KEY POINTS:
Q. I own a commercial building that I lease to a dairy owner. The tenant phoned to advise the shop window had been smashed by vandals. I told him to have the window fixed so he could secure the premises. He paid a glazier $1000 to do the
job which he has deducted from this month's rent. I told the tenant he needs to pay the rent in full. Is this right? Who should pay for the glazier?
A. Whether the tenant is able to deduct the cost of the repairs from the rent will depend on the terms of your lease. It is common for commercial leases to include a covenant requiring a tenant to pay the rent to the landlord without deduction or set-off.
If this applies to your lease, the tenant is not entitled to deduct the cost of the repairs from the rent. However, if under your lease it is your obligation as landlord to repair the broken window, then the tenant may be able to claim the cost of the repairs from you by way of damages.
If there is no covenant in the lease preventing the tenant from deducting or setting-off the rent and under your lease it is your obligation as landlord to repair the window, the tenant will have been entitled to deduct the cost of the repairs from the rent although he should have advised you of this first.
Any right to set off, legal or equitable, will depend on whether the tenant is responsible under your lease for repairing the damage to the broken window.
Your tenant's obligation to repair will be expressly set out in your lease or, if it is not, it will be implied by section 106(b) of the Property Law Act 1952 (PLA) which provides that a commercial tenant: "will, at all times during the continuance of the said lease, keep the demised premises in good and tenantable repair fair wear and tear (all without neglect or default of the lessee) excepted."
If your lease does not expressly set out your tenant's obligations to repair (your repair covenant) and therefore s106(b) of the PLA is implied into your lease (implied repair covenant), it is likely your tenant will not be responsible for repairing the window as the damage was not caused by the tenant's neglect or default. We suggest you check your lease as it is quite common for commercial leases to impose specific repair obligations on a tenant and a landlord. The liability for repair is a matter of negotiation, so the extent of any liability will vary from lease to lease.
Your lease may well limit the tenant's obligation to repair damage to making good any damage to the property or any loss which is caused by the tenant's (or those for whom the tenant is responsible under the terms of the lease) improper, careless or abnormal use. If this applies to your lease, the tenant will not be responsible for the damage to the window as we assume you accept the damage was caused by vandals.
It is not uncommon to see a tenant's liability to repair limited by a landlord's obligation to insure e.g. a covenant that provides that the tenant will not be obliged to make good any damage where the landlord is insured against such damage.
For our conclusive advice we will need to see a copy of your lease in order to assess the relevant repairing and insurance covenants. However, as the damage to the window was not caused by the neglect or wilful act of the tenant (or a person for who the tenant is responsible) and based on the assumption that your lease does not impose liability on your tenant for such damage, your tenant will not be responsible for the loss and you as the landlord will need to look to your insurer.