Appeal panel sets aside $4,800 mould and break-fee award and sends the claims back for rehearing (NCAT, 2026)

What happened

The tenancy started on 2 November 2023 for an initial term of 12 months, with a bond of $2,600 lodged with the Rental Bond Board. On 22 August 2024 the parties signed a further fixed-term agreement running from 6 November 2024 to 5 November 2025. The tenant left the premises on 20 or 21 April 2025 and paid the landlord two weeks' rent, $1,300, as a break fee for ending the fixed term early.

The tenant had told the landlord's agent about mould on the bathroom ceiling by email on 4 March 2024. The landlord gave the tenant a dehumidifier in April 2024 and commissioned a report from a mould company, dated 22 May 2024, which put the main cause down to condensation, high humidity and inadequate mechanical ventilation. The landlord carried out some of the recommended treatment and installed fly screens to improve ventilation. A routine inspection in October 2024 raised no mould issue. In December 2024 the tenant wrote about condensation on walls and windows and damp bed sheets when it rained, and said she was emptying 10 to 20 litres of water from the dehumidifier each day. An inspection on 4 April 2025 found the unit mould free except for two small areas near a bedroom window. On the same day the tenant gave a termination notice and asked to break the lease.

Two applications were heard together on 18 August 2025. The landlord asked for money from the bond for a council clean-up of rubbish ($385), a replacement lock ($233), fumigation ($562.02), repairs to the carpet, a bathroom drawer and a light fitting, and an extra week of break fee ($650). The tenant asked for her bond and the $1,300 break fee back, plus compensation for mould under sections of the Residential Tenancies Act 2010 (NSW) dealing with disclosure, quiet enjoyment, fitness for habitation and repairs, and under the Australian Consumer Law.

The Tribunal gave the landlord $233 from the bond for the lock and dismissed the rest of her claims, including the carpet and drawer, on the basis that she had not shown she had actually spent anything. It ordered the landlord to pay the tenant $4,800: $1,300 for the returned break fee and $3,500 for breach of the landlord's obligations because of the mould, assessed over about 17 months of the tenancy. On 25 August 2025 the Tribunal added four paragraphs to its reasons to explain the break-fee refund. The landlord appealed.

What each side wanted

On appeal the landlord ran eight grounds. The central ones were that the Tribunal awarded compensation for the whole 17-month tenancy without dealing with the three-month time limit for tenancy claims, that it did not explain how it found mould existed at the start of and throughout the tenancy, that it never decided what caused the mould or answered her argument that the tenant's own use of the premises caused it, that it applied the wrong test to her own damage claims, that the later addition of paragraphs to the reasons went beyond the power to correct an obvious error, and that she was denied a fair chance to answer the tenant's claims at the hearing. The tenant, who represented herself, said there was evidence of mould from the start of the tenancy in photographs and oral evidence, and defended the orders she had won.

What the tribunal decided

The Appeal Panel allowed the appeal in part. It set aside Order 4 in the landlord's proceedings (the order dismissing the balance of her claims) and set aside all of the orders in the tenant's proceedings, including the $4,800 money order. Leave to appeal was refused and the appeal was otherwise dismissed, so the $233 for the lock and the dismissal of the rubbish, fumigation and light-fitting claims were left alone.

Three matters were sent back to the Consumer and Commercial Division, differently constituted: the landlord's claim for the carpet and a bathroom drawer, the tenant's claim to be repaid the break fee, and the tenant's mould compensation claim. They are to be decided on the evidence given at the hearing on 18 August 2025 plus any further evidence the Tribunal allows.

The Appeal Panel also ordered that if the landlord had already paid any part of the $4,800, the tenant must repay that amount within 28 days of 6 November 2026. There was no order about the costs of the appeal.

Why the tribunal decided it that way

The first and main problem was timing. Section 190(1) of the Residential Tenancies Act and clause 39(9) of the Residential Tenancies Regulation 2019 require an application about a breach of a tenancy agreement to be made within three months after the applicant becomes aware of the breach. Section 41 of the Civil and Administrative Tribunal Act 2013 lets the Tribunal extend that time. The first Tribunal treated the mould as an "ongoing" breach and so treated the claim as in time for the whole tenancy. The Appeal Panel said that is not how a continuing breach works: a fresh claim can arise on each day the breach is not fixed, and once a tenant knows about the breach she is taken to know about each day's breach as it happens. So anything more than three months before the application was filed needed an extension of time, and the Tribunal neither granted one nor considered whether to. That was the wrong legal principle, which is a question of law, so the appeal succeeded as of right on that ground.

The second problem was the reasons. Reasons must set out the findings on the material questions of fact, the law applied, and the reasoning that led to the result, judged against a minimum acceptable standard rather than a perfect one. Here the Tribunal did not explain how it concluded the premises were affected by mould at the start of and right through all 17 months, when the landlord had paid for treatment in May 2024 and the tenant had signed a further 12-month lease in August 2024. It also did not address the landlord's argument that the tenant's own conduct caused the mould, even though its reasons recorded the mould report's view that poor ventilation was the cause. Failing to deal with a material issue a party has raised is itself a question of law. The Appeal Panel added that mould can breach a landlord's duties of quiet enjoyment, fitness for habitation and repair, but the mere presence of mould at some point does not automatically breach all or any of them; each duty has to be considered separately against the state of the premises over time as problems arise and repairs are attempted. It also noted, without being asked to, that pointing to "comparable verdicts" without explaining how they supported the figure does not show how the amount was reached.

Because the break-fee refund rested on the finding that the landlord was in breach when the tenant gave her termination notice on 4 April 2025, setting aside the breach finding meant the break-fee order had to go as well. Whether the tenant was entitled to give a notice ending the fixed term early under s 98 of the Act is now unresolved and has to be decided again. The Appeal Panel did not need to rule on whether the later addition of paragraphs to the reasons was within the power in s 63 to correct an obvious error, although it discussed the authority on that power at length.

The procedural fairness ground failed for a practical reason. The landlord said at the end of the hearing that she had not had a chance to respond, but to judge that the Appeal Panel would have needed to look at the whole hearing, which ran close to four hours. She had been directed to file a transcript of the relevant parts and filed only a short extract. Appeal Panels do not, except in exceptional cases, listen to full hearing recordings. The Appeal Panel could not substitute its own decision on the remitted claims either, because it did not have all the evidence given at first instance. The published text supplied here stops partway through the discussion of the break fee, so the full reasoning on the landlord's own damage claims and on the remaining grounds is not available.

What this means if you are in a similar position

If you are in a similar position, this decision shows how strictly the three-month limit on tenancy claims is applied, even to a problem that lasts for months. A long-running issue like mould is not treated as one claim that stays fresh; the Tribunal may treat each day as its own breach, which means older parts of the claim need the Tribunal to extend time before compensation can be awarded for them. It also shows that a win can be undone if the reasons do not explain how a key factual finding, such as when the problem started and how long it lasted, was reached.

The decision also shows that the two sides of a bond dispute are judged on the same legal tests, not on who seems more sympathetic, and that a claim that someone else's conduct caused the damage is an issue the Tribunal has to answer rather than pass over. Where a tenant ends a fixed term early and says the landlord was in breach, whether the break fee is payable turns on whether the breach is actually established at the time the notice was given.

If you are in a dispute like this, the step most people take first is a written notice or demand that sets out, item by item, what is claimed and why, with dates and figures, and gives the other side a deadline to respond. An application to the tribunal usually comes after that, and in New South Wales it needs to be made within the time limit the Act sets, or with an extension of time.

How to apply: our step-by-step guide to a NCAT application. More decisions: NCAT cases and house rentals and bonds.

Source: Wang v McKay [2026] NSWCATAP 348 (read the full decision). This summary was prepared from the published decision for general information. It is not legal advice, and the tribunal’s own reasons are the authoritative record.