Court ruling spells trouble
CHANCES are you’ve never heard of the case of Hunt v Roads and Traffic Authority of NSW, but this recent court decision could have a far-reaching consequences for unwary property investors around the country.
The ruling cuts right to the heart of the issue of what “duty of care” an owner and their managing rental agent owes a tenant, their awareness about potential problem areas in rental properties, and the importance of complying with building codes when conducting even routine maintenance.
Here are the facts of the case, according to the NSW District Court:
In April 2005, a tenant of a rental property in Ashfield was seriously injured after his hand struck and shattered the large glass panel that formed part of the front door.
The tenant sued the owner of the property, the Roads and Traffic Authority, and the managing rental agent, Century 21 Brough & Son, alleging negligence because the door had not been fitted with safety glass contrary to building codes.
The court found in favour of the tenant, awarding him $843,146 in damages plus costs.
Liability for paying the total bill was split into a 25 per cent share for the owner and 75 per cent share for the managing agent.*
The case hasn’t rated a mention outside of the property and insurance industries, but it should be on the radar of property investors, particularly those who own older buildings.
While the use of safety glass was not mandatory at the time the rental premises were built, the judge found that the owner/managing agent was responsible for the tenant’s injuries because they failed to install safety glass when conducting repairs on the premises after it became mandatory.
In October 1998, a glass panel in the front door the property was broken during a burglary. The agent employed a “handyman” – rather than a professional contractor or glazier – to fix the damage, who did not install safety glass for that panel or anywhere else on the premises where non-safety glass was still in use and might pose a reasonable risk of injury.
In March 2005 – one month before the injury sustained by the tenant — a glass panel in the door to the bedroom was broken during a failed burglary attempt. The judge found that no measures were taken to install safety glass in the property.
This was important because what happened — or didn’t happen — as far back as 1998 had a direct impact on the tenant’s injury seven years later and, ultimately, the outcome of the case.
It’s worth quoting the judge at length:
“(It) must have been known to the defendants [owner/managing agent] that glass doors in the premises were liable to become broken…This is plain from the very nature of glass that it is common knowledge in the community. It was also known to the defendants from the history of break-ins at the premises and, in 1998, the need to engage someone to replace glass that was broken.”
“The risk of injury due to human impact with a glass door on the premises was not a remote, flimsy or fanciful risk. In my view the occurrence of a lacerating injury…was reasonably foreseeable at all relevant times, at least from 1998 and up to, and including the time of the injury [in 2005].”
“I consider that in 1998, and following, a reasonable person in the position of either of the defendants would have taken the precaution of installing safety glass where annealed non-safety glass was shown to have been located in doors in the premises where human impact was reasonably foreseeable.”
The judge also took particular aim at the managing agent’s decision to employ a “handyman” rather than a specialised contractor in 1998:
“It is plain from the expert evidence that if a glazing contractor had been employed [in 1998], in accordance with practice in the glazing industry at the time, a recommendation would most probably have been given to replace non-safety glass in areas of foreseeable possible human impact, as was required by Australian Standard AS 1288.”
For property investors, the Hunt v Roads and Traffic Authority of NSW ruling raises a whole host of issues that could change the way they have to operate.
The points of law established in the NSW case are likely to be raised elsewhere around Australia, and tenant advocacy groups are already looking into what the decision means for their constituency.
In practical terms, owners and managing agents will have to more closely examine the present condition of their properties and review maintenance records to ensure that even work done in the past meets building codes.
Importantly, the court rejected arguments that the tenant “accepted” the premises as it was at the time the lease was signed. The judge said that the owner must still take reasonable care “in respect of dangers not readily apparent on inspection”.
For owners, the case also suggests that handing over responsibility for the day-to-day management of your rental property also won’t absolve you of liability or financial responsibility for decisions made by your rental agents.
Do you think the decision was fair? What responsibility do owners/managing rental agents have to ensure that older properties meet current building codes? Who should hold the largest share of responsibility, the owner or the managing agent?