You are correct to question whether the landlord is entitled to 100% of the back rent. If this matter were to go to trial the Court would determine how much to reduce the rent "to reflect the diminution in value of the dwelling unit during the period of noncompliance". The period of noncompliance would begin upon his receipt of the notice you provided. There is no hard and fast rule as to how you get to a proper number. Try to work it out with the landlord. If you don't have any luck, check out my website and contact me.
The above is opinion based on very limited facts and not legal advice. This is not a substitute for a consultation with an attorney and does not constitute the establishment of an attorney/client relationship.
I agree that you are entitled to a rent abatement based on your question. A reasonable way to calculate it might be 33% of the home was un-usable for say 4 months, if the rent is $1000 per month, then $4,000 times .33 = $1,320. A judge would decide this in a lawsuit if you cannot work it out informally with the landlord, but both parties should be reasonable. If you do not pay the back rent the landlord would likely sue you and this would be a defense and possible counterclaim. Get a local Landlord - Tenant lawyer if he sues because you cannot come to an agreement.
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