Repaint and re-carpet clause is not a keep in repair clause and therefore, not contrary to s 52 of the RLA 2003 … or is it?

In a decision handed down this week, the Tribunal held that an obligation in a retail premises lease to repaint and re-carpet periodically is not inconsistent with the landlord’s obligation to maintain the premises under s 52 of the RLA 2003.  

In the decision of Deng and Deng Pty Ltd v McPhee and Anor (Building and Property) [2024] VCAT 1025, the Tribunal granted an injunction to a tenant who had been locked out of its motel business by its landlord. One of the breaches relied on by the landlord was an alleged failure by the tenant to:

• paint the Premisses internally every 3 years and externally every 5 years; and
• replace the carpet every 5 years.

The Tenant argued that the repainting and recarpeting clause was inconsistent with s 52 of the RLA 2003.

Section 52 of the RLA 2003 states that:

(1) A retail premises lease is taken to provide as set out in this section.

(2) The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into:

(a) the structure of, and fixtures in, the retail premises; and

(b) plant and equipment at the retail premises; and

(c) the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

Section 94 of the RLA 2003 renders void any provision in a retail premises lease that is inconsistent with a provision of the RLA 2003.

The tenant argued that:

1. the landlord was responsible under s 52 of the RLA 2003 to maintain the paint and carpet in the retail premises in a condition consistent with their condition when the lease was entered into;  and
2. by purporting to require the tenant to repaint and re-carpet periodically, the landlord was in substance contracting out of that obligation.

The Tribunal did not accept that argument, and found that the repainting and re-carpeting clause was not inconsistent with s 52, holding that:

[37] … it is immaterial [under the terms of the lease] whether the paint or carpet has deteriorated to a condition which is not commensurate with the condition when the retail premises lease was entered into. In other words, it has no comparator, which appears to be an essential element under s 52 of the RLA. 

[38] Unlike clause 8 [of the lease], which is directed at repairing or maintaining an element of the Premises, the obligation to paint at a point in time and irrespective of the condition of the paintwork at the time the Lease was entered into; and an obligation to re-carpet at a point in time, again irrespective of the condition of the carpet at the time the Lease was entered into, is more likely to be work of a capital nature. The obligation to repaint and re-carpet does not crystallise in order to maintain the Premises in a condition consistent with their condition when the retail leases premises lease was entered into. Rather, the obligation crystallises irrespective of that condition. 

The Tribunal ultimately found that the requirement to repaint and re-carpet fell into the exception on the recovery of capital costs in s 41(2)(a) of the RLA 2003 and that there was no arguable case or serious issue to be tried that the repainting and re-carpeting requirement was inconsistent with s 52.

The Tribunal held that there was a serious issue to be tried on other grounds, and granted the injunction to the tenant, so it does not look like the tenant will be able to appeal that decision.  

However, obligations to paint during the term of a lease are common and, in fact, can be found in some versions of the LIV standard lease.  The argument that those provisions are inconsistent with s 52 of the RLA 2003 and void by operation of s 94 of that Act has been in circulation for some time and I am aware of at least two other cases in which the point is currently being pressed.  Consequently, despite the finding of the Tribunal in this case, I expect that this will not be the last time the point argued.

Sam Hopper SC and Eli Fryar