Who’s liable for unsafe rental premises?

Posted on January 11th, 2018

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The N.S.W. Court of Appeal recently considered the respective liabilities of a landlord, managing agent and tenant arising out of the collapse of a balcony at a rental property at Collaroy, on the Northern Beaches of Sydney (Libra Collaroy Pty Limited v Bhide).

In 2005, the landlord engaged a real estate agent to manage their residential rental property pursuant to a Management Agreement. During the tenancy, the tenant raised numerous issues concerning the state of repair of the upstairs balcony. The managing agent obtained quotes for repairs and forwarded these to the landlord however these were not acted on.

In 2012, the balcony collapsed injuring 4 people, including the tenant’s daughter. The 4 injured persons commenced proceedings against the landlord and the managing agent for their injuries and the tenant also commenced proceedings against the landlord and the managing agent for psychological injury. The landlord and managing agent issued cross claims against each other and also against the tenant.

At first instance it was held that the managing agent was 100% liable for the claims. It was held that the managing agent had accepted delegation for management of the property on behalf of the landlord and had failed to exercise reasonable care in maintaining the property. It was found the managing agent should have done more than simply pass on quotes for repairs rather, should have recommended the owners obtain expert advice on the structural integrity of the balcony and taken steps to prevent access to the balcony until this occurred. It was also held the tenant had discharged their duty of care by complaining about the condition of the balcony to the managing agent.

On appeal, the managing agent did not challenge the finding it was negligent. It argued however that the landlord and tenant should also be liable for the claims.

In relation to the landlord, it was held on appeal that it was also liable for the claims. Although the landlord had delegated management to the managing agent, it was found that a reasonable person in the position of the landlord should have formed the view that the managing agent was not discharging its duty and should have instructed the managing agent to obtain expert advice on the structural integrity of the balcony and taken steps to prevent access to the balcony until this occurred.  Whilst the landlord was entitled to an indemnity from the managing agent, the amount of the indemnity was reduced to reflect the contributory negligence of the landlord, which was assessed at 30%.

In relation to the tenant, it was also held on appeal that it was also liable for the claims. It was found that a reasonable person in the position of the tenant having expressed concerns as to the safety of the balcony, should have prevented access to the balcony until its structural integrity had been properly investigated and the tenant’s liability to contribute to the claims was assessed at 20%.

Although a landlord may generally discharge its duty of care in respect of property management by engaging a competent managing agent, where a landlord is or should be aware of a risk of harm the landlord may still have a duty to take reasonable steps to ensure the agent addresses the risk.

Similarly, a tenant will not discharge their own duty of care by simply raising issues of concern to the managing agent rather, should also take reasonable steps to avoid the risk of harm.

A managing agent should ensure they act on issues of risk and take reasonable steps to avoid the risk. Further, managing agents should seek to include in their management agreements a contractual indemnity limiting liability to the extent it is caused or contributed to by the landlord’s own negligence.

 

Michael McGrath, Director at Mullane & Lindsay Solicitors, NewcastleMichael McGrath is a Director at Mullane & Lindsay Solicitors and practices extensively in commercial, business and property transactions and adviceIf you require any assistance in this area please contact Michael McGrath to arrange a consultation or contact our Newcastle office.

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