Keep an eye on what your tenant is doing

The lease is signed, you’ve seen their insurance, the tenant is paying the rent on time – end of story, right? Not necessarily – landlords still need to keep an eye on how their tenant is using the property, particularly in two key areas.

Access to exits

Under the National Construction Code, owners of buildings must comply with various requirements which relate to the safety features of the particular building.  These “essential safety measures” include obvious features such as emergency exit lighting, smoke alarms and smoke control systems, but critically for landlords and tenants, “paths of travel” to exits are also mandated under the Code.

So if your tenant has a tendency to store boxes in hallways or lock rear doors for security reasons, they could put you in breach of your obligations to ensure the essential safety requirements for the building are operating.  While in Tasmania the obligations can be delegated to the tenant under the lease, as an individual landlord, you could face fines of up to $13,000 in Tasmania or $17,000 in Victoria ($65,000 or $88,000 for a company landlord respectively) for each breach of the Code requirements.  In addition, if someone is injured as a result of access to a fire exit being blocked, you are likely to face questions from your public liability insurer as to whether you have complied with all relevant laws.

Use of the premises

A building’s essential safety measures are often tailored to the particular use of the building, and for this reason, a slight change in use of the premises can also affect whether or not the essential safety measures are still compliant.  For example, a tenant who operates as a motor mechanic could develop a profitable sideline in tyre sales, but a building which stores tyres will have a different sprinkler system to one which is used solely for vehicle repairs.  As a result, both your annual building inspections and your lease itself need to take into account the potential for the tenant’s particular use of the building to change over the term of the lease.

You should also make sure that the “permitted use” under your lease complies with the applicable planning scheme in your area, even if the lease specifies that it is the tenant’s obligation to ensure that it obtains all necessary permits.  Recently in Victoria, both the building owner and the tenant were found liable for breaches of the Planning and Environment Act 1987 (Vic) when the tenant operated a “materials recycling” facility without a permit (Hume City Council v Ecotec Woodwaste Pty Ltd [2015] VCAT 599).  In that case, the site caught fire and caused significant disturbance as it continued to smoulder for several weeks.  The Tribunal found that the landlord could not rely on the tenant’s representations that it had complied with the planning scheme, and stated that “a prudent landlord should actively monitor whether there are any blatantly unusual/worrying aspects to the occupier’s day-to-day use of the leased land and whether any ‘compliance’ issues arise”.

Conclusion

Active monitoring of the tenant’s use of a premises, together with a well-prepared lease which takes into account both the tenant’s use and the building itself, should be key elements of any landlord’s property management system. Taking the time to address potential issues when the lease is first prepared can significantly reduce a landlord’s risk.

If you would like any information about the matters raised in this article or require a review of the risks posed by your tenant’s use of the premises under an existing lease, please contact Aurora Kostezky akostezky@pageseager.com.au / 03 6235 5199 or John Honner jhonner@pageseager.com.au / 03 6235 5954.

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