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Does mould make a rental
house unfit for habitation?
Mould is a tricky problem in a residential tenancy.
Landlords blame tenants for not properly ventilating.
Tenants blame landlords for building defects.
The Residential Tenancies Act 2010 (NSW) (the RT
Act) requires a rental property to be fit for habitation.
The question is: Does mould make a property unfit for
habitation, and what can a tenant claim if it does?
We are indebted to Judge Hatzistergos for providing a
comprehensive guide to how mould can make a property unfit
for habitation, and what a tenant can claim if their
possessions are damaged or destroyed by mould.
The judgment is Murphy v Lewkowitz; Lewkowitz v Murphy
[2021] NSWDC 361 (11 July 2021), District Court of New South
Wales.
The mould
The tenant, Christopher Murphy, rented a house at 8
Rivers Street, Bellevue Hill for himself and his family in
August 2013. It was a large luxury house with a swimming
pool. He renewed the lease and continued to reside the house
until July 2017, moving out one month before the lease
ended. He paid a monthly rental of $11,626.00.
The landlords, Mr and Mrs Lewkowitz, self-managed the
property. In 1990, they had extensively renovated the
property (which had been built in 1930), including an
extension to the house and a swimming pool. They had lived
in it for 34 years, before leasing it. They regularly
inspected the property.
In 2015, the tenant complained of mould on his leather
coats which he kept in a wardrobe. The landlord replied:
“You should open the window … It is your fault for not
keeping the air circulating.” And added: “You should buy a
packet of ‘Damp Rid’”. The tenant followed the landlord’s
advice and never closed the windows in the bathroom again,
except when absent.
In March 2017 (after weeks of continuous rain) the mould
reappeared and was widespread, despite the tenant having 5
dehumidifier packets. The worst affected area was the main
bedroom, which was downstairs. Leather jackets and shoes
inside the walk-in wardrobe were badly affected by mould.
There were vigorous email exchanges in which the tenant
expressed concerns about the mould and held the landlords
responsible for damage to his possessions.
The landlords engaged several experts to visit the
property. They found rising damp and water ingress. They
found building defects. They recommended remedial work:
better sub-floor ventilation, clearing the existing wall
vents, clearing and repairing stormwater drains, installing
more drains, inserting a new damp proof course and external
ducting for the exhaust fan.
One expert engaged by the landlords described the mould
as very serious – it was condition 3 i.e. “an indoor
environment contaminated with the presence of actual mould
growth, associated spores and fungal fragments”. The expert
measured the airborne mould spore and hyphal concentration
at levels of 161,440 per cubic metre in the main bedroom,
with comparable levels in other rooms. These levels were a
health hazard because they greatly exceeded the acceptable
level of up to 10,000 per cubic metre.
The expert concluded: “continued use of the premises must
not be permitted until remediated”. The tenant vacated the
main bedroom, the wardrobe areas and bathroom, and ceased to
use the downstairs lounge. The tenant continued to occupy
the rest of the house.
The landlords offered to professionally de-mould the
tenant’s possessions and to negotiate a rent reduction.
But after receiving an expert’s quotation for the cost of
remediation, the landlords changed their mind. They told the
tenant: “It is too much money. We have to think about it.
It’s a lot of money to spend just because the tenant hasn’t
opened a window.”
The scene was set for legal proceedings. The hearing took
four days in the District Court. The proceedings were
transferred from NCAT because the amount in dispute exceeded
$15,000.
The legal bases for the
mould claims
The tenant’s claim had 5 alternative legal bases.
The law, the landlords’ argument and the Court’s findings
were:
- Not fit for habitation (section 52)
The law
s 52(1) RT Act: A landlord must provide the residential
premises in a reasonable state of cleanliness and fit
for habitation by the tenant
s 52(1B) RT Act: In particular, the premises must be
structurally sound – that is, no significant dampness
exists in floors, ceilings, walls, and the roof,
ceilings and windows do not allow water penetration
s 52(1) is reproduced in clause 19.1 of the current
Residential Tenancy Agreement, and so this claim is for
breach of contract.
The landlords’ argument
‘Unfit for human habitation’ means ‘not possible to be
resided in’ (at the start of the tenancy).
The Court’s findings
The sources of dampness that led to the mould were
structural defects. These defects were present at the
date when the lease was renewed. The defects were:
“conducive to rising dampness and mould proliferation in
the subject property such that injury or absence of
reasonable comfort was to be expected, or would
naturally occur, from the ordinary use of the premises”.
The Court concluded that the property was not fit for
habitation in terms of s 52(1) of the RT Act,
“notwithstanding the tenant and his family continuing to
reside in it”.
- Not in a reasonable state of repair (section 63)
The law
s 63(1) RT Act A landlord must provide and maintain the
residential premises in a reasonable state of repair
s 63(1) is reproduced in clause 19.3 of the current
Residential Tenancy Agreement, and so this claim is for
breach of contract.
The landlords’ argument
The landlords had no actual or constructive knowledge of
the water penetration or mould proliferation until March
2017.
The Court’s findings
The Court said that s 63(1) imposes “a positive
obligation on the landlord to satisfy himself as to the
state of the premises”.
The Court found that the landlords “did have knowledge
of the water penetration issues particularly in relation
to the rising damp and mould at least from 2012 [when
the previous tenant complained about mould] and failed
to act with reasonable diligence to investigate and
address the problem such that there was a breach of s 63
of the RT Act”.
- Failure to warn of a significant safety risk
(section 26)
The law
s 26(1) RT Act A landlord … must not induce a tenant to
enter into a residential tenancy agreement … by
knowingly concealing a material fact …
cl 8(1)(b) Residential Tenancies Regulation 2019 [A
material fact is that] the residential premises are
subject to significant health or safety risks that are
not apparent to a reasonable person on inspection of the
premises
This is a breach of statutory duty claim.
The landlords’ argument
It was not until they received the mould testing results
in 2017 that they knew of the health or safety risks,
and so could not be said to have ‘knowingly concealed’
the risks.
The Court’s findings
There was no evidence that the landlords knew that the
mould was a ‘significant health or safety risk’ when
they entered into the tenancy agreements, let alone
concealing that risk.
There was no failure to warn in breach of s 26.
- Common Law Duty of Care
The law
The Court adopted the formulation by Emmett AJA (Macfarlan
JA and Campbell AJA agreeing) in Aldred v Stelcad Pty
Ltd [2015] NSWCA 201, that:
“the duty of a landlord is to take reasonable care to
avoid foreseeable risk of injury to a person who enters
onto the demised premises … in the absence of a contract
supporting a higher duty, … [it] does not in general
require a landlord to commission experts … to inspect
the premises to look for latent defects. Nor … to make
premises as safe as reasonable care can make them.”
The landlords’ argument
They had commissioned expert reports. None of the expert
reports conclusively identified the defects in the
property which gave rise to the mould.
The Court’s findings
The civil engineer’s report explained how a “combination
of defects” enabled water to collect “and with
inadequate subfloor ventilation led to rising damp and
mould”.
The Court applied 5B of the Civil Liability Act 2002
(NSW):
- The risk of harm was “the risk of sustaining loss by
water damage and mould due to structural defects in the
dwelling”.
- The landlords “knew or ought to have known” about
these defects.
- The risk was foreseeable and was significant – see
Court’s finding in 2 above.
- The landlords did not take reasonable steps to repair
the defects when they received the reports in 2017 (they
did nothing) nor did they take precautions to prevent
the harm occurring (such as by warning the tenant to
protect their property).
The Court found the landlord had breached the common law
duty of care.
- False and misleading representations as to land (srction
30 Australian Consumer Law)
The Court’s findings
The Court rejected this claim, finding no
misrepresentations were made as to the nature of an
interest in the land, no evidence the tenant would not
have entered into the lease regardless, and no reliance
on a representation as to property condition.
The loss claim for
compensation
The landlords’ breaches had caused the tenant’s loss.
The tenant claimed and was awarded damages (compensation)
under 4 heads.
1. Replacement of destroyed items
2. Other expenses
3. Remediation of Items
4. Artworks
- Replacement of destroyed items
The tenant relied upon an insurance loss adjuster’s
report to determine market value of:
- Hard furnishings including beds and mattresses,
lounges, TV, book shelves and a chest of drawers.
- Soft furnishings including rugs, bedding,
pillows, doonas and lamp shades.
- Clothing including leather jackets, pants,
shoes, scarf and an overcoat.
The methodology used to determine the market value of
these items was to source replacement cost, where
possible. If not, an average value appropriate for the
item or from original purchase price was used.
Depreciation was applied according to average life
expectancy for the item.
The Court adopted the report and awarded $28,426.30.
- Other Expenses
A variety of expenses were claimed. These included
removal expenses, tipping and labour for items disposed
of, storage costs (rent), temporary bedding and
mattresses.
The Court allowed some items but not others. It awarded
$17,281.05 being the expenses it found were reasonable
and necessary. The Court said that expert report fees
were not claimable under this category – they should be
claimed by the tenant as legal costs.
- Remediation of Items
The claim for mould remediation was based on a
restoration specialist’s report.
The claim was substantially for remediation of books and
furniture, and subsequent testing. The claim included
transport and storage.
The specialist described the methodology used as:
“The restorability of mould contaminated contents within
a water damage house depended upon porosity, level of
contamination vs risk factor and economic value vs
intrinsic value.”
To illustrate: “a piece of Ikea furniture that has a
condition 3 mould” is not restored because of its low
value. “Items such as lounges and mattresses I would not
restore because of their complexity” and inability to
“open them up to remediate the foam on the insides”.
The Court adopted the methodology but discounted the
estimated amount because of the “uncertainty as to when
and if repairs will be carried out”. There was also a
lower quote available.
Adopting the approach of “reasonable repair costs as at
the time of breach”, the Court awarded $20,000, instead
of the amount claimed of $53,229.00.
- Artworks
This claim was based on an expert’s report which
described the condition of the 40 artworks and a
two-stage treatment proposal comprising mould
remediation and potential aqueous cleaning. The cost
estimate was $30,827.50 to $63,211.50.
The Court rejected the landlords’ argument that the
claim should be rejected because no remedial work had
been done. But the problem the tenant had with not
having the work done was that the estimates, especially
for the Stage 2 cleaning were “loose”.
The Court awarded $22,000.
Comment – The claims were all for personal
property damaged or destroyed. There were no health related
claims, such as for medical expenses or loss of earnings due
to illness.
The landlord’s claim
The landlord claimed unpaid rent to the date the tenant
vacated the property, in the amount of $31,793.61, after
crediting the bond.
The tenant raised two arguments in defence of the rent
claim. The first was that he was entitled to set off the
amount the landlord is liable to pay, against unpaid rent.
The second was that the landlord could not demand rent while
the tenant was unable to use the property for its intended
purpose because it was not fit for habitation.
The Court rejected the tenant’s arguments and upheld the
landlord’s claim, saying:
The tenant’s “obligation to pay rent remains
notwithstanding that his ability to use the premises is
affected” because the obligation “to pay rent is independent
of the landlord’s covenants”.
The Court said that if the tenant had wanted a reduction
of rent they needed to have made an application under s
44(1)(b) of the RT Act (Tenant’s remedies for excessive
rent) before the end of the tenancy.
The Court orders
The Court made these orders:
- Tenant was awarded $88,307.35 for their claim that
the property was not fit for habitation.
- Landlord was awarded $31,793.61 for unpaid rent.
- On balance of account, the landlord was to pay the
tenant $56,513.74 plus interest from 27 October 2017.
Postscript – What did the landlords do with the
house?
After the tenant moved out, the landlords carried out
extensive work upon the property, at a cost of $300,000. In
mid-2018 they sold the house for $6.375 million dollars.
For more information, advice and four case studies,
click on my article Mould in rental
properties – tenant’s rights and landlord’s responsibilities |
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