Jayawardena v Yue (Residential Tenancies)
[2009] ACAT 5
•14 April 2009
AUSTRALIAN CAPITAL TERRITORY
CIVIL AND ADMINISTRATIVE TRIBUNAL
JAYAWARDENA v YUE (Residential Tenancies) [2009] ACAT 5
RT 115 of 2009
Catchwords: The absence of power to enter premises to ascertain whether the premise have been abandoned and the need for legislative reform on the point: when compensation is payable for foregone rent to the end of the fixed term; repudiation and fundamental breach of a tenancy by reason of rent default.
Tribunal:A. Anforth, Senior Member
Date: 14 April 2009
AUSTRALIAN CAPITAL TERRITORY )
CIVIL AND ADMINISTRATIVE TRIBUNAL) NO: RT 115 of 2009
HARSHANA JAYWARDENA
(Applicant/Lessor)
AND:
TAN YUE
(Respondent/Tenant)
ORDER
The tenant is to pay the lessor the sum of $2760.55 immediately.
…………………………….
A. Anforth, Senior Member
14 April 2009
AUSTRALIAN CAPITAL TERRITORY )
CIVIL AND ADMINISTRATIVE TRIBUNAL ) NO: RT 115 of 2009
HARSHANA JAYWARDENA
(Applicant/Lessor)
AND:
TAN YUE
(Respondent/Tenant)
REASONS FOR DECISION
The tenancy of a residential premises in Ainslie in the ACT commenced on 3rd August 2008 for a period of 12 months at a rent of $1711 per month or $395.00 per week. A bond of $1580 was lodged with the Office of Rental Bonds. The residential tenancy agreement was in standard terms of the terms prescribed in the Schedule to the Residential Tenancies Act 1997 with four (4) special conditions of no relevance to the present matter.
The tenant fell into rent arrears and on 2 December 2009 the lessor served the tenant with a Notice to Remedy. The Notice indicated that the arrears were $2104.00.
On 9 December 2008 the lessor served a Terminate Notice on the tenant requiring possession by 23 December 2008. The Notice indicated that no payment had been made since the service of the Notice to Remedy.
The tenant apparently vacated the premises on a unidentified date and the lessor entered and retook possession on 26 December 2008 at which time the premises were vacant. The lessor changed the locks at that time.
The Applicant lodged an application with the Tribunal on 20 Febraury 2009. Annexed were a copy of the residential tenancy agreement, the Notice to Remedy and the Termination Notice. The lessor included a table setting out the rent arrears claimed to 5 Febraury 2009 in the sum of $2652. 21. The 5 February 2009 was the date on which a new tenant took possession of the premises.
In addition the lessor claimed $592.50 for the reletting fee, $57.14 for advertising fees and $33.55 for the cost of changing the locks.
The matter was listed before the Tribunal on 19 March 2009 and the parties advised in writing. The hearing notice was sent to the tenant at the only address known to the Tribunal, namely the address of the previous tenancy. The fact that the Tribunal had no forwarding address to which to send the hearing notice is a situation created by the tenant himself. Prescribed term 99 in the standard tenancy agreement requires a tenant vacating a premises to provide the lessor with a forwarding address for the very purpose of permitting service on the tenant of any notices or documents arising from the tenancy.
It is however common place for tenants to leave no forwarding address for service. This conduct by a tenant is a breach of the tenancy agreement and has the effect of depriving the Tribunal of the capacity to ensure the tenant is served with all necessary notices and correspondence. If the lessor or Tribunal happen to become aware of a method of contacting such a tenant then it is common practice for the Tribunal to adjourn proceedings and order service on the tenant via that point of contact. But if all the Tribunal has available to it is the address of the former tenancy then all the Tribunal can do is to dispatch notices to that address in the expectation that the tenant has arranged a mail divert.
If a tenant has failed to leave any contact details and has failed to arrange a mail divert then, whether intentionally or not, the effect is that the tenant is evading service. In such cases the Tribunal is empowered to hear and determine matters exparte and commonly does so.
10. On 19 March 2009 Mr Sant, real estate agent appeared for the lessor and there was no appearance of the tenant.
11. Mr Sant informed the Tribunal that:
(a)the rent was paid to 23 October 2008
(b)a new tenant took possession on 5 February 2009
(c)the lessor had become aware that the tenant had vacated the premises on 26 December 2008 but further inquiries suggested that the tenant may have vacated at a substantially earlier date.
(d)the lessor had personally carried out the cleaning of the premises on 4 January. The cleaning took 7 hours.
(e)the lessor had obtained the bond of four weeks rent from the Office of Rental Bond which caused the rent to be paid to 20 November 2008.
(f)the lessor claimed the balance of the rent arrears from 20 November 2008 until 5 February 2009, being 11 weeks rent.
(g)the lessor incurred a cost of $33.55 for the keys not returned.
(h)the lessor incurred a cost of $112.00 for the lodgement fee in the Tribunal.
the lessor claimed the reletting fee paid to Mr Sant of one weeks rent and the advertising costs.
12. At the hearing the issue was raised by the Tribunal as to why it was that the lessor did not know that the tenant had vacated until 26 December 2008. Mr Sant informed the Tribunal that the tenant did not tell the lessor or the agent of his intended point of departure. Mr Sant said that even if the lessor had a suspicion that the tenant may have vacated the premises prior to the expiration of the Termination Notice, the lessor had no power to enter the premises for the purpose of checking whether the tenant had in fact vacated. In these circumstances the lessor had no choice but to await the expiration of the Termination Notice on 23 December 2008.
13. Mr Sant is correct in identifying that neither the Act nor the residential tenancy agreement provide the lessor with the option to entering the premises for the purpose of ascertaining whether the premises have been vacated or abandoned. The effect of this hiatus in the legislation is to cause the premises to sit vacate for longer than is necessary following the departure of the tenant with the consequence that the tenant is likely to incur a greater liability than was necessary for foregone rent until a new tenant is found. The Tribunal notes in passing that section 24(1)(f) Residential Tenancies Act 1987 (NSW) contains a power for a lessor to enter premises to ascertain whether the premises have been abandoned. The Tribunal recommends the inclusion of such a power in the ACT legislation.
14. The lessor in fact had possession from 26 December 2008 subject to the need to carry out cleaning. It was not reasonable to expect the lessor to carry out cleaning on Boxing Day or over the Christmas-New Year holiday generally. The Tribunal put to Mr Sant, without dissent on his part, the view that the cleaning could reasonably have been completed and the premises ready for reletting by 4 January 2009 and thus the lessor was at least entitled to foregone rent to this date.
15. Mr Sant however sought rent to 5 February 2008 being the date of the new tenancy. In response to this claim the Tribunal advised Mr Sant of its view of the law governing the entitlement of a lessor to foregone rent during the balance of a fixed term period. This view is the same as that set out at [2.16.8] Residential Tenancies Law and Practice in NSW Anforth and Christensen 4th edition.
16. A residential tenancy agreement is a contract at common law and is thus regulated by the common law of contract subject to any relevant statutory intervention and in particular the Residential Tenancies Act 1997.
17. In short, there is a difference between a tenant “abandoning” premises and a tenant vacating premises in response to a Termination Notice. This distinction exists at common law and is enshrined in the Act. Section 36 of the Act defines exhaustively the modes by which a residential tenancy agreement may be terminated. In the case of fixed term tenancies section 36(e) deals expressly with “abandonments” and section 36(d) deals with the termination of the tenancy by the Tribunal following the service of a Termination Notice.
18. The Act does not define what constitutes an “abandonment” and so must be taken to have adopted the definition of the term at common law. At common law abandonment occurs when a tenant chooses to vacate the premises without lawful cause during the fixed term. But when a lessor determines to rely upon his/her right under the Act and the residential tenancy agreement to serve a Termination Notice on a tenant, then the tenant has a lawful right to vacate in response to that notice and thus no abandonment has occurred.
19. The power of the Tribunal to terminate residential tenancy agreements under sections 47-49 of the Act following the service of a Termination Notice is conditional upon the fact that the tenant has not vacated the premises in response to the Termination Notice. Even if the lessor’s Termination Notice is found to be defective, section 58 provides that if the tenant vacates in response to a defective notice, the tenancy is nevertheless terminated upon vacation of the premises. The fact that the Tribunal’s power to make orders terminating residential tenancy agreement in respect of which a Notice of Termination has been served, is conditional upon the tenant not having surrendered possession to the lessor shows the statutory intention, consistent with the common law, that if a tenant surrenders possession to a lessor upon the lessors lawful demand for possession, the tenancy then terminates.
20. If there is in truth an abandonment then at common law a lessor is entitled to damages that flow from the abandonment which generally include rent to the end of the fixed term or until a new tenant is found, subject to the lessor’s duty of mitigation. The Act essentially takes this same possession in sections 62 and 107 subject to some statutory capping of the quantum of compensation payable (Hookway v Boxsell [2008] ACTRTT 19). But if there is in truth no abandonment because the tenant had a lawful right to vacate in response to the Termination Notice then the lessor’s compensation is not assessed on the same principles that apply to an abandonment.
21. In the case where the lessor chooses to rely upon a statutory or contractual right to terminate the residential tenancy agreement, the issue of whether the lessor is entitled to damages/compensation for loss of bargain in the form of rent to the end of the fixed term depends upon whether the nature and gravity of tenant’s breach upon which the notice was founded, was such as would have constituted either a repudiation of the tenancy agreement or a fundamental breach of the tenancy agreement at common law. If the breach was sufficiently serious to amount to a repudiation or fundamental breach at common law then the lessor is entitled to damages/compensation for loss of bargain in the form of foregone rent for the balance of the fixed term subject to the duty to mitigate. If the breach was not of that level of seriousness then the lessor is not entitled to damages/contract for loss of bargain and is entitled only to the rent arrears owing under the contract i.e. to the date of at which possession was returned; and foregone rent for any further period necessary for cleaning and repairs during which time the premises were off the market.
22. At common law a repudiation occurs where the tenant demonstrates by their words or actions that they have no intention of being bound by the tenancy agreement. An abandonment is a paradigm case of repudiation at common law. Merely falling into rent arrears in circumstances where the tenant has the intention of making good that default, is not a repudiation at common law ([2.531] Residential Tenancies Law and Practice in NSW Anforth and Christensen 4th edition). On the other hand a demonstrated intention not to pay the rent irrespective of financial capacity to do so, is repudiatory.
23. At common law a fundamental breach is a breach of a fundamental term of the tenancy agreement no matter how small the breach; or a breach of a non-fundamental term of such gravity as to deprive the other party of the essential benefit of their contract (Gumland Property Holdings P/L v Duffy Bros Fruit Market (Campbelltown) P/L [2008] HCA 10). The duty to pay rent on time and to avoid falling into default is not a fundamental term of a residential tenancy agreement at common law and thus it is not the case that even a small or temporary rent default gives rise to a right on the lessors part to terminate the contract.
24. The Act actually regulates the right to terminate residential tenancy agreements for rent default. It sets minimum periods of default and requires the Tribunal to have regard to the tenants capacity to make good the default and to further consider whether it is “just and appropriate” to terminate the tenancy (section 49) reflecting the non-fundamental nature of this contractual obligation.
25. .In order for rent default under a residential tenancy agreement to constitute a fundamental breach it must be one of such gravity as to deprive the lessor of the essential benefit of their contract i.e. it must be substantial and enduring.
26. In the present case the rent was paid to 23 October 2008 when the Notice to Remedy was served on 2 December 2008 and the Termination Notice was served on 9 December 2008. The question is whether such a default is either repudiatory or a fundamental breach. There is no evidence concerning the tenant’s circumstances or intentions prior to service of the Termination Notice, thus there is no evidence to establish that the breach was repudiatory in the sense described above. In coming to this finding of fact the Tribunal is not suggesting that there may not be cases in which the rent default is so extreme as to permit a repudiatory inference to be drawn. However in the case the default was only some 4-5 weeks.
27. The next question is whether the breach was so grave as to constitute a fundamental breach. A rent default of 4-5 weeks is common in residential tenancy matters and can arise for any number of reasons. The bond is security for such default to the extent of 4 weeks. The Tribunal is not of the view that a rent default of this order of magnitude is such as to deprive the lessor of the essential benefit of the contract and therefore does not find that a fundamental breach had occurred.
28. In the absence of any repudiation or fundamental breach by the tenant, the lessor is entitled to rent to 4 January 2009 only. After allowing for the bond the rent is paid to 20 November 2008. The lessor is therefore entitled to rent from 21 November to 4 January 2009 being a period of 6 weeks and 2 days @ $56.25 per day which is $2475.00.
29. The lessor is entitled to the cost of cleaning which was a responsibility of the tenant. The lessor carried out the cleaning personally and so the Tribunal will adopt the common practice of the Tribunal of allowing $20 per hour @ 7 hours which is $140.00.
30. The lessor is entitled to the cost of the key of $33.55 and the lodgement fee of $112.00.
31. The lessor has claimed advertising costs and reletting fee as to which see Dexter v Lun [2009] ACTRTT 7. These heads of compensation are only apposite to compensation for loss of bargain which only arises in the case of repudiatory or fundamental breaches. In so far as the Tribunal has not found any repudiation or fundamental breach, the Lessor is not entitled to these damages.
- Anforth
14 April 2009
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Tribunal Staff
PART A FILE NO: RT09/115
APPLICANT: HARSHANA L JAYAWARDENA
RESPONDENT: TAN YUE
PARTY JOINED: N/A
COUNSEL APEARING: APPLICANT: N/A
RESPONDENT:
PARTY JOINED:
SOLICITORS: APPLICANT: N/A
RESPONDENT:
PARTY JOINED:
OTHER: APPLICANT: SELF WITH AGENT JOHN SANT.
RESPONDENT:
PARTY JOINED:
TRIBUNAL MEMBER: MR A ANFORTH
DATE OF HEARING: 19 MARCH 2009 PLACE: CANBERRA
DATE OF DECISION: 14 APRIL 2009 PLACE: CANBERRA
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )
COMMENTS:
2
0
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