Tenants beware: Don't get hit by safety maintenance costs

Cite as: April 2012 86 (04) LIJ, p.28

Your building lease may require you to pay the cost of safety maintenance and repair or for safety inspections and services. These costs must be met by the landlord.

By Norman Mermelstein and Michael Redfern

Tenants beware:  Don't get hit by safety maintenance costs

The essential safety measures provisions of the Victorian Building Act 1993 and the Building Regulations 2006 have important application to commercial buildings and they should always be fully considered by landlords and tenants of these buildings and those who are acting for them.

Essential safety measures

Maintenance

Regulations 1212–1217 of the Building Regulations require the maintenance of essential safety measures within the following buildings built before 1 July 1994:1

  • Class 1b: Some boarding houses, guest houses or hostels.
  • Class 2: Buildings containing sole- occupancy units (for example, apartments, blocks of flats).
  • Class 3: Backpacker accommodation, residential parts of hotels or motels, residential parts of schools, accommodation for the aged, disabled or children.
  • Class 5: Offices for professional or commercial purposes.
  • Class 6: Shops or other buildings for sale of goods by retail cafes, restaurants, milk bars, dining rooms and bars.
  • Class 7: Buildings used for car parks, storage or display of goods.
  • Class 8: Laboratories or buildings for production or assembly of goods.
  • Class 9: Public buildings such as health care buildings or assembly buildings, nightclubs, bars etc.

together with a class 4 part of a building that is class 5, 6, 7, 8 and 9 if it is the only dwelling in the building2 and a place of public entertainment.

Regulations 1201–1211 require the maintenance of essential safety measures within these classes of buildings built on and after 1 July 1994. Under reg 1217, the owner of a building built before 1 July 1994 is responsible for ensuring that the essential safety measures are maintained in a state that enables them to fulfil their purpose.

Under reg 1205, the owner of a building built after 1 July 1994 must comply with the maintenance determination issued in relation to that building. This is contained in the certificate of occupancy issued for that building which reg 1203 says must list all of the essential safety measures and specify their required level of performance as determined by the relevant building surveyor.

The Regulations also require compliance with the Building Code of Australia which incorporates the Australian Standards for the maintenance of essential safety measures.3

Reports

From 13 June 20084 reg 1214 requires the owners of the buildings covered by regs 1214–1217 (see above) that were built before 1 July 1994 to prepare an annual essential safety measures report. Likewise, reg 1208 requires the owners of these buildings covered by regs 1201–1211 (see above) that were built after 1 July 1994 to prepare an annual essential safety measures report.

Definitions

Regulations 1202 and 1213 each define essential safety measures for the purpose of the buildings to which they apply and it would appear that both include the following:5

  • Air conditioning systems
  • Balustrades and hand rails associated with exits
  • Carpark mechanical ventilation systems
  • Emergency lifts
  • Emergency lighting
  • Emergency warning and intercommunication systems
  • Exit doors
  • Exit signs (including direction signs)
  • Fire and non-fire isolated ramps
  • Fire and non-fire isolated stairways
  • Fire control centres (or rooms)
  • Fire curtains
  • Fire detectors and alarm systems
  • Fire doors and their closing and latching mechanisms
  • Fire extinguishers (portable)
  • Fire hose reel systems
  • Fire hydrant systems
  • Fire indices for materials
  • Fire-isolated passageways
  • Fire order notices
  • Fire protective construction joints and spaces
  • Fire-protective coverings
  • Fire-rated materials applied to building element
  • Fire-resisting shafts
  • Fire-resisting structures
  • Fire shutters
  • Fire windows
  • Paths of travel to exits
  • Passenger lift fire service controls
  • Penetrations in fire-rated structures
  • Smoke and heat alarm systems
  • Smoke and heat detection systems
  • Smoke control measures
  • Smoke doors and their closing and latching mechanisms
  • Smoke and heat vents
  • Solid core doors and their closing and latching mechanisms
  • Sprinkler systems
  • Stairwell air pressurisation systems
  • Standby power supply systems
  • Stretcher facilities in lifts
  • Vehicular access around large isolated buildings
  • Warning and information signs including lifts

together with mechanical ventilation and hot water, warm water and cooling water systems in a building other than a system only serving a single sole-occupancy unit in a class 2 or 3 building or a class 4 part of a building.

Building Act 1993

Section 251 of the Building Act provides:

(1) If the owner of a building or land is required under this Act or the regulations to carry out any work or do any other thing and the owner does not carry out the work or do the thing, the occupier of that building or land or any registered mortgagee of the land or the land on which the building is situated, may carry out the work or do the thing.

(2) An occupier may –

(a) recover any expenses necessarily incurred under sub-s(1) from the owner as a debt due to the occupier; or

(b) deduct those expenses from or set them off against any rent due or to become due to the owner.

(6) This section applies despite any covenant or agreement to the contrary.

Chen v Panmure Hotel Pty Ltd 6

In this case, the municipal building surveyor required the landlord, among other things, to install hard-wired smoke detectors under the Building Regulations.

Regulation 709(8) requires the owner to provide hard-wired smoke detectors. The lease made the tenant responsible. Where a tenant carries out essential safety measures works pursuant to a clause in a lease, s251(2) of the Building Act will allow the tenant to recover its costs from the owner. To avoid such circuity, VCAT decided that no determination should be made against the tenant, with the result that the relevant clause in the lease was effectively unenforceable.

Retail Leases Act 2003

Section 52 of the Retail Leases Act is narrower than the Building Act. Where a lease is subject to the Retail Leases Act, s52 requires the landlord to maintain the structure of the premises, plant and equipment, appliances and fittings and fixtures provided under the lease in the same condition as they were in at the commencement of the lease.

In Ross-Hunt Pty Ltd v Cianjan Pty Ltd,7 VCAT decided that for the purpose of applying s52, the relevant time for determining the required condition of the premises is when the current lease was entered into and not when the tenant first entered into possession. Section 251 of the Building Act does not appear to have been raised. As the mechanical ventilation system in that case was an essential safety measure, it would appear that the landlord should have been required to maintain the system in accordance with Australian Standards and not to the condition at the commencement of the current lease.

So also it would appear that the decision of VCAT in Computer & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd & Ors8 is incorrect to the extent that it required the tenant to comply with an obligation in its lease to pay the landlord’s costs of repairs of an air-conditioning system which placed the system in an improved condition from the condition at the commencement of the lease. While this is seemingly consistent with the terms of s52 of the Retail Leases Act, the decision does not appear to be consistent with the essential safety measures requirements of the Building Act.

It might be noted that in CafĂ© Dansk Pty Ltd v Shiel & Ors9 Deputy President Macnamara expressed the view that the costs of a landlord in maintaining its premises as required by s52 could not be recovered because s51(1)(c) of the Retail Leases Act provides that a landlord is unable to claim expenses from another in relation to the landlord’s compliance with this Act and s94 of the Retail Leases Act prevents contracting out of the Act.

As a result of Chen’s case, the protection of retail tenants is, therefore, extended beyond the provisions of s52 of the Retail Leases Act because s251 of the Building Act applies to all matters required of a landlord under the Building Act irrespective of the condition at the time of the commencement of the current lease.

In respect of works outside the protection given by s52 of the Retail Leases Act and which are of a non capital nature (and therefore outside the control of s41 of that Act), it would appear that s251 of the Building Act will, in the same way, override the provisions of s39 of the Retail Leases Act (which allows landlords to recover outgoings of a non capital nature other than those which might be incurred in complying with s52) in respect of the costs of works that are of an essential safety measures character.

Practical effects

Non-retail leases

The effect of Chen’s case is that even without the protection of ss41 and 52 of the Retail Leases Act, repairs required by the Building Act to be carried out by a landlord cannot be passed on to a tenant despite any provisions contained in the lease purporting to do so.

Essential safety measures reports

The application of s251 of the Building Act will also prevent a landlord from requiring a tenant to pay for the annual essential safety measures report required under regs 1208 and 1214. The owner must “ensure” that the report is prepared in accordance with regs 1209 and 1215 and s251 of the Building Act will, therefore, apply to the respective obligations of the landlord and the tenant in this regard.10 It is an offence not to prepare these reports.

Property managers who outsource this obligation to suitably qualified personnel such as registered building surveyors and pass on the cost as an outgoing under the lease should review their practice.

Fire extinguisher service, air conditioning and inspection charges

For the same reason a landlord’s costs incurred in respect of the inspection11 and service of fire extinguishers contained in a building, which are frequently sought to be passed on to tenants, must be met by the landlord and cannot be passed on to the tenant. So also in respect of air-conditioning systems contained in a building and the costs in respect of which are frequently sought to be passed on to tenants. The owner must meet the cost of inspection12 and servicing and cannot pass these costs on to the tenant.

Inspections

Section 227E of the Building Act provides that the chief officer of the relevant fire authority and the municipal building surveyor may at any time either jointly or severally inspect any safety or emergency installations, equipment or services in a building and any records or reports relating to their operation and maintenance.

LIV lease

It would appear that several provisions of the Law Institute of Victoria (LIV) Commercial Lease of Real Estate (May 2009 revision) are effectively unenforceable as a result of the decision in Chen’s case to the extent that they require a tenant to keep in repair essential safety measures items, and to meet the cost of essential safety measures inspections and reports. These provisions are:

Clause 1.1: definition of building outgoings to include:

(c) the costs of maintaining and repairing the building and the landlord’s installations (but excluding any amount recovered in respect of that maintenance or repair by the landlord from its insurer); and

(g) costs of whatever description, reasonably incurred by the landlord in the administration, management or operation of the building and the land;

Clause 3.1.2: to comply with all notices and orders affecting the premises that are issued during the term;

Clause 3.2.3: to immediately replace glass that becomes cracked or broken with glass of the same thickness and quality;

Clause 3.2.4: to immediately repair defective windows, light fittings, doors, locks and fastenings;

Clause 3.2.5: to maintain in working order all plumbing, drainage, gas, electric, solar and sewage installations;

Clause 3.2.16: to maintain and keep in good repair any heating, cooling or air conditioning equipment exclusively serving the premises.

Outgoings within the definition of building outgoings in clause 1 of the lease that a tenant must pay or reimburse to its landlord under clause 5.4 and schedule item 10 will be similarly unenforceable to the extent that they require a tenant to pay or reimburse the landlord for essential safety measures works and reports.

The “no setoff provision” in clause 2.1.1 line 1 of the LIV lease will be unenforceable in respect of deductions from rent authorised by s251(2)(b) of the Building Act.

Exits and paths of travel to exits

Regulation 1218 places a separate obligation on the occupier of a building to maintain in an efficient condition and keep readily accessible, functional and clear of obstruction so that egress is maintained, all exits, paths of travel to exits and paths of travel from exits to a road.

As these items are described in the Regulations as essential safety measures,13 it would appear that the landlord must, at its cost, include them in its annual reports pursuant to regs 1208 and 1214. Further, as s251 of the Building Act only applies to the obligations of a building owner under the Act and the Regulations, it would appear that the parties to a lease may, as between themselves, provide for the landlord to assume responsibility for meeting the requirements of the tenant under reg 1218.

The work that may be required of a tenant pursuant to reg 1218 can be extensive and it will always be desirable for a tenant to check the latest essential safety measures report for the premises before entering into a lease and, where appropriate, to require suitable protective provisions to be inserted into the lease.

It might be noted that in its decision in Chen’s case, VCAT decided that the requirements of reg 1218 were not enforceable as between the landlord and tenant because under the terms of the lease between the parties the tenant was not required to carry out repairs of a structural nature which were required as a result of the tenant’s normal use of the premises.

Cooling towers

A cooling tower is an essential safety measures item to the extent that it is a cooling water system or is so designated by the relevant building surveyor (reg 1202). A cooling tower must be registered (reg 1301 of the Building Regulations) with the Building Commission14 and with the head of the Department of Human Services.15

The owner of a cooling tower must ensure that a risk management plan exists for the cooling tower system16 and make provision for maintenance of all registered cooling towers under Part 7 of those Regulations.

Residential buildings

The classes of building to which the Regulations apply exclude class 1a which applies to detached dwellings and, therefore, the Regulations will not apply to the majority of non-commercial residential premises. Nevertheless, it will be seen that many private residential premises will be subject to the Regulations and this should be noted.

Where premises are subject to the Residential Tenancies Act 1997 it would appear that the maintenance obligations placed on a landlord by s68 of that Act will extend to the landlord being obliged to carry out the maintenance of exits and paths of travel to exits required by reg 1218.

Considerations

Clearly the primary onus is on the owner of premises to ensure that all essential safety measures are regularly inspected, maintained and made the subject of an essential safety measures report prepared each year and made available for inspection, and provided to tenants where requested.

Landlords should ensure that all leases allow for the landlord and its representatives to enter into and inspect the premises and carry out maintenance work where required. In this regard it should be appreciated that the effect of such inspection provisions will mean that the landlord will be an occupier of the building for the purposes of the application of the occupiers’ liability provisions of the Wrongs Act 195817 and that, as a consequence, a landlord will need to have adequate public liability insurance for its own liability as an occupier of the premises, that is, as well as requiring the tenant to carry public liability cover for the tenant’s own liability as occupier of the premises.

A tenant should, in addition to obtaining its own report on the condition of the building, obtain a copy of the latest annual essential safety measures report for the building before entering into the lease. Provision should also be made in the lease for any works required to be carried out, particularly any work required to comply with the exits and paths of travel provisions of reg 1218.

An assignee of a lease should also obtain a copy of the latest annual report and ensure that any required works (and particularly those required by reg 1218) are carried out. Similarly, a sub-tenant should obtain a copy of the latest annual report and ensure that any required works are carried out before the sub-lease is entered into and, again, particularly work that may be required of the sub-tenant as the occupier of the premises, by the application of reg 1218.




NORMAN MERMELSTEIN is the principal of Law Link Pty Ltd solicitors. He is also a licensed real estate agent and an accredited IAMA mediator and practises in owners corporation law and commercial leasing. MICHAEL REDFERN sadly passed away on 2 March 2012. At the time of his passing, he was a consultant with Russell Kennedy solicitors, a member of the LIV Leases and Property and Environmental Law Section Executive committees and an LIV accredited specialist in commercial tenancy law, property law and mediation. An obituary will appear in an upcoming edition of the LIJ.

1. Regulation 1212. The classes of buildings described are those classified by the Building Code of Australia 2011, ppA3.2–3, and these abbreviated descriptions of the buildings within each class are those of the Building Commission.

2. Regulation 1201.

3. For a detailed explanation and commentary on the essential safety measures requirements for Victoria, refer to the Building Commission’s Essential Safety Measures Maintenance Manual (4th edn), available from the Building Commission and on the Commission’s website: www.buildingcommission.com.au. The maintenance work contemplated by the manual includes regular inspections and reporting which will be used as the basis for the preparation of the annual essential safety measures report at the end of each year.

4. The first report was required to be completed before 13 June 2009 which, as we see it, required a building owner to carry out necessary inspections and record relevant information as from 13 June 2008.

5. This list is a summary of the essential safety measures described in reg 1202(a). Regulation 1202 defines essential safety measures as: (a) any item listed in tables 1.1 to 1.11 and 1.12 of volume one of the Building Code of Australia (except the item in table 1.4 relating to artificial lighting); (b) any other item that is required by or under the Building Act or the Regulations to be provided in relation to a building or place of public entertainment for the safety of persons in the event of fire and that is designated by the relevant building surveyor as an essential safety measure; and (c) any other item that is an essential safety measure within the meaning of Division 1 or Part 12 of the Building (Interim) Regulations 2005 as enforced before their revocation. It would appear to us that reg 1213 will by necessary implication also include at least all of these items to the extent that it defines an essential safety measure as any measure including an item of equipment, form of construction or safety strategy required for the safety of persons using a building or place of public entertainment. Other safety measures in table 1.12 of the Building Code of Australia include glazed assemblies, balconies, balustrades, swimming pool safety fencing, refrigerated chambers, strong rooms and vaults and bushfire protection measures.

6. [2007] VCAT 2464.

7. [2009] VCAT 829.

8. [2010] VCAT 2054.

9. [2009] VCAT 36.

10. To the extent that the word “ensure” is not clear, the heading to the section appears to make the position clear when it says that “owner must prepare report”. Refer to the Interpretation of Legislation Act 1984 s36(2A) and DC Pearce and R Geddes, Statutory Interpretation in Australia (7th edn), at [1.37] and [4.54].

11. Inspection is regarded as a maintenance item as to which refer, for example, to Essential Safety Measures Maintenance Manual (see note 3) s1, p3.

12. See note 11 above.

13. The heading to Division 1 of Part 12 of the Regulations is “Maintenance of essential safety measures”. Refer to the Interpretation of Legislation Act 1984 s36(1)(a) and DC Pearce and R Geddes, Statutory Interpretation in Australia (7th edn), at [1.35] and [4.50].

14. Section 75BA of the Building (Legionella) Act 2000.

15. Section 80 of the Public Health and Wellbeing Act 2008.

16. Section 91 of the Public Health and Wellbeing Act 2008 and s51 of the Public Health and Wellbeing Regulations 2009.

17. Wrongs Act 1958 s14A(a)(ii).

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