month time limit apply to section 94?
As mentioned above, Division 3 of the Act gives the tribunal jurisdiction over various types of application including “breach of agreements” (section 419). By section 420(1)(b), the tribunal may make an order for “the payment of money” and under s 420(1)(e) the tribunal may make “an order for compensation”.
A decrease in rent under section 94 does not necessarily result in a payment of money or compensation. If the tenant owes the landlord money, it would result in a reduction in the amount owed or even its extinguishment. Such a result is not one of the orders available under section 420. This tends to demonstrate that they are two separate regimes. Otherwise, a tenant who has withheld rent for more than 6 months on the grounds of the landlord’s breach resulting in a reduction in amenity, would be better off than a tenant who had paid the rent in full and came to the tribunal asking for a rent decrease on the same grounds. This could not have been the intention of the legislature.
The fact that the section 94 regime is separate and not affected by the 6 month time limit in section 419(3) also appears from an examination of the history of the provisions of section 94.
As originally enacted in the s54 of the Residential Tenancies Act 1994, the section was worded thus:
54 Rent decreases
(1) This section applies if the premises—
(a) are destroyed, or made completely or partly unfit to live in, in a way that does not result from a breach of the agreement; or
(b) no longer may be used lawfully as a residence; or
(c) are appropriated or acquired compulsorily by an authority.
(2)The rent payable under the agreement decreases accordingly or, if an order for a decrease in the rent is made by a tribunal, to the extent stated in the order.
(3)A tribunal may make an order for a rent decrease only if—
(a) the premises are partly unfit to live in; and
(b) an application is made to the tribunal by the tenant for the order.
This appears to be a modern version of a provision which for many years has applied to leases generally and which is now in section 105 of the Property Law Act 1974:
105 Obligations of lessees
(1) Subject to this Act and to the provisions of the lease, in every lease of land made after the commencement of this Act there shall, unless otherwise agreed, be implied the following obligations by the lessee with the lessor—
(a) To pay rent—that the lessee will pay the rent reserved at the time mentioned in the lease, but, if the demised premises or any part of the premises shall at any time during the continuance of the lease be destroyed or damaged by fire without fault on the part of the lessee, flood, lightning, storm, or tempest so, in any such event as to render the same unfit for the occupation and use of the lessee, then and so often as the same shall happen, the rent reserved, or a proportionate part of the rent, according to the nature and extent of the damage sustained shall abate, and all or any remedies for recovery of the rent or such proportionate part of the rent shall be suspended until the demised premises shall have been rebuilt or made fit for the occupation and use of the lessee.
The current version of section 94 appeared for the first time in the 1 December 1998 reprint of the Act.
The fact that the two regimes are separate also appears from the juridical basis for the reduction in rent. This is an abatement, which effectively interferes and adjusts the contractual arrangements between the parties, by statutory intervention. This is a completely different concept from compensation awarded under section 420.
Accordingly I conclude that the 6 months time limit does not apply to section 94 reduction of rent matters, even if the reduction of rent arises because of a breach by the owner. Instead it would appear that the correct time limit for such matters is 6 years under section 10(1)(d) of the Limitations of Actions Act 1974 (limitation period in case of an action to recover a sum recoverable by virtue of any enactment).
Effect of lack of height under – illegality and compensation
By section 115 of the Building Act 1975 it is illegal without reasonable excuse, to live in a building which does not comply with the height requirements of the height requirements of the Building Code of Australia – housing provisions provision. By Schedule 2 of the Act the word “building” includes “any part of a building”. Hence it would be illegal to live downstairs in this house.
The real estate agents regularly inspected the property and it was obvious from these inspections that a person was living downstairs. There is email correspondence from the tenants complaining of the condition of the downstairs room. The agents were aware that the premises were not legal height. The owners also visited the property regularly and were aware of these matters. In any case the knowledge of the agents would be imputed to the owners.
Whilst neither the owners nor the agents encouraged Mr Grace to live downstairs, they did not prevent it.
At the time Mr Grace was unaware that it was unlawful to occupy the downstairs part of the premises.
Since the tenants continued to pay the rent for the premises despite the problems with it, the only effect that any illegality might have on the claim would be that Mr Grace might be unable to pursue his claim for reduction of rent because he was occupying the premises illegally. This would mean that the owner would be in a better position because of their own wrong in permitting his occupation to happen. This would be manifestly unfair, and for that reason alone the effect of any illegality on Mr Grace’s right to bring the claim should be disregarded.
But there is another reason why the effect of the illegality on Mr Grace’s right to bring the claim should be disregarded. This is because in his claim regarded as a rent decrease claim, he is not suing on the tenancy agreement as such. He is relying on the statutory provision which provides that his rent was decreased. The consequential order would be an order for refund of rent, but this order would not be made under the tenancy agreement. It follows that any illegality in this tenancy agreement is irrelevant to the rent decrease claim.
The fact that it was illegal to live downstairs however, might in other circumstances have affected the amount of a rent reduction. If a tenant had lived downstairs contrary to the owners’ instructions, then that tenant would find it difficult to obtain a rent decrease if the downstairs became unfit to live in. But that is not the situation here, as I have said above. Everyone on the owners’ side was aware that he lived below and turned a blind eye to this. The premises below had been converted for such living and no instruction was given that this should not happen.
For this reason it is right to regard the premises as one, and to regard the downstairs area occupied by Mr Grace as let as part of the liveable areas of the property.
Was the property or any part of it at any time unfit to live in?
Whether premises are ‘fit for the tenant to live in’ is determined by imposing a standard of reasonableness test. In Fine v Geier [2003] QSC 073, Wilson J held:
“Questions of fitness for habitation and repair are to be judged against a standard of reasonableness having regard to the age, character and locality of the residential premises and to the effect of a default on the state or condition of the premises as a whole: Bond v Weeks [1991] 1 Qd 134 at page 138 (where the Court of Appeal discussed provisions to similar effect in earlier legislation).”
Having regard to the mould reports, the evidence about the electricity meter board, and the evidence about the state of the property generally including the rear steps, it is clear to me that by the time the tenants vacated on 30 November 2011 the whole house was unfit to live in.
I find that the whole house was unfit to live in from 1 October 2011 because of these problems.
Downstairs became unfit to live in by 1 November 2010 at the latest. It remained unfit from that time until the tenants vacated.
On the evidence, the kitchen/dining area was unfit to live in from the beginning of 1 April 2009 until 11 March 2011.
The approach to the rent decrease
Reference can be made to the Supreme Court decision of Underwood v Queensland Department of Communities (State of Queensland) [2012] QCA 158 for guidance on how section 94 operates. The Underwood principles relevant to this case[3] are that:
(a) if the premises are wholly unfit, then the rent decreases to nothing without the need for an order of the tribunal;
(b) if any part of the premises are partially unfit, or if the amenity or standard of the premises decreases substantially (not due to tenant’s malicious damage) then the rent decreases to an extent that may be determined by the tribunal;
(c) in this latter type of case, the tribunal has a discretion whether to decrease the rent and would not do so if it were unjust to do so;
(d) relevant factors when exercising discretion are for example if the tenant has hidden the defects from the landlord, or where an application to the tribunal had been made late, or where the rent had already been discounted to allow for the condition of the premises, or where the tenant was paying a very low concessional rent, or any other relevant circumstances.
[3] Stated in paragraphs [24] to [33].
The reference in Underwood to the rent already having been discounted is one of the contentions made by the respondents in this case. They argued that the rent for the property was already reduced to take account of its poor condition, and therefore it would be unfair to the owners to reduce it further. To understand the relevance of this, it is possible to see from the wording of section 94 that it is intended to deal with unexpected events occurring or becoming apparent during the tenancy. Section 94(1)(b) applies if the premises “no longer” may be used as a residence or s 94(2)(a) services, facilities or goods are “no longer available or are withdrawn” and s 94(2)(b) “if the amenity or standard of the premises decreases substantially”. It is reasonable to suppose that a tenant would be willing to pay a market rent for the property at the start of the tenancy. Normally such market rent is likely to be adjusted to take account of the property’s known or apparent defects. Where the tenants are existing occupiers they are probably going to be aware of the defects in the property to a greater extent than new tenants. The strength of this point will vary from case to case, because (for example) some tenants might take on a tenancy without considering the state of the premises, or without trying to negotiate down the rent to take account of obvious defects, or on promises made by the landlord.
In this case, each of the tenants at the start of their tenancies realised that the property was not in the best condition. However until they lost faith in the owners, they had a reasonable expectation that any real problems would be dealt with within a reasonable time by the owners in accordance with their obligations.
At each proposed rent increase, the tenants negotiated a lower rent partly relying on the poor condition of the property.
In the year before the time with which I am concerned, the premises were let for $500 per week (8 March 2008 to 7 March 2009). The next year the rent was $550 per week (8 March 2009 to 7 March 2010). After 7 March 2010 the tenancy was periodic but on 9 August 2010 the rent increased to $600 per week. I have had no expert evidence or even any opinion expressed about the rent levels which would have obtained if the property had been in good condition, but an examination of the email correspondence between the tenants and the agents and documentation is illuminating.
On further renewal of the lease in 9 August 2010 the existing tenants and also most likely the incoming tenants at that time were well aware that the owner was not reliable in carrying out repairs to the property, but on the other hand, the owner did promise to deal with them. This is shown by the special terms inserted on the new tenancy agreement of that date. This was inserted: “Tenants acknowledge that the following maintenance issues are resolved or in the process of being resolved: roof leak, rat holes under house, drainage issues, debris left in yard”. Before signing, the words “issues are resolved” were crossed out by the tenants, the words “the process of being resolved” were circled and these words were written in “maybe + too a shoddy quality”. This demonstrates that the tenants were sceptical about the owner’s promise to do this work. Despite this, they signed the agreement with effect from 9 August 2010. It was a 5 month term with a rent of $600 per week.
Upon the expiry of that term, in February 2011 there were discussions about a new lease and also rent increases. In one email the agents asked the tenants whether they would be prepared to pay $650 per week (an increase of $50 per week over the existing rent) if the water running down the side of the house issue was added to the lease as an issue to be resolved. At the time the owner was saying that the mould problem downstairs was lack of air below so the tenants’ complaints about this were not accepted.
As part of the negotiation at that time on 2 February 2011 the tenants wrote “How about $625? There is still a lot of stuff wrong with the house including vines growing in from the outside, windows that don’t shut, mould all over the side of the house to name but a few”. In mid February the rent was agreed in email correspondence at $635 per week as from 18 April 2011. However this agreement was never formalised by the signing of a new tenancy agreement. So the agents expected no more than the original $600 a week. Neither the agents nor the owners are claiming the extra $35 a week. Clearly they have waived any claim to it.
It can be seen from the above that the tenants did have the benefit of lower rent levels because of the poor state of the premises, although they probably also had some remaining expectation or at least a hope that the required maintenance work would be done.
There was no explanation forthcoming from the tenants as to why they were willing to stay on in the house in its worsening condition, except that they found the premises convenient and it suited their then purpose which was for cheap shared accommodation. Eventually at the end of November 2011 they did leave, but the question is why they did not leave earlier. I am sure there was the element of inertia here – between themselves, the tenants had an arrangement which worked, and which was difficult to end suddenly because there so many different households involved[4]. So they stoically persevered in the house until the condition of the premises became so bad that it was obvious they had to go.
[4]This is shown by the fact that when they did eventually leave it took two weeks to achieve the move, over which time they had to rent other premises to live in.
The reason why the tenants moved out is set out in their email of 15 November 2011. It was primarily because the two electricians had said that the electrical installation was unsafe which I have found to be true, but also because of the many other problems with the state of the premises.
The owners told me that they suspect that the tenants planned all along to make a claim for reduction in rent, the implication being that they were content for the premises to deteriorate to achieve this. I not think there was a deliberate plan with this aim. It is true as I have found, that the tenants did not allow certain parts of the property to be inspected by the agents, but as I have found above this is explained by the desire to hide the number of occupants in the premises.
Not allowing access to certain parts of the premises also meant that the owners and the agents were not always aware of the full extent of the problems at the house. This is shown by things missing from the inspection reports. I have considered whether the decrease in rent should be affected by this but I have decided that it should not for two reasons. Firstly, a landlord or his agent can require inspection of the whole property – if necessary by applying to QCAT under section 201 of the Act. I do not think the agents persevered sufficiently to do this. Secondly it was obvious from an external view of the property and from those parts of the property that could readily be inspected, in particular downstairs and the kitchen/dining room upstairs and the rear of the property that it was suffering serious problems and was badly in need of maintenance. I take into account here that the owners were regular visitors to the premises, and also had another house next door.
I do allow however, for the fact that some reduction in rent was already achieved by the tenants because of the condition of the premises. But I do not think that the rent was reduced fully to take into account the poor condition of the property. I can see from the email correspondence that during negotiations for new tenancies or increased rent, the tenants were told that if they did not agree they would have to leave. This, and the inertia factor referred to above means that a further discount is required under section 94. Doing the best I can with the available information, I believe that the rent was reduced by about half of what it should have been to allow for the condition of the property. Therefore I am going to discount the rent decrease under section 94 (in respect of areas of the property which were fit to live in) by half to allow for this factor. I am going to call this the “reduced base rent factor”.
I turn now to the actual calculation of rent decrease under section 94. One approach approved on appeal in QCAT is to take an average reduction over a period of time, rather than to go week by week and quantify each decrease in amenity separately[5]. However, in this case I need to take a mixed approach.
[5] Wechsel v Andrew (No 3) [2011] QCATA 106.
In accordance with the Underwood guidance, in respect of any area of the property which was unfit I shall treat the rent as having decreased to zero for that area.
As for downstairs, I have dealt earlier with my reasons for saying that it should be regarded as let as part of the liveable areas of the property. Although I have no floor plan, it seems to me that the downstairs accounted for 20% of the rent payable for the whole house, bearing in mind it was fitted out to live in, and had its own kitchenette and bathroom which was a distinct advantage over the tenants upstairs who had to share their kitchen and bathroom.
The upstairs of the property therefore accounted for 80% of the rent payable for the whole house. In the case of the kitchen/dining room although this was only one of six rooms upstairs, it would have been used by all the tenants and therefore its poor condition had an impact on all of them. On this basis it is right to regard the rent referable to the kitchen/dining room as 20% of the rent payable for the upstairs of the house, so it accounted for 16% of the rent payable for the whole house.
Apart from the periods of unfitness in the property which I have already found, in my opinion the amenity or standard of the premises decreased substantially over the whole period with which I am concerned. At first this was gradual, but was more rapid from about November 2010 until the tenants left a year later. This decrease in amenity or standard of the premises was not due to any act of the tenants. Mainly I am concerned here with the dampness and rot in the front right hand side and middle left bedrooms and generally in the rear of the property, the rear steps and the electrical problems other than the problem with the board holding the switches and fuses. Ignoring for the moment the reduced base rent factor which affect this rent decrease (considered above) from 8 March 2009 to 30 October 2010 I would have awarded a general decrease in rent of 10% of the rent due on the whole of the property, and from 1 November 2010 to the end of the tenancy a general decrease in rent of 15% of the rent due on the whole of the property to account for these matters. It is right to half these figures to allow for the reduced base rent factor.
The decrease in rent which I order is therefore as follows:
(a) 1 October 2011 to 30 November 2011 (whole house unfit) – 100% decrease in rent.
(b) 1 April 2009 to 11 March 2011 (kitchen/dining room unfit) – 16% decrease in rent.
(c) 1 November 2010 to 30 September 2011 (downstairs unfit) – 20% decrease in rent.
(d) From 8 March 2009 to 31 October 2010 a general decrease in rent of 10% in respect of other parts of the property, reduced to 5% by reason of the reduced rent factor.
(e) From 1 November 2010 to 30 September 2011 a general decrease in rent of 15% in respect of other parts of the property, reduced to 7.5% by the reduced rent factor.
Applying these rent decreases to the rent which was payable from time to time produces this table:
Period Rent payable Discount Days Refund 8 Mar 2009
to 31 Mar 2009$550pw 5% 23 $90.11 1 Apr 2009
to 8 Aug 2010$550pw 16% + 5% = 21% 494 $8,128.67 9 Aug 2010
to 31 Oct 2010$600pw 16% + 5% = 21% 83 $1,489.91 1 Nov 2010
to 11 Mar 2011$600pw 16% + 20% + 7.5% = 43.5% 130 $4,833.86 12 Mar 2011
to 30 Sep 2011$600pw 20% + 7.5% = 27.5% 202 $4,748.38 1 Oct 2011
to 30 Nov 2011$600pw 100% 60 $5,128.77 Total $24,419.70
When rent is reduced under section 94, it means that the owners, and/or the owners’ agent, have been paid too much money. I shall therefore order a refund of this amount.
Should the agents be ordered to pay the refund?
The agents are a party to this claim and submit that they should not be ordered to repay any money. They point out that they have passed all rent money to the owners, and the rent money they currently hold is held on trust for the owners.
By section 206(3) of the Act, a real estate agent who is named in writing to the tenants may stand in the place of the owner for a prescribed proceeding and such proceeding may be brought against, and an order made against, the agent as if the agent were the owner. By regulation 24 of the Residential Tenancies and Rooming Accommodation Regulation 2009 any application to the tribunal which may be brought by the tenant is a prescribed proceeding, so this includes the application before me.
The provisions give the tribunal a discretion whether to make an order against the agent. In my view this case is exceptional and whilst I think the agents could have done a lot more to ensure that the premises were in good condition, and safe and fit to live in they did face considerable problems managing the tenancy. These were mainly caused by frequent changes in the occupiers of the premises and also from the owners’ insistence that they would carry out repairs themselves. For these reasons, the agents’ responsibility for the state of the premises is much less than that of the owners. Having regard also that the rent refund goes back many months and all rent received on the premises after appropriate deductions has been paid to the owners, I do not regard it as fair that the agents should have to bear the cost of the rent refund even in the first instance.
Dealing with the bond
The parties to the rental bond of $2,000 are Metrocity Realty on the owners’ behalf and Michael Vincent, Nicholas Grace, Selvin Kwong, Gonzalo Villanueva and Elisabeth Hoyt. Two of these people (Michael Vincent and Gonzalo Villanueva) are not parties to this claim. However, my jurisdiction to deal with the bond (which can be implied from section 137 of the Act) does not depend on the parties being before the tribunal.
The respondents resist the claim for repayment of the bond to the tenants because of alleged rent arrears of $804.16 and arrears in respect of water of $967.79. Previously the agents calculated the arrears of rent as $257 – a figure which is also disputed by the tenants. The new figure comes about from a re-calculation of the figures. It is said that this re-calculation came to a different amount because the rent ledger was incorrect for a while when on renewal of the lease, an error was made as to when the new increased rent was payable. The evidence before me about rent from the tenants’ side was incomplete since at the end of the tenancy one of the other tenants and not Mr Grace was making final payments. I am told by Mr Grace however that the agents had admitted to him at one time that the whole ledger was out by one week in the owners’ favour and that this had been the case from 2008. There is confusion on both sides about the rent, and doing the best I can on the available evidence I find that the calculation made by the agents originally was probably correct. Therefore I find that there is $257 rent owing.
As for the water bills, one contention made by the tenants is that there was no written agreement that they would pay for their water usage. On my finding however, this was agreed. It appears in the copy tenancy agreements in exhibit R1. In any case, the fact that the tenants did pay for water until the beginning of 2011 strongly suggests that such an agreement was made, and when they stopped paying water it was not on the basis that they were not obliged to do so. Instead, the tenants complained of leaks in the system resulting in a higher than normal consumption.
The evidence from the water bills does tend to show there was a leak. They show that the water consumption at the premises increased markedly in 2011 and at one time was five times the Brisbane average, whereas previously it had been roughly average. It is right to reduce the claim of $967.79 to allow for this. I can see that the usual quarterly bill for normal usage was $117. I agree with the tenants’ submissions that the agents are overstating the number of unpaid water bills in exhibit R2. It appears from the agent’s letter of 5 May 2011 and from the Form 11 issued on 18 October 2011 that there were only four bills unpaid by the tenants by the time they left, and so I am going to say that the tenants owe 4 x $117 = $468 for water usage.
[100]There is a deduction therefore to be made from the bond in this case of $725. To simplify my final order, I shall order the bond to be paid out by the RTA as follows: $725 to the tenants and $1,275 to Metrocity Realty. I shall expect the money in the hands of Metrocity Realty which emanates from the bond to be held by them on trust and payable to Mr Grace in discharge of the costs order. The remainder of this money should be held and paid to Mr Grace upon his receipt of the final order when he gives the required written undertaking to the tribunal.
Costs
[101]There is a claim for “expenses” being the cost of obtaining mould and water damage reports. These expenses are in the nature of “costs” and may be recovered in the proceedings if the tribunal considers the interests of justice require it to make the order (the test in section 102). Section 102(3) gives a list of things which the tribunal may have regard to when considering whether to make such an order. The most expensive part of these costs was the inspection of the house and collection of samples by All Ace Services at a cost of $220 and a scientific analysis of the mould growth and report costing $437.75. To my mind, although obtaining this report was not essential to support the tenants’ claims, and it was limited to the downstairs of the property, it was a justifiable expense because it was reasonable to suppose it would be useful to the tribunal. The plumbing report by CG Plumbing cost $88. This described the mould growth in the kitchenette downstairs. It was helpful and I allow that. The most useful report of them all, from Xsteam Clean Pty Ltd (which opined that it was pointless clearing away the mould without dealing with its cause first) was it appears, free. So I allow costs of $745.75. I also allow the filing fee of $265, a total of $1,010.75.
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