Cogle v Thangavel & Balakrishnan (Residential Tenancies)

[2022] ACAT 44

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

COGLE v THANGAVEL & BALAKRISHNAN (Residential Tenancies) [2022] ACAT 44

RT 37/2022

Catchwords:               RESIDENTIAL TENANCIES – rental bond dispute – lessor sought to terminate tenancy due to intention to sell – tenants failure to vacate in accordance with notice – lessor’s application for termination and possession orders not determined by tribunal – tenants failure to give three weeks’ notice under periodic tenancy – lessor’s claim deduction from bond amount owing for tenants’ failure to give required notice – tenancy terminated in accordance with tenants’ defective notice – no rent owing or payable at date tenancy terminated – amount claimed by lessor constitutes compensation not deductible from bond – bond released to tenants

Legislation cited:        Residential Tenancies Act 1997 ss 31, 60, standard terms 84, 88, 96

Tribunal:  Senior Member K Katavic

Date of Orders:  31 May 2022

Date of Reasons for Decision:      31 May 2022

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          RT 37/2022

BETWEEN:

HOLLY COGLE

Applicant/Lessor

AND:

RAJENDIRAN THANGAVEL

First Respondent/Tenant

SINDUJA BALAKRISHNAN

Second Respondent/Tenant

TRIBUNAL:Senior Member K Katavic

DATE:31 May 2022

ORDER

The Tribunal orders that:

1.ACT Rental Bonds on behalf of the Territory is directed to release the whole of the bond to the tenants.

………………………………..

Senior Member K Katavic

REASONS FOR DECISION

Introduction

1.The application before the Tribunal is a rental bond dispute. The lessor seeks to recover from the bond the amount of $1,131 for rent owed. Outstanding rent is the kind of claim that can be made against the bond. The tenants dispute that rent is owed. As will become apparent from the reasons below, what the lessor claims is not rent owed.

Background

2.The tenancy commenced on 10 July 2019 for a fixed term ending on 10 January 2021 being a periodic tenancy thereafter. On 9 September 2021, the lessor issued the tenants a notice to vacate under clause 96(1)(d) of the Standard Residential Tenancy Terms, being an intention to sell. It required the tenants to vacate by 4 November 2021. They did not.

3.On 5 November 2021 the lessor applied to the tribunal for termination and possession orders (the T&P Application). The T&P Application came before the tribunal on 18 November 2021. It was adjourned to 19 January 2022. The tenants intended to continue looking for an alternative residence.

4.On 15 December 2021 the lessor issued a notice to remedy for unpaid rent of $880 where rent had not been paid for 8 days.

5.On 15 December 2021 the tenants sent an email to the lessor’s agent advising they were vacating the property on 17 December 2021 (2 days’ notice). The lessor’s agent advised 21 days’ notice was required.

6.The tenants returned the keys and left the property on 17 December 2021 and a final inspection was conducted on 20 December 2021. The lessor maintained that 21 days’ notice was required, and rent was to be paid up to the end of the required notice period.

7.The tenants paid $629 rent on 20 December 2021 bringing the lessors claim for unpaid rent down to $1,131.

8.On 20 December 2021, the lessor raised a bond dispute with ACT Rental Bonds for the whole of the bond. The dispute was referred to the tribunal. The matter before this Tribunal is that rental bond dispute and is the dispute the subject of this decision. Section 31 of the Residential Tenancies Act 1997 (the RTA) sets out the amounts that may be deducted from the bond. One such claim is rent owing and payable under the agreement at the time the agreement terminates or is terminated.

9.The T&P Application came before the tribunal on 19 January 2022. The tribunal did not make any orders regarding the status of the tenancy other than to list the lessor’s compensation claim (I assume this was for unpaid rent) to a future date and made orders for the filing of material in support of the claim. This was subsequently discontinued by the lessor as the lessor elected to pursue the unpaid rent from the bond.

10.The lessor maintains that the tenants were required to give 21 days’ notice to vacate and now owe outstanding rent or otherwise seek compensation for inadequate notice. The lessor claims the amount of $1,131 be deducted from the bond as it comprises rent owing and payable under the agreement at the time the agreement terminates or is terminated.

11.The tenants say they do not owe any rent because they vacated the property before they were ordered to do so and were not required to give 21 days’ notice. The tenants misunderstand several things which I discuss below.

12.I need to decide when the tenancy terminated in order to determine what if any rent was outstanding and what if any amounts are owed. I need to determine whether the lessor is entitled to deduct the amount from the bond.

13.At the hearing before me, Ms Clugston, the property manager appeared as the lessor’s authorised representative. Mr Samnugan Chandramohan, appeared as an authorised representative for both tenants. Only Mr Thangavel attended the hearing. He understood limited English but informed me that he wanted Mr Chandramohan to speak on his behalf. Mr Chandramohan also helpfully translated for Mr Thangavel.

14.I have had regard to all the documents filed by both parties in support of their respective positions, being a bundle of documents lodged on behalf of the lessor on 23 March 2022 and a bundle of documents lodged by the tenants on 5 April 2022.

When did the tenancy terminate?

15.In order to decided when the tenancy terminated, it is necessary to consider in some detail the circumstances leading up to the tenants’ departure from the property.

16.The tenants erroneously considered the tenancy had already ended either on 4 November 2021, being the date by which the notice to vacate required vacant possession or at the hearing before the tribunal on 18 November 2021. Neither position is correct in fact or law.

17.As a result of the tenants’ belief, they considered the terms of the tenancy agreement no longer applied because the time by which they needed to vacate the property had passed and because the matter was before the tribunal. Neither position is correct in fact or law.

18.It was also submitted on behalf of the tenants that the tenancy agreement had expired on 10 January 2021 and the lessor had agreed to allow them to stay and pay rent ‘month to month’. Again, this is misconceived.

19.Further, the tenants also relied upon statements purportedly made to them by the presiding member at the hearing on 18 November 2021 which they took to mean they were not required to give any notice to the lessor if they vacated the property at any time and in particular before the next hearing, which was scheduled for 19 January 2022. As far as I could ascertain, the tenants understood the member advising them that they need to find an alternative place to live prior to the next occasion as a suggestion that they did not need to give notice or had otherwise been evicted. I do not have a transcript from those proceedings, however, the tribunal made the following orders:

Ex-Parte the second tenant:

1.       The matter is adjourned to Wednesday 19 January 2022 at 3:00pm.

2.       The second tenant is to provide the Tribunal and the lessor a valid power of attorney by 13 January 2022.

20.It is apparent that the tenants had very little, if any understanding of the terms of the tenancy agreement or the rights and obligations imposed on both lessor and tenant under that agreement. Clearly, they misunderstood the effect of the notice to vacate, other than it required them to leave the property which they informed the tribunal in the earlier proceedings they could not do due to a high demand for rental properties. There is no doubt the tenants were actively seeking alternative accommodation as a result of receiving the notice to vacate. They erroneously believe that once the date by which they were to vacate passed, the tenancy had ended. In such circumstances, a lessor is required to make an application to the tribunal seeking termination and possession orders. The lessor did so in this case. The tenancy agreement is then only terminated in accordance with orders made by the tribunal. The date specified in the notice to vacate does not end the tenancy if the tenant fails to vacate. The parties’ obligations under the tenancy agreement continue until the tribunal orders the termination of the agreement.

21.Further, in this case, the tenants misunderstood what the meaning of ‘month to month’ rent was. This is the colloquial term used to describe a periodic tenancy. The tenancy did not end, contrary to the tenants’ belief, upon the expiry of the fixed term. The tenancy agreement continued with effect and specific terms of that agreement deal with termination of a periodic tenancy. The parties were still subject to the notice requirements regarding termination of a periodic tenancy under the agreement.

22.The commencement of proceedings in the tribunal seeking to terminate the tenancy and the orders made on 18 November 2021 also did not terminate the tenancy, contrary to the tenants’ belief. The tenants asserted that because they had been ‘taken to the tribunal’ the tenancy agreement no longer applied. At the time the matter came before the tribunal on 18 November 2021, the parties were subject to a period tenancy, as I have stated above. The terms of the agreement regarding the termination of a periodic tenancy applied. The tenants (and the lessor) were subject to the notice requirements set out in those terms.

23.The tribunal did not make any orders in relation to the tenancy agreement on 18 November 2021 other than to adjourn the hearing. I have no reason to doubt the tribunal member advised the tenants they needed to find somewhere else to live and the adjournment of the hearing would give them more time to do that. I am doubtful the member advised the tenants they were not required to give notice at all or other than in accordance with the terms of the agreement. Even so, the tenants clearly misunderstood the comments made by the member regarding the need to find alternative accommodation. The assumption they made regarding their notice obligations was plainly wrong as was their understanding of whether the terms of the tenancy agreement continued to apply or not. Clearly, they did as the tenancy agreement had not been terminated.

24.In addition, the tenants submitted that they could not practically give three weeks’ notice as they needed to move into the new property. They had signed a new tenancy agreement on 14 December 2021 commencing on 15 December 2021 from which date they were required to pay rent in relation to the new property. They claimed that giving three weeks’ notice meant they would pay ‘double rent’. The reality is yes, they would. Commencing a new tenancy and being obliged to commence rental payments for that new tenancy does not absolve tenants from being required to give proper notice under an existing tenancy agreement. In those circumstances the tenants faced paying rent simultaneously at both properties for a period of time or otherwise risk having a compensation claim made against them for failing to give proper notice. I do not accept the tenants could not give the required notice because they had signed a new tenancy agreement.

25.I do not accept the position and understanding of the tenants as set out above is a valid basis for failing to give the required notice to vacate the property.

26.Fortunately, the tenants were able to find alternative rental accommodation after the hearing on 18 November 2021 and vacated the property. The issue relates to the notice they gave.

27.On 15 December 2021, Mr Thangavel sent an email to Ms Clugston stating:

Hi

I am vacating the property on 17/12/21 you can inspect the property same day also you can advice me if we need to do anything also we are expecting next Tribunal hearing in 19/01/22 we will see what direction will tribunal is making

Thanks

Regard

Raj

Thangavel

28.Ms Clugston, on behalf of the lessor did not accept the tenants had given the required notice. She advised them by email that they were required to give 21 days’ notice and had not done so. She informed them that giving 21 days’ notice would require them to vacate by 4 January 2022 and they would be required to pay rent until then.

29.On 17 December 2021, the tenants returned the keys to Ms Clugston and left the property. She conducted a final inspection on 20 December 2021. There were no other issues regarding the tenants’ vacation of the property other than insufficient notice.

30.The tenants’ email of 15 December 2021 is a defective notice as to form and does not give the required notice. As I have found the tenancy agreement had not terminated the tenants were required to give 3 weeks’ notice in accordance with clause 88(1) of the standard terms. Clause 88(1) states:

The tenant may give notice to terminate a periodic tenancy by giving the lessor not less than 3 weeks notice of the date when the tenant intends to vacate the premises.

31.Further, clause 84 of the standard terms states:

(1)     If the tenant serves a notice of intention to vacate and vacates the premises in accordance with the notice, the tenancy terminates on the date of vacating the premises.

(2)     On receiving a notice of intention to vacate, the lessor may—

(a)accept the notice and accept that the tenancy ends on the date nominated in the notice; or

(b)apply to the tribunal for confirmation of the tenancy agreement, an order for compensation or both.

32.The tenants vacated the property in accordance with their notice.

33.In the case of a defective notice, section 60 of the RTA states:

(1)     If a tenant purports to serve a termination notice on a lessor and vacates the premises in accordance with the notice, even though the notice is not in the form approved under section 133 (Approved forms—Minister) for a termination notice—

(a)the residential tenancy agreement terminates on the vacation of the premises in accordance with the notice; and

(b)the former lessor may apply to the ACAT for compensation for the tenant’s abandonment of the premises.

(2)     The ACAT must award compensation to a person who makes an application mentioned in subsection (1) (b) unless satisfied that the person was not in a significantly worse position because of the defect in the notice than the person would have been had the notice been in the approved form.

34.On one view, the lessor did not accept the tenants’ notice as Ms Clugston wrote to the tenants and advised the tenancy would not end until 4 January 2022 being the 3 weeks’ notice period. However, the lessor did not apply to the tribunal for orders confirming the tenancy agreement or compensation, and by accepting the keys and conducting a final inspection accepted the notice by conduct.

35.Ironically, the lessor had expected the tribunal to terminate the tenancy on 18 November 2021, as per the T&P Application and had the tribunal done so, the lessor would have been perfectly content with the tenant leaving then or shortly thereafter. In those circumstances the lessor would not have been entitled to compensation equivalent to 3 weeks’ rent but only an occupancy amount for each day the tenants remained in the property after the date the tribunal made a termination and possession order. Instead, the lessor expected the tenants to give 3 weeks’ notice while the outcome of the T&P Application before the tribunal was still pending, which is technically and legally correct, but which contradicts the lessor’s expectation and motivation for applying to the tribunal. It is clear the requirement to give proper notice in accordance with the standard terms was to secure the payment of 3 more weeks of rent. Section 60 of the RTA contemplates the lessor may do so. It is the value of this rent the lessor now seeks to recover notwithstanding such an entitlement may not have arisen had the tribunal terminated the tenancy on 18 November 2021.

36.I am satisfied that the tenancy terminated on 17 December 2021 when the tenants vacated the property in accordance with the notice given. There is no doubt the notice was defective and there is no doubt that section 60 combined with clause 84 provides an avenue for the lessor to seek compensation.

37.As the tenancy terminated on 17 December 2021, I need to consider what if any rent was outstanding as at that date in order to decide whether the lessor is entitled to deduct from the bond the amount representing the rent that would have been payable up to 4 January 2022 had the tenants given proper notice.

What can be deducted

38.Section 31 of the RTA sets out the amounts that can be deducted from the bond. At sub-section (c), a lessor is entitled to deduct from the bond any rent owing and payable under the residential tenancy agreement at the time the agreement terminates or is terminated.

39.As I have found the tenancy agreement terminated on 17 December 2021, I need to decide what if any rent was owing and payable as at that date.

40.To confuse matters, on 15 December 2021, the lessor served on the tenants a notice to remedy for rent arrears in the amount of $880, being 8 days rent. I take this to mean rent was payable fortnightly in advance and that payment was due on 7 December 2021 for the coming fortnight which was not paid as at the date the notice to remedy was issued. In other words, on 7 December 2021 the fortnightly rent in advance was due, being $880 and by 15 December 2021 (8 days later) the fortnightly rent in advance remained unpaid.

41.At the hearing, Ms Clugston told the Tribunal that on 15 December 2021 the tenants owed $502 rent (calculated on a daily rate) and that on the day they vacated, 17 December 2021, they owed the $502 plus two days rent. The tenants made a payment of $629 on 17 December 2021 which paid the arrears as of 15 December 2021 plus two more days. No rent was owing on or after 17 December 2021.

42.Ms Clugston has claimed $1,131 as rent owing and deductible from the bond on the basis that the tenants did not give the required notice and owed rent for 18 more days after they vacated the property up to 4 January 2022.

43.I am not satisfied rent was owing and payable after 17 December 2021, being the date the tenancy terminated. As at that date the tenants paid rent owed from 7 December 2021 up to the date they vacated in accordance with the notice given.

44.The provisions regarding when the tenancy terminated albeit with defective notice are clear and the provisions regarding what can be deducted from the bond are clear. The tenancy terminated on 17 December 2021 and the tenants paid rent up to that date.

45.The amount the lessor claims is properly characterised as compensation arising from defective notice by the tenants. There is no doubt the tenants were required to give 3 weeks’ notice and did not. This was required despite the lessor seeking to have the tenancy terminated sooner before the tribunal. There is no doubt the lessor is entitled to seek such a payment by way of compensation, however as it is not rent owing and payable as at the date the tenancy terminated it cannot be deducted from the bond.

46.The amount of the bond in dispute should therefore be released to the tenants.

47.In the initial T&P Application to the tribunal on 5 November 2021, the lessor did not seek compensation of any kind from the tenants. When those proceedings came before the tribunal on 19 January 2022, for reasons that are unclear, the lessor was permitted to raise the issue of compensation arising from the tenants’ failure to give proper notice. Directions were made for the filing of evidence by the parties in relation to the compensation issue. As the rental bond dispute was also before the tribunal, ultimately the lessor elected to discontinue the T&P Application proceedings and pursue the claim through a rental bond dispute. The lessor sent the tribunal a Notice of Discontinuance on 10 February 2022. As a result of receiving the notice, the tribunal made orders that “the proceedings being discontinued are dismissed” and vacated the hearing date.

48.The substantive issue of whether the lessor is entitled to any compensation arising from the tenants’ failure to give proper notice has not been decided. I have only decided that the amount claimed is not capable of being deducted from the bond as it does not constitute rent owing and payable for the purposes of section 31 of the RTA. Whether the lessor can bring such a claim in the circumstances is not relevant to the rental bond dispute and I make no further comment.

Conclusion

49.ACT Rental Bonds on behalf of the Territory is directed to release the whole of bond to the tenants.

………………………………..

Senior Member K Katavic

Dates of hearing:	27 April 2022
Applicant:	Ms E Clugston, authorised representative
First Respondent:	In person with Mr S Chandramohan, authorised representative
Second Respondent:	Mr S Chandramohan, authorised representative