(a) The insurable risks to be covered under each lease differed from one lease to the other. In the 2020 Lease, riots and civil commotion, strikes, impact by aircraft and articles dropped from them are all excluded. In the 2016 Lease those risks are not excluded. Further, the 2016 Lease specifically requires building and public liability insurance. This was not mentioned in the 2020 Lease.

(b) In the 2016 Lease, there were annual fixed increases in rent of 4 percent. In the 2020 Lease, these were fixed at 2 percent.

(c) Importantly, the 2016 Lease contained one further option of four years, which meant that if option was exercised, the tenants' tenure would end in 2024. However, the 2020 Lease also contained an option to renew for a further four years, meaning that if the Tenant exercised that option, her tenure would end in 2028.

1. Therefore, I accept the submission made by the Tenant that clause 3.2.1 of the 2016 Lease effectively expired when the term of that lease ended on 18 January 2020, which is less than 5 years since the commencement of that lease. In other words, clause 3.2.1 effectively 'reset' with the commencement of the 2020 Lease. Therefore, that clause expired under the 2020 Lease because the Tenant did not exercise her option to renew and vacated the Premises before the expiration of the five-year period under that lease.
2. In my view, s 7 the RLA does not change that outcome. This is not a case where the original 2016 Lease was renewed, which occurred in Versus. In other words, it cannot be said that the 'effective' commencement of the 2020 Lease, for the purposes of s 7 of the RLA, was when Acacia Rose and the Tenant - as joint tenants - took possession of the Premises. Their joint leasehold interest and any right to renew ended when the Tenant entered into a new lease as sole tenant and on different terms to the 2016 Lease.
3. Therefore, I find that the Tenant did not enjoy a term of more than four years under each lease. Consequently, clause 3.1.2 does not apply to either the 2016 Lease or the 2020 Lease.
4. As for the condition of the Premises, the Landlords rely upon the evidence of Mr Romanos, corroborated by a condition report prepared in February 2024 ('the Condition Report'). The Condition Report was prepared for the incoming tenant. The evidence of Mr Romanos is at odds with that of the Tenant. According to Mr Romanos the condition of the Premises was poor and required complete repainting of the walls and ceilings. According to the Tenant, the condition of the Premises was good with only some areas possibly requiring minimal touch-up painting, which she submitted was consistent with fair wear and tear.
5. The Tenant produced several photographs of various parts of the Premises. Although I accept it is sometimes difficult to discern from photographs the condition of a building, those photographs appear to depict the Premises in a reasonably good condition, without any discernible marks on the walls or ceilings.
6. The photographs produced are generally consistent with the Condition Report. Specifically, the Condition Report describes various parts of the Premises as follows:

1. It is not clear who prepared the Condition Report. However, the condition of each area is described as either being good or fair, notwithstanding additional comments made by the Landlords describing certain areas as having permanent stains or dents.
2. As indicated above, the photographs produced by the Tenant do not show any stains or dents in the walls or doors. Regrettably, the Landlords did not produce any photographs of the stains or dents in the walls and doors; nor did they produce any expert report detailing the condition of the walls, doors and ceilings. The only other document produced by them was a quotation from Jim's Painting Services dated 17 January 2024 for painting the doors, walls and ceilings for $9,700.
3. In my view, the Condition Report reflects what might be described as general fair wear and tear of the walls and doors. That being the case, I find that the Tenant has generally complied with clause 3.1.1 of the 2020 Lease by keeping the doors, walls and ceiling of the Premises in the same condition as at the start of that lease, except for fair wear and tear. I do not accept the evidence of Mr Romanos that there were scratches and marks everywhere or that the condition of the walls and doors was poor.
4. At worst, I find that the condition of the walls and doors may have some scuffs or dents but that those scuffs or dents do not justify completely repainting the Premises. This is especially so in relation to the ceiling where the Condition Report identifies all ceiling areas as being in good condition.
5. Further, there is no comparative evidence as to the condition of the Premises at the commencement of the 2020 Lease. Although Mr Romanos gave evidence that when the 2016 Lease commenced, the Premises were freshly painted and newly carpeted, there is no evidence as to the condition of the Premises at the end of that lease or at the commencement of the 2020 Lease.
6. In addition, the Tenant gave evidence that she did undertake repainting of the Premises in 2021. She produced a letter from Anthony Zahra dated 12 February 2024 to substantiate that evidence. That letter stated, in part:

I Anthony Zahra, am writing this letter to confirm that I painted the property located at 101/161 Moret Street South Melbourne, for my sister-in-law Narelle Borg. The painting was carried out over two separate periods due to my availability during the COVID-19 Lockdowns. As the clinic was unable to operate and Narelle not being in a hurry, due to the lockdowns, as her brother in law I was happy to help in this challenging time and not put any more burden on her financial status and just requested Narelle to purchase the paint.

The 1st stage of painting was carried out from Friday, 30th July to Sunday 1st August 2021. This involved myself in preparation of all surfaces including any minor plaster repairs to ceilings, walls, woodwork and doors. At the completion of Sunday 1st of August, I completed 2 coats of paint on the ceilings and 1 Coat of paint on the woodwork.

The 2nd stage of painting was carried out from Saturday 28th August to Tuesday 31st August 2021. This involved myself completing 2 coats of paint to all walls and a 2nd coat of paint to the woodwork and all doors.

I am a fully qualified Painter and Decorator since the year 2000...

1. Mr Romanos disputed that the Premises had been repainted in 2021. He said that he was not notified of any painting that was undertaken during that time. He further observed that the invoice for the supply of paint produced by the Tenant did not indicate that sufficient paint was purchased to paint more than one room.
2. The Tenant reiterated that the Premises were repainted in 2021. She said that some of the paint was supplied by her brother-in-law which explained why the invoice for material did not accurately reflect the amount of painting that was undertaken.
3. I accept that some painting was undertaken by the Tenant or on behalf of the Tenant in 2021, although it is difficult to gauge to what extent. However, as I have indicated, there was no contractual obligation to do so.

1. As indicated above, the Landlord's claim for $14,289 represents the complete replacement of all carpet within the Premises. Mr Romanos gave evidence that there were stains on the carpet in every room. Again, there are limited photos produced by the Landlords to substantiate that allegation. In fact, the photographs produced by the Landlords relate to one or possibly two rooms and only show a faint outline of a slightly dark area in the middle of the room, which Mr Romanos contends is a stain. There are other photographs produced by the Landlords which show marks left by steam cleaning equipment, which the Tenant contends is the residual moisture left after the cleaning was undertaken and before the carpet dried. The Landlords have also produced an invoice from Maxneat Services dated 24 February 2024, which states, in part:

1. In contrast, the Tenant produced numerous photographs of various rooms, which she said were taken on 12 January 2024. None of those photos show stains on the carpet.
2. The Condition Report states that the condition of the carpet throughout the Premises is either good or fair, noting some stains in some areas. However, the Condition Report was signed by the Landlords on 14 February 2024, ten days before the date of the carpet cleaning invoice. Therefore, it is reasonable to infer that the carpet cleaning occurred after the Condition Report was prepared.
3. In my view, photographs produced by both parties show general fair wear and tear. I am not persuaded that the condition of the Premises, especially after the additional stain cleaning was undertaken, depict damage which necessitated a complete re-carpeting of the whole of the Premises.
4. Consequently, I find that the Landlords' claim is limited to the cost of the additional cleaning of $367.19, which I presume is reflected in the second Maxneat Services invoice dated 24 February 2024 of $381.32. Otherwise, I am not satisfied on the balance of probabilities that the condition of the carpet was anything other than exhibiting fair wear and tear.

1. Clause 13 of the 2016 Lease and 2020 Lease sets out the parties' obligations concerning the security deposit. In relation to the question whether the Landlords were required to hold the security deposit in an interest-bearing account, clause 13.2 states:

13.2 Any security deposit not in the form of a guarantee must be invested in an interest bearing deposit and all interest accruing on it is treated as a supplementary payment of security deposit. When the term starts, the tenant must provide the landlord with the tenant's tax file number.

1. In addition, s 24 of the RLA further governs and regulates the party's rights and obligations in respect of security deposits. That provision states, in part:

(1) A retail premises lease is taken to provide that -

(a) money paid by the tenant to the landlord as a security deposit for the performance of the tenant's obligations under the lease must be held by the landlord on behalf of the tenant in an interest-bearing account; and

(b) the landlord must account to the tenant for interest earned on the deposit but the landlord is entitled to keep the interest and deal with it as money paid by the tenant to the landlord to form part of the security deposit;

(d) if the tenant performs all of the tenant's obligations under the lease the landlord must return the security deposit to the tenant as soon as practicable after the lease ends.

1. The first respondent gave evidence that the security deposit of $6,500 was held in an interest-bearing account in accordance with the Landlords obligations under the 2016 Lease, the 2020 Lease and s 24 the RLA. He said that the interest which accrued on that amount was offset against the income tax derived from holding the security deposit. It is unclear to me why the Landlords were required to pay income tax on money which they held on trust for the Tenant. The Landlords gave no detail of the amount of interest that accrued or how their tax liability arose.
2. Nevertheless, the Tenant makes no claim for interest on the security deposit held, nor did she give any evidence or make any submission as to what interest might have accrued. That said, even if I adopted a conservative interest rate based upon, say an average of the Reserve Bank of Australia cash rate over the relevant period, the amount of interest over that period is likely to be under $1,000.

1. In my view, there is insufficient evidence adduced by the Landlords to substantiate their claim that the Premises were left in a condition worse than fair wear and tear and which justified repainting and recarpeting of the Premises.
2. Further, as I have already indicated, I do not accept that clause 3.1 operates to impose an obligation on the Tenant to repaint the Premises, given that the 2016 Lease and 2020 Lease both expired within five years of the commencement of each lease.
3. Although I accept, as conceded by the Tenant, that there may be some minor touch-up work required, I do not find that there is sufficient evidence to justify an order that monies be deducted from the initial security deposit held by the Landlord, other than the additional cleaning costs of $367.19 claimed. In my view, the fact that the Tenant makes no claim or adduced no evidence to contend that the security deposit amount should be more than $6,500, because of accrued interest over the eight-year period held, mitigates against the cost of minor painting or further carpet cleaning expenses.
   1. Consequently, I find that the Landlords' counterclaim is only partially proven. In contrast, apart from deducting $367.19 for additional cleaning costs, I find there are no legal grounds to withhold the balance of the security deposit. I will make orders to that effect.

[1] The Statement of Adjustment incorrectly calculated the amounts set out therein. It stated that the balance owing by the Tenant was $5,378.77.

[2] Drymaster invoice dated 29 January 2024 for $427.85 and Maxneat Services invoice dated 5 February 2024 for $106.32.

[5] [2015] VSC 515.

[6] Leek & Moorlands Building Society v Clarke [1952] 2 QB 788; 2 All ER 492.