PARKER ?V- WOODHAM
[2008] ACTRTT 2
•28 February 2008
AUSTRALIAN CAPITAL TERRITORY
RESIDENTIAL TENANCIES TRIBUNAL
CITATION: PARKER –V- WOODHAM [2008] ACTRTT (2)
RT 745 of 2007
Catchwords: Rent increases in the fixed term of a lease; the postal service rule; time for making a rent review application.
Tribunal:A. Anforth , Member
Date: 28 February 2008
AUSTRALIAN CAPITAL TERRITORY )
RESIDENTIAL TENANCIES TRIBUNAL ) NO: RT 745 of 2007
RE: ANN PARKER
(Applicant/Tenant)
AND: JAN WOODHAM
(Respondent/Landlord)
DECISION
Tribunal : A. Anforth, Member
Date : 28 February 2008
Decision :
The rent increase from $290 per week to $310 per week from 6 September 2007 is unlawful.
The landlord is to refund to the tenant all rent collected in excess of $290 per week.
…………………………….
A. Anforth, Member
AUSTRALIAN CAPITAL TERRITORY )
RESIDENTIAL TENANCIES TRIBUNAL ) NO: RT 745 of 2007
RE: ANN PARKER
(Applicant/Tenant)
AND: JAN WOODHAM
(Respondent/Landlord)
REASONS FOR DECISION
The Applicant is the tenant of premises in Bonython in the ACT and the Respondent is the landlord. The tenancy commenced on 6 February 2006 for a term of 2 years and is in the standard terms without any endorsements. The rent was $290.00 per week.
On 11 July 2007 the landlord, via its agent Lanyon Real Estate, served notice on the tenant that the rent was to increase to $310.00 per week from 6 September 2007.
The Applicant lodged an application with the Tribunal on 13 December 2007 seeking review of the proposed rent increase. The tenant’s applicant was accompanied by the following submission:
Issue in dispute
Or. the 6th February 2006 a fixed term lease (24 months) was signed between myself (Tenant) Ann Parker and (Lessor) Jan Woodham, and Leafon PTY LTD trading as Paradime Real Estate, ABN 83 071 207 648 as the Lessor's licensed agent. Paradime Real Estate has since been taken over by Lanyon Real Estate ABN 30 080 146 149
A lease agreement was negotiated between myself and the Lessor for a 24 month lease at property 15/37 Barr Smith Ave Bonython ACT for $290.00 p/w. It was agreed on the lease agreement that the rent to be paid was $290 per week for a period of 24 months, starting on the 8 February 2006 and due to expiry the 7 February 2008. I signed the lease on the understanding that the agreement could not be changed. Both parties had to be in agreement to change the terms. It is a legal contract between both parties that the rent would stay at $290 for a period of 24 months. The real estate signed the lease in agreement with this.
A letter was received by myself from Lanyon Real Estate the second week in July 2007. advising me that the rent was to be increased in accordance with Clause 38 of the prescribed terms of the Residential Tenancies ACT 1997. I received 8 weeks notice from Lanyon Real estate to increase the rent effective from 6 September 2007 from S290.00 to $310.00 p/w.
I contacted Sue Funnell at Lanyon Real Estate, Calwell branch to query the letter. I was of the opinion that my rent could not be increased as I had signed a 2 year lease agreement at a rate of $290.00 p/w with expiry on 7 February 2008.
My understanding of the lease agreement was that the rent could not be increased during the rental period of 2 years. Contrary to this belief Sue assured me that it could go up every twelve months no matter when the lease expired. Rent could not go up more that once in a twelve month period. She then directed me back to Clause 38. I accepted this discussion in good faith. I was guided by her knowledge of the Residential Tenancy Act. She had more knowledge, as she was working within the industry on a daily basis.
A month ago the property that I am renting 15/37 Barr Smith Ave, Bonython ACT was listed by LJ Hooker Manuka to be sold. After meeting Liza Richardson the listing agent it became apparent that the rent could not be increased. Liza advised me that if the lease is still current the rent could not be increased. Liza sought advice from her fellow work colleagues and confirmed the information that she had given me was correct.
2. Nature of Relief I am Seeking
I am seeking to have my rent reverted back to $290 per week until the end of my lease and the overpayment to be reimbursed. The amount that I have paid over and above the lease agreement is $280.00 as at 13 December 2007. I am also seeking to have any out of pocket expenses (lodgement fee) reimbursed.
3. Brief History of the Dispute
Having taken Liza's advice on board I sought a second opinion from the Tenants Union ACT Inc where I spoke with both Sandra and Izzy on a couple of occasions and they advised that the real estate had duly misrepresented the law. I was also advised to contact the real estate and explain that what they had done was incorrect and to give them a chance to reverse the rent increase.
I then proceeded to contact the Calwell branch of the real estate and spoke with Carly. I explained the situation and I advised her that if I didn't hear from her within 2 working days (Wednesday 28 November) I would be going to the tribunal. In the mean time I spoke with Daryl Saxon the Owner/Manager of Lanyon Real Estate and in no uncertain terms I was told I was wrong. Carly did get back to me the next day and told me the same information her manager had told me, they were well within the rights to increase the rent. I then sent an email to the real estate asking them to review the increase and again was told that they had nothing wrong and were legally allowed to increase the rent.
I have also advised Jan Woodham (Lessor) by leaving a message through the listing agent Liza Richardson of my intention to lodge with the Tribunal.
The matter was listed before the Tribunal on 24 January 2008. The Applicant appeared in person and Mr Saxon, real estate agent, appeared for the landlord.
The tenant advised the Tribunal her grievance was centred on the issue of whether it was lawful for the landlord to increase the rent during the fixed term of a lease. She did not contend that the magnitude of the rent increase itself was unreasonable.
The parties were given the opportunity to address the Tribunal on the issue of law. The parties were asked whether either sought an adjournment to obtain legal representation to argue this issue. Both parties indicated that they were content for the Tribunal to rule upon the matter without the benefit of submissions from the parties on the issue of law. The decision was reserved for to this end.
The relevant legislation is:
Relevant sections of the Residential Tenancies Act 1997:
Section 65 Waiver of notice requirements
(1) The tribunal may hear an application for the review of a rental rate increase even though the application is made less than 2 weeks before the day when the proposed increase is to come into effect, if the tribunal is satisfied that—
(a) the application is late because of special circumstances; and
(b) to hear the application will not place the lessor in a significantly worse position than the lessor would have been had the applicant applied as prescribed.(2) If a tenant vacates premises as a result of a rental rate increase but fails to give the lessor notice of intention to vacate premises in the form approved under section 133 (Approved forms—Minister), the tribunal may, on application by the tenant or former tenant, treat the notice as having been given in the approved form if satisfied that—
(a) the failure to give notice in the approved form is a result of special circumstances; and
(b) to treat notice as having been so given will not put the lessor in a significantly worse position than if notice had been given properly.Section 66 Freezing rents
If an application for review of a rental rate increase has been made but not decided, no increase in the rental rate happens unless allowed by the tribunal.
Section 67 Orders
The tribunal may make the following orders in relation to an application for review of a rental rate increase:
(a) an order allowing the increase applied for or the other increase that the tribunal considers just;
(b) an order disallowing the increase;
(c) an order disallowing part of the increase.Section 68 Guideline for orders
(1) The tribunal must allow a rental rate increase that is in accordance with the standard residential tenancy terms unless the increase is excessive.
(2) For subsection (1)—
(a) unless the tenant satisfies the tribunal otherwise, a rental rate increase is not excessive if it is less than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later); and
(b) unless the lessor satisfies the tribunal otherwise, a rental rate increase is excessive if it is more than 20% greater than any increase in the index number over the period since the last rental rate increase or since the beginning of the lease (whichever is later).(3) If a tenant or lessor proposes that a rental rate increase is or is not excessive, the tribunal, in considering whether it is satisfied about the proposal, must consider the following matters:
(a) the rental rate before the proposed increase;
(b) if the lessor previously increased the rental rate while the relevant tenant was tenant—(i) the amount of the last increase before the proposed increase; and
(ii) the period since that increase;
(c) outgoings or costs of the lessor in relation to the premises;
(d) services provided by the lessor to the tenant;
(e) the value of fixtures and goods supplied by the lessor as part of the tenancy;
(f) the state of repair of the premises;
(g) rental rates for comparable premises;
(h) the value of any work performed or improvements carried out by the tenant with the lessor’s consent;
(i) any other matter the tribunal considers relevant.(4) If the tribunal considers a proposed rental rate increase is excessive but a lesser increase would not be, it may disallow so much of the increase as is excessive.
(5) In subsection (2):
index number means the rents component of the housing group of the Consumer Price Index for Canberra published from time to time by the Australian statistician.
Section 69 Effect of orders
(1) If the tribunal makes an order under section 67 (a) or (c), the rental rate increase takes effect from the date when the proposed increase would, apart from section 66, have taken place.
(2) The tribunal may, on application, grant a tenant time to pay rent owed because of the operation of subsection (1).
(3)If—
(a) the tribunal makes an order mentioned in section 67 (b) or (c); and
(b) despite section 66, the tenant has paid the lessor the full amount of the rental rate increase proposed by the lessor;the tribunal may order the lessor to pay to the tenant the difference between the amount the tenant paid to the lessor and the amount that was payable.
Section 70 Further increases
If a proposed rental rate increase has been reviewed by the tribunal, any further purported increase in the rental rate for a period of 12 months after the day the proposed increase was to take effect is void.
Section 73 Applications for resolution of dispute
(1) A party to a residential tenancy agreement may apply for a resolution of a tenancy dispute.
(2) A party to an occupancy agreement may apply for a resolution of an occupancy dispute.
(3) An application must—
(a) be in writing; and
(b) contain the prescribed particulars; and
(c) for an application that relates to a rent increase—subject to section 65 (1), be made not less than 2 weeks before the date the rent increase is proposed to take effect; and(d) be lodged with the registrar.
Relevant prescribed terms:
34 The amount of rent must not vary from period to period except as provided by this tenancy agreement and the Residential Tenancies Act.
35 The rent may not be increased at intervals of less than 12 months from either the beginning of the tenancy agreement for the first increase, or after that, from the date of the last increase.
36 Despite clause 35, if the commissioner for housing is the lessor under this tenancy agreement and the commissioner—
(a) undertakes a review of rent in accordance with the Housing Assistance Act 1987, section 15 (3); and
(b) as a result of the review, decides to increase the rent;then—
(c) if a previous review of rent has been undertaken—the increase must not take effect less than 1 year after the date of the last increase of rent in relation to the premises; or
(d) if no previous review of rent has been undertaken—the commissioner may increase the rent.37 The restriction on increase in rent applies provided the identity of at least 1 of the tenants who occupy the premises remains the same as at the time of the last increase.
38 The lessor must give the tenant 8 weeks written notice of intention to increase the rent and include in the notice the amount of the increase, and the date when it is proposed to increase the rent.
39(1) The tenant may apply in writing to the tribunal for review of an excessive increase in rent (time limits for applying and the meaning of excessive is set out in the Residential Tenancies Act).
(2) On such application being made, no increase in rent is payable until so ordered by the tribunal.
40 If the tenant remains in occupation of the premises without applying to the tribunal for review, the increase in rent takes effect from the date specified in the notice.
41 If the tenant wishes to vacate the premises before the increase takes effect, the tenant must give 3 weeks notice to the lessor.
Is the rent increase notice valid:
The rent increase notice was served by mail and posted on 11 July 2007. Prescribed term 38 provides that the landlord must give 8 weeks notice of the date of commencement of the rent increase.
Neither the Residential Tenancies Act 1997 nor the Residential Tenancies Regulations contains any provision relating to the service of rent increase notices. In these circumstances sections 151, 247 and 250 Legislation Act 2001 applies.
10. Section 151(6) provides that a period between two events, eg the date of the notice and the date the rent increase is to take effect, is reckoned exclusive of the day the event is to take effect. Thus the 8 weeks notice period required by prescribed term 38 does not include the 6th of September itself.
11. Section 247 permits postal service. Section 250 provides:
(1) A document served by post under this part is taken to be served when the document would have been delivered in the ordinary course of post.
(2) However, subsection (1) does not affect the operation of the Evidence Act 1995 (Cwlth), section 160.
Note The Evidence Act 1995 (Cwlth), s 160 provides a rebuttable presumption that a postal article sent by prepaid post addressed to a person at an address in Australia or an external territory was received on the 4th working day after posting.
12. Section 4 Evidence Act 1995 (Cwth) provides that the Evidence Act 1995 applies to “Act Courts” which is defined in that Act as follows:
"ACT court" means the Supreme Court of the Australian Capital Territory or any other court of the Australian Capital Territory, and includes a person or body that, in performing a function or exercising a power under a law of the Australian Capital Territory, is required to apply the laws of evidence.
13. The Tribunal is not a court and is not required to apply the laws of evidence, therefore the Commonwealth Evidence Act 1995 has no application to the Tribunal’s processes. On this premise a rent increase notice is taken to be served when the notice would have been delivered in the ordinary course of post per section 250(1) Legislation Act 2001.
14. The landlords rent increase notice is taken to have been serviced on Friday the 13 July 2007. Inclusive of the 13 July 2007 but exclusive of 6 September 2007, the rent increase notice is short 1 day of the required 8 weeks and is therefore not valid.
15. The Act contains no power to waive a defective rent increase notice and accordingly the landlord rent increase was unlawful.
Is the tenants application to review the rent increase out of time:
16. In view of the finding immediately above it is not strictly necessary to consider this issue.
17. Section 73(3)(c) requires that an application by a tenant to review a rent increase must be filed with the Tribunal not less than 2 weeks before the rent increase notice is due to take effect. In the present case the rent increase notice was due to take effect on 6 September 2007 and the tenant did not file her application until 13 December 2007. Plainly the tenant is out of time.
18. Section 65(1) allows the Tribunal to hear an application for review of rent increase made “less than 2 weeks before the day when the proposed increase is to come into effect” if satisfied that “special circumstances” exist and the landlord will not be “in a significantly worse position than the lessor would have been had the applicant applied as prescribed”.
19. There is no suggestion by the landlord that she is prejudiced in any way by virtue of the 3 months or so delay by the tenant in making application to the Tribunal. There is no suggestion that relevant data or access to relevant evidence etc has been lost due to the delay. In any event there is no dispute in this case concerning the magnitude of the rent increase, the case wholly turns on a point of law.
20. In present case the tenant says that the special circumstances are to be found in the fact that the landlords real estate agent misadvised the tenant on the relevant law to the effect that a lawful rent increase could be imposed during the fixed term of a lease.
21. There is a wealth of case on the term “special circumstances” including in sections 542H, 601, 603A, 1184K and 1237AAD Social Security Act 1991 and sections 66, 69, 69A and 70 Residential Tenancies Act 1987 (NSW). I do not propose to traverse these authorities in the present instance. I am satisfied that if the landlord’s agent induced a wrong belief in the tenant concerning the state of the law and thereby dissuaded the tenant from making her application for review, then that is a special circumstances sufficient for the purposes of section 65(1).
Can a rent increase be effected in a fixed term:
22. A tenancy agreement does not end at the end of a fixed term. A tenancy agreement only comes to an end if one of the circumstances set out in section 34. Prescribed term 5 expressly provides that at the expiration of a fixed term the tenancy continues as a periodic tenancy.
23. Prescribed term 34 provides that the “must not” be increased from period to period except as provided in the tenancy agreement or the Act. The tenancy agreement is simply the prescribed terms which are annexed to the Act. Prescribed term 34 therefore abrogates any right to increase the rent by reference to any collateral agreement outside the terms of the tenancy agreement.
24. Prescribed term 35 provides the rent “must not” be increased at intervals of less than 12 months from the beginning of the tenancy or from the last rent increase. Thus if the fixed term of a lease is for 12 months or less then the issue presently under consideration cannot arise. The issue of whether the rent can be increased in the fixed term is only a live issue for leases with fixed terms of more than 1 year.
25. The Act and prescribed terms are silent on the issue of whether the rent is to remain fixed during the whole of the fixed term of a lease.
26. In Hart & Freeburn v Norton [2000] ACTRTT 9 the Tribunal held that rents could not be increased during a fixed term. With no disrespect intended, the decision of the Tribunal did not contain any reasoning process leading to that conclusion.
27. During a fixed term the tenant has a degree of security of tenure in that the landlord may not terminate the agreement except for breach by the tenant, or in a small number of other irrelevant circumstances. The landlord obtains the advantage of knowing there is a rent paying tenant in possession throughout the fixed term period, and has the right to hold the tenant to the agreement during the fixed term.
28. The use of rent increases as a defacto mode of eviction is well known in the industry and provides part of the legislative policy under pinning the power given to the Tribunal to review proposed rent increases. Notwithstanding the Tribunal’s role, a power vested in the landlord to raise rents is always a potential threat to the tenant’s security of tenure. Hence prescribed term 41 permits a tenant to terminate a lease on 3 weeks notice following notice of rent increase. If the landlord has the power to increase rents in the fixed term then prescribed term 41 would permit a tenant to vacate within the fixed term following service with a rent increase notice.
29. It follows from the above that if the landlord is free to raise the rent during the fixed of a lease then the security of tenure during a fixed term for which the tenant bargained is potentially endangered.
30. One argument in favour of the power to raise rents during a fixed terms is the disincentive to grant longer fixed term lease unless than can be rent reviews during the longer fixed term of the lease.
31. The issue of the power of the landlord to raise rents after 12 month into the fixed term of a lease is unclear from the text of the Act. There are some policy considerations in favour of each contention such that the legislative intent on the issue is not also not clear (section 139 Legislation Act 2001). In these circumstances section 142 Legislation Act 2001 authorises the Tribunal to have recourse extra legislative materials. The Explanatory Memorandum presented with the Residential Tenancies Bill 1997 explicitly stated that the Bill “implements many of the recommendations made by The Community Law Reform Committee of the Australian Capital Territory (Report No8) (the report)”.
32. Clause 274 of the Report read:
People may agree to increase the rent during the fixed term tenancy if the tenancy agreement provides for this. If the tenancy agreement does not so provide, then any increase during the fixed term shall constitute a breach of the tenancy agreement. The restriction on frequency of rent increases should apply whether the increase takes place during the fixed term or during the periodic tenancy.
33. This passage from the Report appears to harmonise the above identified completing policy considerations. It is also consistent with section 45(4) Residential Tenancies Act 1987 of New South Wales which specifically provides that rents cannot be increased in the fixed term unless the lease itself provided for the increase.
34. Until the matter is clarified by the Legislature or by the Supreme Court, the Tribunal takes the view that rents cannot be increased after 12 months within the fixed term of the lease unless the lease itself makes explicit provision for such increases.
35. In the present case there was no agreement between the parties for a rent increase after 12 months of the fixed term and therefore the rent increase was unlawful and the landlord is required to refund all rent collected over and above the original rent of $290 per week.
A. Anforth, Member
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