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Ask Deborah Awyzio Your Own Question
Deborah Awyzio
Deborah Awyzio, Solicitor
Category: Australia Law
Satisfied Customers: 863
Experience:  Bachelor of Laws (QUT), BIT (QUT), Family Law Accredited Specialist, over 12 years experience
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I have a commercial tenancy law question. On 1/April/2016 my

Customer Question

Hi there,I have a commercial tenancy law question.On 1/April/2016 my wife leased the middle floor of a three floor industrial building in Sydney. She assumed responsibility for an existing lease that was four months old. The existing leaseholder had fitted the floor out as a dance studio but had then decided against continuing the tenancy. My wife signed a contract with the real estate company responsible for managing the building, transferring the lease to her. At the time my wife signed the contract the upper floor was being fitted out as a games parlour. That fit out was completed around the 20/May and the new business began about that time.On Monday 30/May during the day when the building was unoccupied a fire began on the upstairs floor. It is thought that a gaming machine was left on and a possible fault might have begun the blaze. The fire caused extensive damage to the upstairs floor. My wife's studio has also suffered damage in the form of smoke residue on every horizontal surface in her studio. Water from the Fire Service hoses has also seeped through the ceiling causing two panels to fall and also badly damaging the floor. The floor is made of interlocking vinyl tiles and was installed primarily as a dancing surface by the former leaseholder. The water seeped under the tiles in two rooms damaging most of the surface in both rooms. The damage consists of the tiles lifting at the joins. A floor technician viewed it earlier this week and said both floors need replaced because once the interlock has been broken it cannot be re-attached.The legal problem is as follows. The real estate property manager has been dealing with an insurance company. I presume that the insurance company is that of the building owner rather than that of the upstairs tenant. We have been told the insurance will clean the soot off the floor and make the required repairs to the ceiling tiles, a water damaged window sill and two door frames. They say the insurance will not cover replacement of the floor because it was installed as part of the previous owners fit out and that we should use our own insurance to replace it. Is the insurance company legally excused from responsibility because the floor was part of a fit out?We only have public liability insurance which I assume is to cover our obligations towards third parties when we are at fault. I don't think our insurance company would replace the floor when the damage has been caused by another party. Is this correct ?I had assumed the owner's insurance company which has been assessing the damage would deal with all the third party damage including that to our floor and then would have sued the tenant who is at fault having caused the fire. Is this a correct interpretation of insurance protocol?If the building owner's insurance, or our insurance will not replace our floor, is our only option to sue the upstairs tenant?We have been unable to use the studio now for 19 days. My wife has had to lease other premises, she has lost students as well as the loss of potential business when she has had to tell prospective customers the studio is not operating in their area at present. The real estate property manager is aware of this and has been told on numerous occasions that we will not be paying rent for the days the studio is not available to us. Is this a sound legally based statement? Perhaps Force Majeure?Regards
Lindsay.
Submitted: 7 months ago.
Category: Australia Law
Expert:  Leon replied 7 months ago.

Good Evening

My name is ***** ***** I am a NSW Solicitor. Thank you for your question, and will do my best to assist you with your question. Please understand this is not legal advise Please understand this is not legal advise but a guide to assist you.

Public liability insurance is there to protect the insured from any claim by third parties that fall over and get hurt. Not for this type of damage.

The law generally says the tenant has to be insured for their own fixtures and fittings. If the floor was installed by the tenant then they should have their own insurance. Does your wife have business insurance?

The damage caused to the floor was because of the fire and it should be covered by the claim for the fire.

I would have said the owner of the upstairs equipment (tenant) they should have covered the damage.

If they have left and the landlord is the owner of the equipment then the landlord should pay for the damage.

Customer: replied 7 months ago.
Thanks Leon, I need to know 'whose' claim for the fire will cover the damage? The owners insurance is covering the cost of restoration but they haven't included the cost of replacing our floor. Are we able to compel them to include the cost of our floor in the owner's claim, which after all will eventually be paid by the upstairs tenants?
I know the upstairs tenants will be liable but who has to sue them, the owner's insurance company (as part of the main claim) or us?Also, can we rely upon the doctrine of Force Majeure and withhold payment of rent while the studio is unavailable for our use.Lindsay
Expert:  Leon replied 7 months ago.

Good Evening

The fire is claimed by the tenant above.

If the building is damaged then the landlord can claim on the building and his insurer will sue the tent above as it was caused by his equipment.

Your wife's insurance has to chase the tenant of the above floor for the damage to your wife property. But she claims on her insurance.

If the premises is now not habitable then your lease should say that you are not liable for rent.

If part of it is habitable then the rent would be apportioned.