Mercuri v Jefferis (Residential Tenancies) [2013] VCAT 2141 (18 December 2013)

Last Updated: 30 December 2013

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL



CIVIL DIVISION



RESIDENTIAL TENANCIES LIST



VCAT REFERENCE NO: R2013/45072

CATCHWORDS

Reduction of fixed term tenancy agreement – landlord’s claim for retention of bond and compensation – mitigation of loss by landlord – Residential Tenancies Act 1997 s210, s234 and s417

ORDER

The landlord is entitled to retain the sum of $1325.91 from the bond of $1538.35 and the balance of $212.44 is to be returned to the tenant. The balance of the landlord’s claim for compensation is dismissed.

J. Good, Member

18 December 2013





APPEARANCES:

For the Applicant: Mr T Sanders, Property Manager, Noble Knight Real Estate Pty Ltd

For the Respondent: In person

REASONS FOR DECISION

BACKGROUND and EVIDENCE

1. The tenant entered into a fixed term tenancy agreement with the landlord in respect of the property situated at 33 Arwon Court, Lilydale (the rented premises) for a period of 12 months from 18 July 2013.

2. On 18 September 2013 the tenant advised Mr T. Sanders, the landlord’s agent (the agent)in writing that she would need to break the lease and intended to vacate the rented premises on 17 October 2013.

3. Upon receipt of that advice the agent sent a letter to the tenant which enclosed a copy of a Lease Break Agreement (the agreement). The letter then states, amongst other things that ... “Our office will not enter into any negotiations until the Lease Break Agreement is signed; and all moneys paid in advance. We calculate your pro rata letting fee cost is $761.40 inclusive of GST; and up front advertising costs are $198 inclusive of GST. Therefore we require the above amounts to be paid, with the return of the signed Lease Break Agreement. Please note that no action will occur until the above conditions are agreed to.”

4. The agreement requires the tenant to acknowledge, again amongst other things, that the tenant is able to apply to the VCAT – Residential Tenancies List, to reduce the fixed term tenancy agreement due to financial hardship; or for medical reasons, but has chosen not to do so.

5. The document also requires the tenant to acknowledge that she is liable for a number of charges and, in the event that the tenant fails to agree to pay those charges, the landlord is not compelled to proceed with the agreement to terminate and reduce the tenancy, or to commence promotion to secure a further tenant.

6. The charges listed include rent monthly “in advance, until the day the property is re-let or until the expiry of the lease; whichever comes first” and a re letting fee and advertising costs.

7. On 25 September 2013, presumably on advice from the tenant that she was unable to pay the costs sought “up front” the agent sent an email advising the tenant that upon receipt of the signed agreement with an acknowledgement of her intention to settle costs at the conclusion of her tenancy, “we will agree to commence promotion. This will allow mitigation of costs to all parties.”

8. On the same date the tenant returned the signed agreement to the agent, but with a number of clauses crossed out and a notation indicating that she did not agree to those deleted conditions. In addition she has handwritten at the end of the agreement “As agreed in conversation between Travis and myself Noble Knight will start commencement of re-letting the property and I will finalise payments after this time.”

9. The next day the agent responded by letter which states “ ...we don’t agree with your unreasonable amendments ...” to the agreement and another copy of the document was sent to the tenant for signing. Referring to the previous conversation that the tenant had referred to, the agent went on to say that “..it was advised that we would be able to start advertising the property once the lease break agreement was signed and the letting fee and advertising could be paid at a later date. There was not agreement that any of the fees due could be wavered(sic).”

10. A further letter was sent to the tenant on 7 October 2013 which includes the following paragraphs :

(1) “Your notice of intention to vacate on 17 October 2013, is formally declined.

(2) Previous attempts have occurred to resolve the situation at hand.

(3) However, you have indicated that you have no intentions whether now or at a later date, to pay compensation to the landlord on a pro rata basis of letting fees; which would be due if a lease break or reduction of fixed term where (sic) to occur.

(4) This is regardless of being informed of the landlords likely entitlements for compensation, under the provisions of the Residential Tenancies Act 1997.

(5) Initially. Discussions occurred; whereby if you agreed to fulfil these costs; they would not be requested up front. However, this is not what then transpired.

(6) We propose that an unreasonable manner (sic), makes it near impossible to mitigate a loss to all parties.”

11. The tenant subsequently applied to the Tribunal for a reduction of the fixed term tenancy agreement on the grounds of hardship under section 234 of the Residential Tenancies Act 1997 (the Act). That application was coincidentally heard by me on 29 October 2013. The tenant had vacated the property earlier but had retained the keys pending the outcome of her application.

12. At that hearing the tenant stated that she needed to vacate the rented premises as she could no longer afford to pay the rent. From my memory of the reason given at the time, she had a disabled child who was living with her when the tenancy agreement was signed and that meant that she was entitled to child support or carer’s payments. However, since that time she found that she was no longer able to manage her son’s difficult behaviour and he had moved to live with his father in another property. That meant that she was not in receipt of the same benefits or income. The tenant had then decided to move into a different rental property with her current partner and his children and to share the rent cost there, which was more manageable for her.

13. After hearing all the evidence relating to that application, I made an order to reduce the term of the fixed term tenancy agreement on the grounds of the tenant’s hardship so that it would end on 29 October 2013. In addition on that date, I ordered that the landlord was entitled to apply for compensation and or retention of all or part of the bond, but that such a claim should be the subject of a further application.

14. On 11 November 2013 the landlord applied to the Tribunal for retention of the full bond paid by the tenant and for compensation totalling $3936.64 under sections 417 and 210 of the Act. That sum was comprised of rent owed to the date that the tenancy had been determined to end, rent loss due to the property not having been re let, re letting and advertising fees and the cost of the application to the Tribunal.

15. By fax dated 18 November 2913 the agent subsequently advised the Tribunal that the landlord’s claim for rent loss had been reduced to $1112.76 as a new tenant had been found.

16. At the hearing that took place on 22 November 2013, the landlord was again represented by Mr Travis Sanders, property manager of Noble Knight Real Estate (the agent referred to above) and the tenant represented herself and was accompanied by her partner Mr John Palmer.

17. The agent did not ask me for written reasons for my decision until the conclusion of the hearing, when it was apparent that the decision was not entirely in the landlord’s favour. Hence the information set out in these reasons is based on my memory of the facts, the documents provided and some brief handwritten notes made by me in the course of the hearing.

18. Ultimately the landlord claimed an amount of rent owed from 18 October until 29 October 2013 being $606.31, rent loss to the date the property was relet being $1112.76, reletting and advertising costs of $959.40 and the application fee to the Tribunal of $44.90.

19. As previously indicated, despite the tenant advising the landlord in writing on 18 September 2013 that she had to break the lease and would be vacating the rented premises on 17 October, the agent refused to take any action to re let the property until such time as she had signed the lease break agreement that had been sent to her and acknowledged her liability to pay various costs as a result.

20. At the earlier hearing in respect of the tenant’s application for a reduction of the fixed term tenancy agreement and again at the subsequent hearing, the agent contested my advice to him that the provisions of the Act required a party bringing a claim for compensation to prove that all reasonable steps had been taken by that party to mitigate their loss. The discussion took place in the context of why the landlord had not advertised the property for re letting as soon as the tenant had advised that she had to break the lease.

21. On both occasions I stated that section 211 of the Act provided that the Tribunal was entitled to take into account various matters set out in that section when considering an application for compensation under sections 209 and 210 of the Act, including subsection(e) which states “whether or not action has been taken by the applicant to mitigate the loss or damage.”

22. The agent fiercely disputed my assertion that the landlord ought to have quickly taken steps to seek a new tenant and was adamant that the provisions of the Act did not require the landlord to do so.

23. The property was not advertised until at least 3 weeks after the tenant gave her notice and it is likely that it did not occur until much later. Copies of rental advertisements from the agency which mention the rented premises amongst other properties, but are in an undated format, apart from hand written dates inserted on each copy, appear to indicate that the advertisements took place on 22 October, 5 November and 19 November 2013.

24. However my memory of the discussion that took place at the first hearing on 29 October 2013 in respect of this issue seemed to indicate that the agent was convinced that my interpretation of the duty of the landlord to mitigate their loss in such situations was completely wrong in law.

25. At the time I stated that he was entitled to his opinion but I disagreed with his interpretation and advised him to take steps to advertise the property without any further delay.

26. In any event it is clear from all the evidence that the agent did not advertise the rented premises for some considerable time after 18 September. The property was ultimately re let from 21 November 2013.

DECISION

27. On the basis of the evidence set out above I decided that whilst the landlord was entitled to some compensation as a result of the reduction of the fixed term tenancy agreement, that should be confined to rent owed to the date the tenancy was reduced to end and a part re letting fee.

28. I consider that the tone and content of the correspondence sent to the tenant at the time she advised the agent that she would need to break the lease (referred to above) is at least in part incorrect and misleading. It is clearly intended to intimidate tenants into agreeing to conditions and costs that they may not be liable to pay.

29. In my view a tenant who advises a landlord that they are unable to continue to pay the rent for some genuine reason and gives the landlord sufficient prior notice of their intention to vacate, should not be unduly penalised for doing so. In the present case, the tenant gave the landlord written notice that she needed to break the lease one month prior to her departure.

30. Depending on the facts of a particular case, the Tribunal may determine that no compensation at all shall be paid to the landlord. Landlords are frequently in the position where they have to serve notices to vacate on tenants when their rent falls into arrears. When a tenant vacates in response to such a notice, the landlord is only entitled to claim rent until the date the tenant actually vacates the property and there can be no claim for breach of a fixed term tenancy agreement.

31. In this instance, the agent ought to have immediately commenced advertising the property for re letting. The fact that he did not do so is a matter that I may take into account when determining what compensation should be paid to the landlord in accordance with the provisions set out in section 211 of the Act. Had this occurred, a new tenant may well have been found prior to the end of the tenancy and the landlord may not have suffered any rent loss at all.

32. Accordingly I was not satisfied that the landlord had taken appropriate steps to mitigate her loss. I decided that the landlord was only entitled to the sum of $1325.91 from the bond, being rent owed to the date that the tenancy was determined to end and part of the costs claimed for re letting expenses. The balance of the landlord’s claim was dismissed.

J. Good, Member

18 December 2013