In brief - Landlord liable to carry out structural works and compensate tenant
In a dispute related to structural works required on a hotel by the council, the landlord was held liable to carry out the works and to reimburse the tenant for the works that it had paid for and also to compensate the tenant for loss of profit whilst the accommodation section of the hotel was closed.
Holus Bolus v The Wicko
In Holus Bolus Pty Limited v The Wicko Pty Limited, the matter in dispute between the parties was a notice with regard to carrying out works related to fire safety issues in a hotel in Quirindi.
The dispute arose between the lessor and the lessee as to who was responsible for this and council ordered that the residential portion of the premises be closed until the works were undertaken.
Lease states that landlord to carry out all works "of a structural nature"
The lease contained what could be classified as fairly normal provisions dealing with obligations to repair and comply with statutory requirements on the part of the tenant.
The lease also contained a covenant that the landlord was required to carry out "all amendments, alterations, reparations and additions of a structural nature".
The court held that the reference to works "of a structural nature" was descriptive of works carried in and upon the hotel building. The structure comprised many parts and this description was not limited to works which affected those parts of the building which are load bearing (such as a main wall), as contended by the lessor.
Structure of hotel building to be considered as a whole
The court held that the words "of a structural nature" relates to the structure considered as a whole.
The court further found that, having regard to the very large list of works set out by the council, the case had to be determined having regard to the totality of the works required to be done, rather than the individual parts.
Building work required to meet fire safety standards
The required works were related to the fire safety and fire resistant condition of the hotel building. The works, taken as a whole, involved the installation of a total system for the compartmentalising and containment of fire within the hotel building.
The totality of these works would change the building to a standard which was regarded as essential for the use and enjoyment of the accommodation amenities of the hotel. Without completion of the works, the structure could not be lawfully used for the purpose for which it was designed and let to the tenant.
Totality of works deemed to be "structural", even if individual items are not
In short, the undertaking of the works changed the condition of the property from a building which was deemed unsafe to a building which was safe, and therefore the works were deemed to be structural works, even though individual items of work may not, in isolation, have been considered to be structural in nature.
Leases require careful drafting
Firstly, it must be clear in leases as to what works each party is to undertake and in particular where the tenant is to be responsible for any structural works.
Secondly, the drafting of the lease needs to be clear as to whether the works are looked at on a totality basis or on an individual works item basis.
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