Saeck & Anor v Sikander & Ors (Residential Tenancies)

[2024] ACAT 73

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

SAECK & ANOR v SIKANDER & ORS (Residential Tenancies) [2024] ACAT 73

RT 139/2024

Catchwords:               RESIDENTIAL TENANCIES – periodic tenancy lasting over ten years – lessors’ claim for compensation - claim for arrears of rent, and costs of repair and cleaning – issue as to which of the tenants bear liability for costs not necessary to establish – condition of premises – habitability and liveability of premises – whether the lessors met their obligations under the RTA – equitable set-off against arrears of rent – cost of bond found to cover the applicants’ overall expenses – application for compensation otherwise dismissed

Legislation cited:        ACT Civil and Administrative Tribunal 2008 s 6

Residential Tenancies Act 1997 Schedule 1

Subordinate

Legislation cited:        ACT Civil and Administrative Tribunal Procedures Rules 2020 r 113

Cases cited:British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1980] QB 137

Gibb Australia Pty Ltd v Cremor Pty Ltd (1992) 108 FLR 129
Gration v C Gillan Investments Pty Ltd [2005] QCA 184
Liangis Investments Pty Ltd v Daplyn Pty Ltd (1994) 117 FLR 28
MEK Nominees Pty Ltd v Billboard Entertainments Pty Ltd (1993) V ConvR para 54-468
Mitchell v Xu (Residential Tenancies) [2020] ACAT 110
Shields v Deliopoulos [2016] VSC 500

Tribunal:Senior Member R Arthur

Date of Orders:  20 June 2024

Date of Reasons for Decision:      3 September 2024

Date of Publication:  12 September 2024

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          RT 139/2024

BETWEEN:

ALEX SAECK

First Applicant

JUDITH SAECK

Second Applicant

AND:

MALIK MUHAMMAD SHAHROZ SIKANDER

First Respondent

MUHAMMAD HAMID SHAH

Second Respondent

SAIMA SIDDIQ

Third Respondent

TRIBUNAL:Senior Member R Arthur

DATE:20 June 2024

ORDER

Ex-Parte the respondents:

1.ACT Rental Bonds on behalf of the Territory is directed to release the bond to the lessors.

2.The application otherwise is dismissed.

…………………………………

Senior Member R Arthur

REASONS FOR DECISION

1.In this matter, the applicants are Alex and Judith Saeck. The first respondent is Malik Muhammad Shahroz Sikander; the second respondent is Muhammad Hamid Shah; and third respondent is Saima Siddiq. The applicants’ claim is for arrears of rent, and the costs of repairs and cleaning on expiry of a residential lease.

The matter

2.The matter concerns a lease with respect to the premises in Oaks Estate, ACT (the premises). The lease was granted on 6 September 2013 by the lessors, the Saecks (the applicants). The tenants at that time were Mr Muhammad Hamid Shah and Ms Saima Siddiq (the respondents) and their children. The lease was for a term of one year, at a rate of $220 per week. A bond of $880 was paid to the Office of Rental Bonds.

3.Upon expiry of the lease in 2014, the respondents, Mr Shah and Ms Siddiq remained at the premises, continuing their occupation on the basis of a periodic tenancy ever since.

4.This application first came before the Tribunal (then differently constituted) in March 2024. On that occasion, the periodic lease was terminated by order of the Tribunal as from 1 March 2024. The lessors’ claim for compensation, and the potential for a tenant to counterclaim, were reserved for future hearing. The rent at the date of termination was $277 per week.

5.At that time, the identification of who the parties to the lease were was matter of dispute between the first and third respondents in correspondence with the applicants’ current property agents at Oz Property Real Estate, who regarded all three of the respondents as co-tenants.

6.Ms Siddiq and the children had travelled to Pakistan earlier in 2023, with the nature and timing of their return unclear. Sometime around October 2023, Mr Shah met in-person with Mr Andreas Haas of Oz Property Real Estate – the authorised agent of the applicants as lessors – and advised him that he was leaving and would get other premises on return, and that Mr Sikander was to take over. Despite Mr Sikander having applied for the lease and been accepted, as there was nothing in writing to record the departure of Mr Shah and Ms Siddiq, and therefore the transfer of liability regarding the premises to Mr Sikander, the applicants maintain that Mr Shah and Ms Siddiq are still liable under the lease.

7.The applicants seek relief for the following expenses:

(a)Rental arrears: $2,255.57;

(b)Time for cleaning/repair, one weeks’ rent compensation: $277;

(c)End of lease cleaning invoice: $900;

(d)Galaxy Plumbing to install replacement sink: $509.20;

(e)Replacement of wash basin (second-hand, not new): $200;

(f)Compensation for a lock/re‑key: $200;

(g)Removal of carport rubbish, incl tip fee and travel costs: $195;

(h)Removal of heater in second bedroom: $220;

(i)ACAT application fee: $176; and

(j)In total: $4,942.77.

8.There was a further hearing on the remaining issues of this matter before me on 1 June 2024, in which Mr Haas appeared on behalf of the applicants, and Mr Shah appeared in person. There was no appearance from either Ms Siddiq or Mr Sikander.

9.I found that the rental arrears were established by the rental records maintained and produced by the applicants. The question as to which of the tenants – Mr Shah and Ms Siddiq, or Mr Sikander – would be liable is something that, in light of the way I propose to dispose of this matter, is not necessary for me to establish.

Condition of the premises

10.The condition of the premises is central to this matter. At the first hearing, evidence was adduced to this point, but the issue was not then considered. Before me, Mr Shah asserted that the premises were “not liveable” and gave examples of what he meant. The examples he gave are borne out by the other evidence in the matter but are not exhaustive of the factors that I have taken into account.

11.Mr Haas, in response, maintained that a good deal of work had been done by way of maintenance over the years by the lessors’ family members, who included persons who had appropriate trade experience. The actual extent of any such work is not of any consequence, as it is the state of the premises at particular times as recorded in three condition reports that provide the most relevant evidence for present purposes. If periodic inspections were undertaken and reports created, they were not put in evidence.

Lessor’s obligation

12.The obligation of a lessor in terms of the condition of the premises is established by Standard Terms 54 and 55, contained in Schedule 1 of the Residential Tenancies Act 1997 (the RTA), which govern the contract between the lessor and the tenant in the ACT. Standard Term 54 is as follows:

Lessor to provide premises in a reasonable state at the start of the tenancy

At the start of the tenancy, the lessor must ensure that the premises, including furniture, fittings and appliances (unless excluded from the tenancy agreement), are;

(a)     fit for habitation and;

(b)     reasonably clean and;

(c)     in a reasonable state of repair and;

(d)     reasonably secure.

…[1]

[1] Subsequent subclauses are not relevant

13.There are no exclusions to be considered.

14.Standard Term 55 is as follows:

Lessor to make repairs

(1)The lessor must maintain the premises in a reasonable state of repair having regard to their condition at the commencement of the tenancy agreement.

(2)The tenant must notify the lessor of any need for repairs.

(3)This section does not require the tenant to notify the lessor about anything that an ordinary tenant would reasonably be expected to do, for example changing a light globe or a fuse.

15.Whilst those standard terms are enforceable as a contract, they are terms mandated by the RTA and as such are, in essence, a requirement of the legislature spelling out what the condition of the premises ought to be and identifying that part of the obligation in relation to the state of repair of the premises falls on the lessor.

16.Those terms appear in the legislation of other jurisdictions in materially the same terms as in the ACT. For example, in the matter of Shields v Deliopoulos,[2] the Supreme Court of Victoria expressed the effect of those terms as:

The duty imposed upon a landlord to ensure that rental premises are in good repair is strict and absolute and imposes an obligation upon a landlord to identify and rectify any defects of which they are aware or ought to be aware.

[2] [2016] VSC 500, following a decision of the Queensland Court of Appeal in Gration v C Gillan InvestmentsPty Ltd [2005] QCA 184

17.It was also argued and accepted in that case that the lessor cannot escape the obligation to provide and maintain the premises in a good state of repair by reason that:

(a)the tenant agreed to premises not in good repair in exchange for a low rent; or

(b)that the premises were in a poor state of repair at the start of the tenancy and therefore the duty to repair does not extend beyond maintaining the premises in that same poor state of repair; or

(c)that the tenant chose to take the premises and could but has not vacated.[3]

[3] [2016] VSC 500 at [30], [38], [39] and [48]

18.It was pointed out that, although imposing such a standard on lessors may have the effect of limiting the availability of low-cost rental housing, that is the result of a policy choice of the legislature. As such, it is not a matter affecting the interpretation of the provisions.

19.Expressions and observations to the same effect have been stated by courts in South Australia and Queensland, and have been followed in Victoria, particularly in the Victorian Civil and Administrative Tribunal.

20.I consider that those authorities are persuasive in this case because of the material similarity of the language used and are apt to be applied in the ACT. That the Standard Terms in the ACT are enforceable as a contract is not a matter for distinction – the parties are required to adopt them, and they are to be interpreted objectively in that light.

21.The terms ‘habitable’ and ‘good repair’ are not necessarily coextensive, though they certainly overlap. ‘Habitability’ focuses on the health and safety of the occupants which may, or may not, depend on premises being in good repair. The latter is necessary for an appropriate level of comfort for the occupants and the functioning of the premises as a residence.

22.It is important to remember that, as an obligation of strict liability, reasonable efforts on the part of the lessor may not be sufficient. It is the objective standard of habitability and good repair that is to be maintained. This may require some proactivity on part of the lessor.

State of the premises

23.The state of the premises on entry in 2013 was the subject of a premises entry report, which effectively indicated that the premises were in a reasonable condition. It was accompanied, however, by photographs which were produced on the first hearing by the applicants in the folder which I have identified as “Folder 2” which show, to my eye, that the condition of the premises was barely acceptable – a cupboard door missing, a significantly cracked and damaged wall,  and minimal window furnishings which appeared old and ill-fitting as examples – which I would consider to be unacceptable, though they may have been in the minority and the premises were overall acceptable. At that stage, there appears to be no indication of mould, although there was a reference to black marks evident in the bathroom.

24.Correspondence referable to this period is contained in a manila folder on the tribunal file, which has been noted by the member constituting the Tribunal on the previous occasion as, “Documents provided by Mr Sikander during the hearing”. It contains a corresponding set of the original entry photographs together with some photographs that show a zoomed-in and therefore more useful indication of the state of various parts of the premises.

25.It includes a text message from Mr Shah to Nicole Pratt, an agent at Ray White (the previous property manager of the premises, before Oz Property Real Estate) saying, “Hello, Nicole.” It is dated 11 September 2013, and states:

Firstly, the condition of the property was acceptable to me and my wife because we noticed small marks and scratches around the walls and the ceiling but we don't mind. According to the provided pictures, you have done very well to cover most of the area.

26.My own observation is that, given what is shown in the photographs, that is a generous indication of what the premises were at that time.

27.A notification about mice was in an email from Mr Shah to Madison Christian, whom I infer was the managing agent at the time, sent on 19 May 2016, stating:

Hi Madison. Just spoke to you over the phone about a hole in the floor and mouses coming through those hole. I just want to notify you because I previously told the property manager before you but she did nothing…

28.To this email, Mr Shah attached two photographs showing significant holes appearing in the corners of a couple of rooms, and a wearing away of the carpet in that vicinity.

29.In 2017, there was a change of managing agent, and Mr Haas at Oz Property Management took over the premises from Ray White. At that time, following an inspection, a condition report showed a considerable deterioration in that, whilst the premises are generally clean, a significant number of elements or items are identified as being broken or damaged – 8 of 13 in the kitchen, 5 of 10 in the bathroom, 2 of 4 in the laundry, 4 of 6 in Bedroom 1, 4 of 7 in Bedroom 2, and 4 of 6 in the lounge room. Two separate mouse holes were noted in Bedroom 1 and another in Bedroom 2. Other examples are doors swollen, bench damaged, chips, damaged edges, cracked paint, cracks and water stains in the ceiling, paint patches, mirror edges pitted and rusty, rusted laundry trough, holes in walls and doors, and old carpets.

30.In the lounge room, two mould patches were noted. It is also noted that the electrical wiring in the lounge and kitchen resulted in the lights flickering from time to time. That was one of the matters identified by Mr Shah in his oral evidence.

31.The premises were inspected again on 1 March 2024, being the date on which Mr Sikander, who was the only person who was actually then in occupation, vacated the premises. It was a comprehensive End of Lease Report (the EOL Report) which shows further deterioration in the premises, the most significant part of which is that mould was noted in the living area, the kitchen, the bathroom, Bedroom 1, and Bedroom 2.

32.On the front page of the EOL Report, under the heading “Lessor disclosure” and the words, “The lessor must indicate whether the following apply to the residential premises”, in answer to the question, “Are there any signs of mould and dampness?”, the report states “Yes”.

33.The EOL Report was completed by the agent only. It is a little difficult to interpret. On one view, it would seem that there is no feature of a room, except the bathroom, that is undamaged in some way. On another view, consideration of specific comments suggests that there was some damage in the bathroom, and some features in other rooms that were not damaged.

34.I indicated earlier that I thought that the state of the premises at the commencement of this lease in 2013 only just met the applicants’ obligation to ensure that the premises were in a reasonable state of repair. I have indicated how the state of the premises 4 years later had significantly declined. The EOL Report shows a further decline in the ensuing 7 years.

35.I note that the tenants - for the most part, the second and third respondents, Mr Shah and Ms Siddiq and their children – have occupied the premises on a month-to-month tenancy for approximately the last 10 years. In that time, the rent has risen $57. Mr Haas described the rent several times as being “the cheapest rent in Canberra”.

36.At no time has there been any indication that the state of repair of the premises described in the 2017 Condition Report was not the responsibility of the lessor. Further, the lessor has not sought to suggest (other than in certain instances referred to below) that the tenant is to blame for the state of the premises (other than in respect of cleanliness) as noted in the EOL Report.

37.In my view, given the overall poor condition throughout the house, the premises were not in a reasonable state of repair at the time of the end of the lease, and probably had not been so for a considerable period of time. More importantly, having regard to the presence of mould, the premises were not in a habitable condition. The applicants are claiming for some 2 to 3 months of rent. It is not a stretch to find that the poor state of repair has lasted for at least that long.

Set-off

38.The respondents have raised the liveability of the premises but have not expressly claimed compensation. The manner in which Mr Shah made his complaint  appeared to be more about the unfairness of the claim for arrears of rent than as a claim for compensation. I propose to deal with it in that light and treat it as raising a set-off against the arrears of rent claimed.

39.The way in which the set-off has been raised does not strictly comply with rule 113 in the ACT Civil and Administrative Tribunal Procedures Rules 2020, pertaining to set-offs, in that it is not in writing on the approved form.[4] It was, however, apt to convey to the Tribunal and to the applicants that the respondents disputed the claim for rent and did so on the basis of the liveability of the premises, and they provided documentation in support of their claim. In the context of the achievement of the objectives of the ACT Civil and Administrative Tribunal Act 2008, as set out in Section 6, and noting that the respondents were unrepresented, I consider that rule 113 was substantially and sufficiently complied with.

[4] ACT Civil and Administrative Tribunal Procedures Rules 2020 rule 113 ss(2)(a)

40.The claim by a lessor for non-payment of rent is capable of being met in equity by set-off, in respect of compensation that would be payable to a tenant for a landlord's breach of the obligation to maintain the premises in good repair and in a habitable condition.[5]

[5] See Gibb Australia Pty Ltd v Cremor Pty Ltd (1992) 108 FLR 129; MEK Nominees Pty Ltd v Billboard Entertainments Pty Ltd (1993) V ConvR para 54-468 at 65,466-7; Liangis Investments Pty Ltd v DaplynPty Ltd (1994) 117 FLR 28, applying British Anzani (Felixstowe) v International MarineManagement (UK) Ltd [1980] QB 137

41.A claim for compensation can be made as a defence to a claim for rent in circumstances where the entitlement to compensation is as a result of a breach which impeaches, or undermines, the claim for payment of rent. That is to say, in a residential lease situation, the tenant pays rent as agreed for the right to occupy premises which are in the condition that is mandated by the agreement between the parties, and that is the condition which is mandated by Standard Terms 54 and 55 in Schedule 1 of the RTA.

42.What the tenant pays for is premises which meet that definition/standard. It is a situation in which, to the extent that it fails to meet that standard, there can be a reduction in the amount of compensation relative to the amount of rent payable. But, in the circumstances of the present matter, where mould is evident in every room of the house, I consider that there is a complete undermining of the lessor's right to recover rent.

43.As a consequence, I consider that the claim for rent is appropriately met. The matter of the liveability of the premises having been raised by the respondents who, if they had sought it, would be entitled to an award of compensation which, in my view, ought at least to exceed the amount that the lessor seeks by way of arrears of rent.[6] They are not, however, entitled to compensation in respect of any excess.

[6] This approach was taken by the Tribunal in Mitchell v Xu(Residential Tenancies) [2020] ACAT 110, though without reference to the equitable remedy

44.The orders I propose to make accordingly are that the Rental Bond Board is directed to release the bond to the lessor, and that the application is otherwise dismissed.

45.I make that order on the basis that I am satisfied that there was some degree of lack of cleanliness and leaving of materials which required expense in rectifying and although I am not able to, from the information I have, work out exactly what that figure would be, on the whole I think it is an appropriate way of disposing of the matter to return the whole of the bond to the lessor on that account.

46.In relation to the other claims:

(a)The sink is not shown on the EOL Report as needing replacement, but in any event, I would consider it to be a matter of general wear and tear.

(b)The wash basin, on the evidence provided by the respondents, had an existing crack and was installed by “Nick”, who I understood to be a member of the applicants’ family. That it has subsequently broken is not, in the circumstances, to be taken as solely the responsibility of the respondents.

(c)The other matters I consider, given the overall state of the premises, to be part of the work required to be done by the respondents to present the premises to new tenants in compliance with Standard Term 54 of the new lease.

47.Having achieved only partial success, the applicants should not have the application fee paid for.

…………….…………..

Senior Member R Arthur

Date(s) of hearing:	3 June 2024
Applicants:	Andreas Haas, authorised representative
First Respondent	No appearance
Second Respondent:	In person
Third Respondent:	No appearance