Noble v Vorreiter No. DCCIV-03-1908

Noble v Vorreiter
[2004] SADC 25
Judge Lee
Civil

This is a tenant’s appeal from a decision and orders of the Residential Tenancies Tribunal on 27 November 2003.
The tenancy, which is with respect to premises in Unley, commenced on 24 May 2003, and is due to end on 23 February 2004. The rent was and remains $500 per week, payable monthly.
On applications by both the landlord and the tenant, the Tribunal determined that:
1.   following non-payments of rent, the tenancy be reinstated subject to payment of rent for the balance of the term, with possession to the landlord upon the tenant’s further default
2.   it was not satisfied that the rent of $500 per week was excessive
3.   to the extent that the landlord had failed to provide the premises in a reasonable state of repair, the landlord should pay compensation to the tenant in the sum of $1,200.
The tenant appeals from the second and third of the determinations. As a condition of an earlier order of this Court granting a stay, the tenant has paid ongoing rent into court to await the outcome of the appeal.
I mention by way of background that the Tribunal inspected the premises on 1 July 2003, being the occasion of an earlier dispute between the parties. In reasons for decision at that time, the Tribunal said:
“I also find the premises are not in a reasonable state of repair. I viewed the premises on 1 July 2003. Many of the walls and ceilings are cracked. There are cracks between cornices and ceilings. The cornice in the dining room has moved and is out of alignment in one corner. The cracking is particularly bad in the master bedroom and adjoining front section of the hallway. There is also a significant crack in the ceiling over the kitchen bench. There is evidence of dust falling between the ceilings and cornices in some of the bedrooms. There is a small gap in the flooring at the door of the master bedroom. Grout is missing in the separate toilet, ensuite bathroom and main bathroom. The area behind the kitchen sink is not properly sealed. I find that these defects are such that the premises are not in a reasonable state of repair.”
I will deal first with the issue of rent. Section 56 of the Residential Tenancies Act 1995 provides:
“56. (1) The Tribunal may, on application by a tenant, declare that the rent payable under a residential tenancy agreement is excessive.
(2) In deciding whether the rent payable under a residential tenancy agreement is excessive, the Tribunal must have regard to-
(a)    the general level of rents for comparable premises in the same or similar localities; and
(b)    the estimated capital value of the premises at the date of the application; and
(c)     the outgoings for which the landlord is liable under the agreement, and
(d)    the estimated cost of services provided by the landlord and the tenant under the agreement; and
(e)    the nature and value of furniture, equipment and other personal property provided by the landlord for the tenant’s use; and
(f)   the state of repair and general condition of the premises; and
(g)    other relevant matters.
(3) If the Tribunal finds, on an application under this section, that the rent payable under a residential tenancy agreement is excessive, the Tribunal may, by order-
(a)   fix the rent payable for the premises and vary the agreement by reducing the rent payable under the agreement accordingly; and
(b)   fix a date (which cannot be before the date of the application) from which the variation takes effect; and
(c)    fix a period (which cannot exceed one year) for which the order is to remain in force.
(4) The Tribunal may, on application by the landlord, vary or revoke an order under this section if satisfied that it is just to do so.
(5) If, while an order remains in force under this section, a landlord asks for or receives rent for the premises to which the order relates exceeding the amount fixed by the order, the landlord is guilty of an offence.
Maximum penalty:          $1 000.”
At the hearing which led to the determinations under appeal, the tenant submitted two reports. The reports were written by Ashleigh Lorraine of Executive Home Rentals and Brenton Wundenberg of Action Property Rentals. The first was to the effect that the premises would only attract a minimal return, perhaps $80 from each of three or four individuals in a commercial situation. The second was to the effect that the premises would be attractive to the singles sharing market or possibly a large family in need of space in the range of $300 to $340 per week.
The Tribunal expressed its conclusion in the following paragraphs of its reasons:
“It is difficult for the Tribunal to consider the two appraisals. Although the Tribunal is not bound by evidentiary rules (see Section 32(2) of the Act) I did not hear evidence from either Mr Lorraine or Mr Wundenberg. I do not know of their experience in the rental market. I do not know if the properties referred to in the appraisal by Action Property Rentals are comparable properties or not. Although some comparisons can be made from the information provided one must assume that Mr Wundenberg did not inspect the “would be” comparable properties himself. In preparing the report Mr Wundenberg did not suggest that the twelve other properties referred to are comparable, although that presumably is the inference which Mr Noble seeks that I draw.
Mr Noble did not lead any evidence as to the capital value of the premises, the outgoings for which the landlord is liable or the costs of services provided by the landlord and the tenant under the agreement. Mr Vorreiter suggested the capital value to be between $700,000 and $800,000. He listed his outgoings as rates, land tax, SA Water costs and Emergency Levy.
….
I am not satisfied the rent is excessive. I have insufficient evidence to establish the general level of rents for comparable premises. The evidence does not satisfy me the twelve properties referred to in the report from Action Property rentals are comparable. I simply do not have sufficient evidence in that regard. As to the other items in section 56, other than the state of repair and general condition of the premises, Mr Noble did not produce any evidence.”
It must be said at once that the reports submitted by the tenant were the only reports that were before the Tribunal on the issue of the rent. Both address the location and state of repair of the premises. Both refer to rents of other premises for the purposes of comparison. The report of Executive Home Rentals does so by saying that a rental of $500 per week puts the premises into the “executive” market, and that “homes in this price bracket and close to the CBD are frequently sought after by international and interstate executives on assignment to South Australia”. The report then concludes:
“In its current condition, I would not present it to a potential tenant as a rental proposition, certainly not at $500 per week. An executive client of mine would not even consider renting it if it were presented for inspection today. I consider that if it were to be rented, it could only attract minimal return and most likely from a group of 3 or 4 individuals in a communal situation who would each contribute perhaps $80 each towards the rent.
If the building were to be repaired and restored with the faults corrected in a professional manner, it might fetch between $450 - $500 in today’s market.”
The report of Action Property Rentals refers to twelve other properties and concludes as follows:
“General comments – although large in proportion, the property is quite dated with the extension and upgrades being quite outdated – the home is not of high quality and the severe cracking and general presentation would probably see it be attractive to the ‘singles sharing’ market or possibly a large family in need of space rather than quality features
Current Rent Range - $300-$340”
In my opinion, the Tribunal erred in concluding that the evidence was insufficient to establish the general level of rents for comparable premises. Although the authors of the reports did not say so specifically, clearly they were looking at the general level of rents of other premises for the purposes of comparison. Otherwise there would have been no point in mentioning them. There is no reason on the face of the reports to apprehend that the authors lacked experience or conducted their appraisals upon insufficient or incorrect information. Moreover, as I have said, the Tribunal did not have any contrary or other opinion.
If the Tribunal felt that it lacked sufficient information, then I consider that it should have alerted the parties. Section 32(1) of the Act gives the Tribunal wide powers of enquiry into matters of dispute. Relevantly, the Tribunal may “hear an application in the way the Tribunal considers most appropriate” (subsection (1)(a)), and may “adjourn a hearing to a time or place or to a time or place to be fixed” (subsection (1)(g)). Moreover, subsection (2) provides:
“(2) The Tribunal’s proceedings must be conducted with the minimum of formality and in the exercise of its jurisdiction the Tribunal is not bound by evidentiary rules but may inform itself as it thinks appropriate.”
Even given that the tenant did not produce evidence as to some of the other matters in s.56(2), the Tribunal did have on those matters the landlord’s evidence and knowledge derived from its own inspection of the premises. If the Tribunal felt that there were gaps in that evidence and knowledge, the gaps could have been filled quite easily by way of an enquiry of the parties.
My own view of the evidence overall is that it was sufficient, and that, upon the basis of the reports, and having regard to the matters referred to in s.56(2) of the Act, a fair rent in all the circumstances would be $320 per week.
Counsel for the tenant next challenged the Tribunal’s finding that the landlord acted with reasonable diligence with respect to repairs to the cracking, wet area and pergola. Counsel said that the Work Practices document was no more than a request from the tenant to the landlord, and did not affect the landlord’s right to enter and repair the premises under s.72 of the Act. I do not consider that the Tribunal overlooked a landlord’s statutory right of entry for the purposes of repair. For all practical purposes – and I think that this is what the Tribunal meant – the landlord was unable to conduct effective repairs of the premises because of the unreasonable restraint of the so-called “Work Practices” document.
Counsel for the tenant submitted that, the landlord having had notice on 2 May 2003 of the need to repair, his consulting engineer did not attend the premises until 29 August 2003, and the Tribunal did not take this delay into account when finding that the landlord had endeavoured to act with reasonable diligence. In its reasons, the Tribunal dealt in detail with the history of the dispute and the communications that took place between the parties. Although it is true that the Work Practices document did not surface until 24 September 2003, and that the Tribunal at one point referred only to that document, I disagree with the submission that the Tribunal failed to take the history and the communications into account in finding that the landlord, with some exceptions, endeavoured to act with reasonable diligence in effecting repairs.
Counsel for the tenant criticised an observation of the Tribunal that a breach in the obligation to provide the premises in a state of repair at the commencement of the tenancy was not ongoing. Clearly the state of disrepair was ongoing, but equally clearly the Tribunal was saying that the breach was not ongoing because the landlord, with some exceptions, had acted with reasonable diligence in attempting to have the repairs carried out.
The Tribunal awarded $1,000 to the tenant as compensation for the discomfort, inconvenience and distress which arose from the landlord’s breach of contract, and an additional $200 for a cockroach infestation and an electrical fault. Counsel for the tenant submitted that, in assessing compensation, the Tribunal took account of irrelevant matters and ignored relevant matters. Having considered the points made by counsel, and without dealing with them chapter and verse, I am satisfied that the Tribunal took only relevant matters into account.
I return to the issue of the rent. Section 41(2) of the Act empowers this Court to quash or vary the Tribunal’s determination and to make any order that should have been made in the first instance. Section 56(3) empowers the Tribunal, if it finds that the rent under a residential tenancy agreement is excessive, to vary the agreement by reducing the rent from the date of the tenant’s application. In the result, I propose to make an order that in my opinion should have been made at first instance. I find that the rent is excessive, and I vary the agreement by reducing the rent to $320 per week from 11 November 2003.
Given that the reduction in rent results at least in part from the state of disrepair of the premises, it would seem to me, subject to submissions, that the award of $1,000 for “discomfort, inconvenience and distress” should be discharged. I will hear the parties on the orders which should now be made to finally dispose of the appeal.

[2004] SADC 25

13 February 2004