Robert Hay’s post – Breach of s 52 can amount to repudiatory conduct

My friend Robert Hay just added a post to his blog on a new decision in which VCAT held that a landlord repudiated the lease by failing to comply with its repair and maintenance obligations under s 52 of the RLA.

Read Robert’s post here.

VCAT’s decision is available here.

Acceptance of the landlord’s repudiation will terminate the lease and allow the tenant to claim damages.

This decision is useful for tenants as it gives a tenant bargaining power against a landlord who has failed to adequately maintain a premises, particularly given the recent press about the lack of retail tenants to fill vacant shops.

For example, assuming that the breach constitutes a repudiation of the lease (not all breaches are a repudiation – but that is a topic for another post), it might be possible for a tenant to accept the landlord’s repudiation, terminate the lease and use the threat of litigation to renegotiate the terms of its lease on more favourable terms.

However, this would be a bold strategy because:

1. the landlord may be able to find another tenant, causing loss of goodwill, investment in fitout and all the usual problems that come with the loss of a retail premises lease; and
2. the tenant would then need to sue for damages.  This may be a hollow remedy given that:

(a) the tenant is only entitled to its loss.  Many smaller retail tenants have significantly reduced profits after payment of directors’ salaries;  and

(b) the litigation would take place in a no-cost jurisdiction.  Litigation over the loss of a tenancy requires either a forensic accountant or a valuer in addition to the usual legal costs, which may consume a significant portion of the damages award.