Pateman & Griffin & Anor; (Residential Tenancies) - [2012] ACAT 47

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

PATEMAN & GRIFFIN AND ANOR
(Residential Tenancies) [2012] ACAT 47
Case Number:           RT 12/411
Catchwords:             RESIDENTIAL TENANCIES – whether notice of intention to terminate tenancy was valid – whether notice of intention to terminate tenancy was accepted by the lessor’s agent – early termination of tenancy agreement – compensation for lost rent – whether the tenancy was abandoned – mitigation of loss - Tribunal’s power to make an order against the rental bond for compensation – status of referral from the Office of Rental Bonds – ‘break lease’ fee
List of legislation:     Residential Tenancies Act 1997, ss. 31, 36, 38, 60, 61, 62 and 84, and Division 3.4, and previous section 104, and prescribed terms 82, 84 and 85

List of Texts/Papers: Explanatory Memorandum to the Residential Tenancies Bill 1997
Community Law Reform Committee of the Australian Capital Territory, Report No 8, Private Residential Tenancy Law (1994)

Tribunal: Mary-Therese Daniel, Member

Date of Orders:  21 June 2012
Date of Reasons for Decision:       10 July 2012
IN THE ACT CIVIL &            )
ADMINISTRATIVE TRIBUNAL          )   FILE NUMBER
RT 12/411

EILEEN PATEMAN

Lessor

HUGH GRIFFIN & CATHERINE GAUTHIER

Tenants

Tribunal: Ms Mary-Therese Daniel, Member
Date: Thursday, 21 June 2012

ORDER

The Office of Rental Bonds is directed to release $423.95 of the disputed sum to the lessor’s agent; and the remaining $212.50 of the disputed sum to the tenants.

Ms Mary-Therese Daniel
Member
ACT Civil & Administrative Tribunal
REASONS FOR DECISION

On 21 June 2012 I heard an application for compensation by the lessor of $636.45 for rent lost as a consequence of early termination of a tenancy agreement. At the conclusion of that matter I directed that $423.95 of the bond be released to the lessor as compensation, and the remainder of the bond monies returned to the tenants. My reasons for that decision follow.

Facts

The facts in this matter were largely undisputed. On 11 July 2011 the tenants Mr Griffin and Ms Gauthier entered into a second residential tenancy agreement in relation to premises at (address removed). Under the agreement the fixed term of the tenancy was for one year, concluding on 6 June 2012, and rent of $480 per week was payable. From September 2011 that rent increased to $495 per week.
As it transpired, the tenants purchased a home and on 13 March 2012 Mr Griffin telephoned the lessor’s agent Luton Properties and spoke to Ms Hatch, advising of the tenants’ desire to terminate the tenancy. While Ms Hatch was not available to give evidence of that telephone conversation, and Mr Griffin’s recollection was not strong, it is clear that he was told that he would need to give notice in writing. Later that day, Mr Griffin sent an email to Ms Hatch, in the following terms:
“I confirm that as we have just bought a house (we exchange today), we wish to break our contract and move out on or around Friday 30 March 2012.
We are keen to get new tenants in ASAP so as to avoid having to pay rent for any time the house is unoccupied.
We will of course be guided by your advice as to whether this date is possible, given both its proximity to a weekend, and the short timeframe between then and now. ...”
This email seems to have been treated by the parties as the ‘notice of intention to terminate’ referred to by section 36(b) of the Residential Tenancies Act 1997 (RT Act).
Ms Hatch then responded to Mr Griffin by email of 15 March advising that the lessor had been advised of the termination date, and that formal correspondence would follow. That email relevantly stated:
“I have spoken to the owner and informed them of the date you will be
vacating, he has also decided to put the price up.
We have scheduled as per your request to have an open for this Saturday
at 12:30 – 12:45.
I will be putting the property on the webs ASAP and will send out your
official vacating letters tomorrow.
We will see how much interested (sic) there is on the weekend and when
we have a successful applicant we can figure out a final inspection date.”

The formal correspondence that followed that day consisted of a letter entitled ‘re: Vacating – (address removed)’, sent both by email and by ordinary mail. This correspondence purported to impose a ‘break lease fee’ of one week’s rent and included an excerpt of section 62 of the RT Act which relates to abandonment of premises during the fixed term.
The tenants and lessor’s agent continued to correspond by email, and clearly both worked hard to have advertisements for the premises on the internet by 15 March and an open house conducted on Saturday, 17 March. One prospective tenant that attended the open house was a current tenant of another property managed by the agent. They had been given notice to vacate that property by end of April 2012. That prospective tenant submitted an application form, seeking to take a lease over the premises from 10 April 2012 (the Tuesday after the Easter Long Weekend), and that application was accepted.
Although other prospective tenants attended the open house, Ms Davis gave evidence that on her recollection and from examining the file, she believed no other suitable applications seeking to commence a tenancy on an earlier date were received. Indeed, there was no evidence of any other suitable applications being received by the agents. Mr Griffin gave evidence that the tenants had not taken any independent steps to locate suitable tenants who might be available from 31 March 2012.
Notwithstanding that the incoming tenants did not propose to occupy the premises until 10 April 2012, Mr Griffin and Ms Gauthier proceeded to vacate the property as planned on Friday 30 March 2012. It was not clear from the evidence of Mr Griffin why the flexibility as to dates expressed in his email of 13 March 2012 was, in the end, not forthcoming.
The new tenants moved in on 10 April 2012. Under the new tenancy agreement, the incoming tenants paid $25 per week more rent than the outgoing tenants.
There was evidence from Mr Griffin, which was not disputed by Ms Davis, that in the 9 days that the property was unoccupied gardening work was done, and two tradesmen attended the property – one to service (or possibly replace) the heater and the other to undertake some pest management. It was also not disputed that on 9 April 2012 the new tenant attended the premises and put items from a truck into the garage at the premises.

These proceedings

These proceedings were initiated by the referral from the Office of Rental Bonds to the Tribunal of a rental bond dispute. The amount in dispute was $636.50. The lessor’s agent then filed an application for compensation for loss of rent for 9 days, in that amount. No compensation was sought for advertising and reletting.
The tenants submitted that they should not be liable to pay compensation for lost rent on the grounds that:
a)The notice of intention to terminate had been ‘accepted’ by the lessor’s agent;
b)The lessor took actions in relation to the premises during the 9 days it was vacant which were inconsistent with a right to compensation; and
c)The tenants had given adequate notice of their intention to terminate (almost 3 weeks) and the reality in the rental sector is that a lessor should expect that at the end of a tenancy the property may sit vacant for a few days, these losses are therefore not attributable to the outgoing tenants.
d)The lessor had received a rental increase through the new tenants which for the period 10 April to 6 June 2012 amounted to $212.50 more than if the previous tenancy had been in place.

Issues in the proceedings

Much time was spent in the hearing on the legal basis for the claim for compensation for lost rent. The tenant’s written submissions also addressed this issue comprehensively. The disposition of this legal issue is fundamental to the lessor’s claim and my findings in that regard are set out below.
The tenants also raised procedural issues about the referral of this matter from the Office for Rental Bonds and other miscellaneous issues were also apparent in the documentation provided by the parties. Although these procedural and miscellaneous issues are peripheral to the disposition of this matter, the tenants had sought a ruling on these points and I consider that there may be some benefit in recording the views of the Tribunal in these respects. I address these miscellaneous issues separately at the conclusion of these reasons.

Applicable law

Section 36 of the RT Act provides that a residential tenancy agreement may only terminate in certain circumstances. Subsection 36(b) applies where a tenant has given notice to terminate to the lessor, and has vacated the premises in accordance with that notice. In such cases, the tenancy terminates on the date specified in the notice, irrespective of whether the lessor has agreed to the early termination or not. Section 36(e) applies where the tenant abandons the premises. In those cases, section 61 of the RT Act provides that the tenancy agreement terminates on the day of abandonment.
The legal mechanism by which the tenancy agreement was terminated is relevant, because the provision under which compensation may then be sought by a lessor varies accordingly.
For example, where a tenancy terminates by abandonment, section 62 of the RT Act provides that the former lessor may apply for compensation for the loss of rent that the lessor would have received had the agreement continued to the end of its term (capped at 25 weeks’ rent), plus compensation for advertising and reletting costs (capped at 1 weeks rent). Subsection 62(4) directs the ACAT in determining the amount of compensation to have regard to the time at which the tenancy would otherwise have terminated.
By contrast, section 84 of the RT Act provides that where a lessor receives a notice of intention to vacate before the end of the fixed term of the tenancy agreement, the lessor may either accept the notice or apply for compensation for loss of rent, advertising and reletting costs. Similarly to section 62, any such compensation is capped and the ACAT is directed to have regard to the time at which the tenancy would otherwise have terminated.
Whether the tenancy has been terminated by notice or by abandonment turns upon whether there has been a valid notice of intention to terminate.

Was there a valid notice to terminate?

Clause 85 of the prescribed terms of a residential tenancy agreement sets out the requirements of a notice to terminate. In the current case, the proposed notice to terminate, being Mr Griffin’s email of 13 March 2012, did not comply with the requirements of clause 85 of the prescribed terms in that it did not refer to a ‘certain date’ and did not contain a statement that the tenancy would terminate on that certain date. While the email of 13 March certainly provided notice of an intention to vacate the premises, that notice was vague and imprecise. I have been unable to identify in the documents provided by the parties any other piece of correspondence emanating from the tenants which meets the technical requirements of clause 85.
Section 60 of the RT Act provides that where a defective termination notice is served by the tenant, and the tenant vacates the property in accordance with the notice, the tenancy agreement terminates on the date the premises are vacated and the lessor may apply to the ACAT for compensation for abandonment of the premises. Subsection 60(2) requires the ACAT to award compensation unless satisfied that the defect in the Notice did not place the lessor in a significantly worse position. The way that section 60 operates is not clear on its face, however reference to the explanatory memorandum for the Residential Tenancies Bill 1997 reveals that it was intended that, if the Tribunal chose not to rectify or waive the defect in the notice, compensation would be determined by the application of section 62 of the RT Act. In cases where the defect in the notice is waived or rectified, the question of compensation then falls to be determined under section 84 of the RT Act.
In the current case, although the Notice was clearly defective, all parties subsequently proceeded on a common understanding that the premises would be vacated on 30 March 2012. Accordingly, it is in my view appropriate to waive the defect in the notice and consider the question of compensation under section 84 rather than section 62 of the RT Act.
This distinction is important, because as I have noted above section 84 of the RT Act admits of the possibility that the lessor may ‘accept’ the notice of intention to terminate. In such a case, the right to compensation is lost.

Was there ‘acceptance’ of the Notice to Terminate?

The word ‘accept’ as it appears in section 84 of the RT Act is not defined, and I have been unable to find any judicial interpretation of the word in that context. The ordinary English meaning of the word, according to the Macquarie dictionary, is:
1.To take or receive (something offered); receive with approval or favour: her proposal was accepted.
2.To admit and agree to; accede or assent to: to accept a treaty; to accept an excuse.
3....
While another 6 meanings for the word ‘accept’ are also listed, the first two meanings seem most apt to the drafting of section 84. These meanings should be adopted, unless the word was intended to have a specific or technical meaning.
Section 84 was a late insertion into the RT Act, it was proposed (as section 106A) by the Attorney-General Mr Humphries during debate of the Bill. Consequently, the meaning of the word ‘accept’ and intended operation of the section is not discussed in the explanatory memorandum for the Bill. An examination of Hansard for 6 November 1997 reveals that section 106A was proposed because of the inclusion of the cap for compensation in relation to abandonment of premises. There was concern that, unless a similar cap for compensation was imposed in relation to early termination of a tenancy agreement by notice, tenants would have no incentive to give notice of a proposed vacating of the premises. There is no suggestion, either in Hansard or in any extrinsic material of which I am aware, that the word ‘accept’ in section 84 was to have anything other than its ordinary English meaning.
The use of the word ‘accept’ in section 84 is perhaps an unfortunate choice given that this term has been utilised in tenancy law, in particular in relation to repudiation of a tenancy agreement. At common law it is accepted that where a tenant repudiates a tenancy agreement, that tenancy agreement would terminate by virtue of ‘acceptance’ of the repudiation by the lessor and entitlement to damages for the termination would then arise. The drafting of section 84 is contrary to the common law approach, and caution should be taken in referring to precedents or interpretation of the word ‘accept’ in the context of repudiation, when considering section 84 of the RT Act.
It is also relevant to note that the term ‘acceptance’ is a technical term in the law of contract, and there is a large body of law in relation to what constitutes a valid acceptance. A residential tenancies agreement is fundamentally a creature of contract, and it might be argued that the word ‘accept’ should be interpreted and applied in accordance with these principles. As intellectually attractive as this proposition may seem, there is no basis either in the RT Act itself, or in the extrinsic material, to assert that this body of law necessarily applies to the application of section 84 of the RT Act.
Nonetheless these legal principles, or the reasoning underpinning them, may be of assistance to the Tribunal in determining questions which arise in relation to the application of section 84 in any particular case. For example, the following general points in relation to a valid ‘acceptance’ in contract may be relevant to a consideration of whether a lessor has ‘accepted’ a notice of termination:
·An acceptance must be in response to an offer
·An acceptance must be an unconditional/unequivocal agreement to the terms
·An acceptance should be communicated
·In some cases an acceptance may be communicated by conduct or by silence
·An acceptance must be communicated within any relevant time frame.
Turning to the submission of the parties, it was asserted by the tenants that the agent’s email to Mr Griffin of 15 March 2012 is properly to be interpreted as an ‘acceptance’ of the notice of intention to vacate.
I do not consider that this email constitutes an ‘acceptance’ in the sense that that word is used in clause 84 of the standard terms or section 84 of the RT Act.
I should first note that the email of 13 March 2012 was not a valid notice, and the starting position would be that without a valid notice there could be no acceptance. However in this case I have waived the defect in the notice and nothing turns on this point.
Fundamentally, I do not consider that on its terms the email of 15 March was an unconditional or unequivocal agreement to the tenants’ vacating the property without liability for compensation. I emphasise these words, because they are not expressed in the text of section 84. However, it is important in the context of this matter to note that if an acceptance is to be effective for the purposes of section 84, it cannot be predicated on an understanding that compensation is to be paid.
In the current matter, the tenant’s liability for compensation for unpaid rent was acknowledged by Mr Griffin in the ‘Notice’ of 13 March 2012, and there was nothing in the email of 15 March 2012 that contradicted that position. It is also clear from the terms of the 15 March 2012 email that at this time the termination date was uncertain and that ‘official’ correspondence on the question of termination of the tenancy would follow. The contents of that ‘official’ correspondence made it clear that the tenants were being held liable to pay for rent up until a new tenant was found. In my view the correct interpretation of the 15 March 2012 email, and subsequent correspondence, was at its highest an acknowledgement of an approximate date of vacating the premises but at no time an acceptance that the lease might be broken without compensation being sought.
The tenants also submitted that the actions taken by the lessor’s agent, prior to 30 March, such as advertising the property for rent and holding an open house, support an interpretation of the email of 15 March 2012 as an act of ‘acceptance’ or themselves constituted an act of acceptance. While in an appropriate case acceptance of a notice could be communicated by the performance of acts, I do not consider that this is a correct interpretation of the specified actions in this case. Section 38 of the RT Act imposes a duty to mitigate loss on any person who would seek compensation under the Act. It is difficult to see how actions which are legally required of a party can themselves be interpreted as a voluntary act of acceptance. While the performance of these actions by the lessor represents an acknowledgment of the fact the tenancy was to be terminated, they do not themselves amount to an ‘acceptance’ of the Notice of Intention to Terminate or nor do they necessarily imply that the email correspondence of 15 March should be so interpreted.
The tenants also raised the issue of work undertaken by the lessor at the premises after 30 March 2012, as constituting acts of acceptance or supporting an interpretation of the email of 15 March 2012 as an acceptance. Putting to one side the legal question of whether actions undertaken by the lessor after the termination of a tenancy in accordance with a Notice to Terminate can have effect as an act of acceptance of the Notice to Terminate, in this case, I find that the lessor’s subsequent actions of arranging work on the heating system (either servicing or replacing), gardening, exterminating pests, and allowing the incoming tenants to store their items at the premises were not as a matter of fact an unconditional acceptance of the Notice.

I should note the submission by the tenants that section 84 provides a complete list of the alternative actions a lessor may undertake. In other words, if the lessor does not apply for compensation, then the lessor is deemed to have accepted the Notice. This interpretation requires the reading of the word ‘may’ in section 84 as meaning ‘may only’. I do not consider that there is any basis in the extrinsic material for adopting this interpretation. Further, such an interpretation is inconsistent with clause 84 of the prescribed terms which provides that upon receiving the notice the lessor is presented with four alternatives: the lessor may accept the notice, or apply to the Tribunal for confirmation of the tenancy, compensation or both.
I should also note, as a related issue, that the RT Act does not impose any time limit on the lessor making an application under section 84 of the RT Act to the Tribunal. (David Hutcheson and Helen Hutcheson v Baden Cameron McMaster and Sonia Mary McMaster [2008] ACTRTT 14.)
In summary, I have perused all of the correspondence provided by the parties in these proceedings, and have been unable to identify a document emanating from the lessor’s agents which would constitute an unequivocal agreement that the tenants vacate the premises on 30 March 2012 without any liability for compensation for early termination. There was no evidence of such an oral communication. In the circumstances of this case, the actions undertaken by the lessor’s agents prior to 30 March 2012 were legally required of them, and do not amount to an acceptance. Nor do the actions of the lessor after 30 March 2012 constitute an acceptance. While there may be cases in which silence of a lessor amounts to an acceptance of a Notice to Terminate, I do not consider that there was such silence in this case. I am satisfied that there was no ‘acceptance’ of the Notice of Intention to Terminate in the sense required by section 84 of the RT Act, and the question of compensation thus needs to be determined.

What is encompassed by the right to compensation?

As set out above, section 84 allows a lessor to seek compensation for rent lost as a consequence of early termination of a tenancy agreement, together with reasonable costs of advertising and reletting of the premises. I have noted already that no compensation for advertising or reletting expenses is sought.
Section 84 of the RT Act provides that the amount of compensation for unpaid rent which may be awarded is limited to 25 weeks’ rent or the rent for the unexpired part of the agreement, whichever is the lesser. In this case, the cap would be 9 weeks and 4 days of rent. However, the lessor may only seek compensation for the actual loss suffered by early termination of the tenancy agreement, and in this case, the property was unleased for only 9 days, thereby resulting in a loss of rent of some $636.45.
The property was then relet at a higher rent. In relation to the increased rent, Mr Griffin gave evidence that the lessor through the new tenants had received an additional sum of $212.50 for the remainder of the tenancy. This evidence was not contested. Mr Griffin submitted that if a liability for compensation for lost rent was found, it should be reduced by this sum. I accept this submission.
In terms of the amount of compensation payable, the tenants raised the issue of work undertaken by the lessor in the 10 days the property stood vacant, suggesting that the lessor had obtained a benefit on those days which was inconsistent to any right to compensation. Mr Griffin submitted that there was no request to the tenants to access the property, and seemed to suggest that any right to compensation would have hinged upon the premises at that time being under the control of the tenants. This submission misunderstands the basis on which compensation under section 84 is awarded.
Where a residential tenancy agreement is terminated without cause during the fixed term period, the lessor is entitled to compensation in accordance with the legislation for loss of rent. This is legally separate to the question of access to or control of the premises, which after termination of the tenancy has returned to the lessor. In the current case, after 30 March 2012 the premises were in the possession of the lessor, and the lessor was entitled to attend the premises and undertake work. There was no evidence that any of the actions undertaken by the lessor made the premises uninhabitable, such that the premises could not have been occupied (and consequently no rent charged) on the day or days these activities occurred. While in the current case it seems likely that the lessor took advantage of the premises being empty to undertake these activities, these activities might equally have been undertaken by the lessor while tenants were residing at the premises, under the lessor’s right of access provided by cl.82 of the prescribed terms. I do not consider that the amount of compensation for lost rent should be reduced to take into account the performance of these works.
The tenants also submitted that the length of notice which had been provided (almost 3 weeks) should be taken into account in assessing the period of time for which compensation was payable. Reference was made to the three week period of notice required when terminating a periodic tenancy. I was not persuaded by this submission. It is certainly the case that in the context of a periodic tenancy, or at the conclusion of a fixed term, the legislation requires only 3 weeks’ notice to be given by the tenant. However, the legislature chose not to incorporate any reference to such a notice period into section 84, or elsewhere in the legislation or prescribed terms in relation to termination by a tenant prior to the end of the fixed term period. The legislature chose to leave open to the Tribunal the question of assessment of compensation, subject to the duty to mitigate imposed by section 38 and the cap imposed by subsection 84(3).
Connected to this submission, the tenants argued that as a matter of commercial reality it was highly unlikely in any case that a tenancy would terminate and an incoming tenant take over the premises from the next day. The tenants argued that even had they continued the tenancy agreement to 6 June 2012, and given the three weeks’ notice required by the legislation, there would likely have been a period of time during which the premises were not leased, and this should be accepted as a part of the lessor’s costs. In other words, a nominal number of the days during which the premises were unleased should not be considered to have been caused by the tenants’ early termination of the tenancy agreement.
I was not persuaded by this argument. First, there is no specific time during which rental premises remain untenanted at the conclusion of a fixed term of which it is appropriate to take ‘judicial notice’. Secondly, the evidence before me on this point varied considerably – Ms Davis considered that the incoming tenant in the current matter had been found promptly; while an email Mr Griffin sent on 15 March 2012 to the agents referred to a nearby property being leased 4 days after it was posted. In the end, the Tribunal would be engaging in speculation if it were to reduce the compensation otherwise payable on the basis of a finding that the property would have been untenanted for a period of time at the conclusion of the fixed term in June 2012.

Did the lessor take all reasonable steps to mitigate loss?

The tenants submitted that the lessor had failed to mitigate their loss and compensation should be reduced accordingly. I have noted above the steps taken by the lessor’s agent and tenants to ensure the premises were promptly advertised as available to rent, and an open house held only 4 days after the tenant had advised of their intention to leave the property.
There was some issue raised both in the correspondence between agent and tenants and in the evidence of Ms Davis as to why the incoming tenants did not take up the lease until after the Easter Long Weekend, on Tuesday 10 April 2012. In the end, it seems that this was the date requested by the incoming tenants. There was an obligation on the lessor to take steps to take the earliest available suitable applicant. The evidence of Ms Davis, which was not contested, was that there had been no other suitable applicants. I do not consider that there was any obligation on the lessor to require the incoming tenants to take the lease from an earlier date; it is unclear what power the lessor or agent would have to impose such a requirement.
Taking all of the above factors into account, I am satisfied that the lessor suffered loss as a consequence of early termination of the tenancy agreement and is entitled to compensation of $423.95; being $636.45 for lost rent reduced by $212.50.

Other legal and procedural issues

The manner in which this matter came to be heard by the Tribunal is not unusual; however the tenants raised questions about the interpretation of the RT Act and the powers of the Tribunal, and other issues, and asked that the Tribunal address those issues in these written reasons.

Relevant provisions

Section 31 sets out items that a lessor is entitled to deduct from a bond:
31Deductions from bond
A lessor is entitled to deduct from the bond paid under the residential tenancy agreement any of the following:
(a)     the cost of repairs to, or the restoration of, the premises or goods leased with the premises as a result of damage (other than fair wear and tear) caused by the tenant;
(b)     any rent owing and payable under the residential tenancy agreement at the time the agreement terminates or is terminated;
(c)     the cost of replacing any fuel (such as gas, oil or wood) supplied to the premises by the lessor at the commencement or during the course of the tenancy;
(d)     any reasonable amount (not greater than the costs incurred) for the cost of legal fees incurred by the lessor in assigning or transferring a tenant’s rights under a residential tenancy agreement;
(e)     any amount expressed in a term of the agreement to be deductible by the lessor from the bond, if the term is endorsed by the ACAT under section 10.
Division 3.4 of the RT Act sets out the process whereby the Office of Rental Bonds may receive an application for payment of the bond, where applicable give notice of that application to the other party to the tenancy agreement, and ultimately release the monies. Section 34(1) sets out the three circumstances in which money is paid out of the bond, paragraph 34(1)(c) referring to an application for payment in accordance with an order of the ACAT specifying an amount of money to be paid out of the bond.
Section 83 of the RT Act sets out the orders that the Tribunal may make in relation to a tenancy dispute. Specifically, subsection 83(d) allows the making of an order for compensation for loss of rent or any other loss caused by breach of a residential tenancies agreement, and subsection 83(e) permits an order to be made requiring that an amount be paid to the lessor from the trust account.

Can the Tribunal make an order against the bond for compensation?

Implicit in the tenants’ query is a suggestion that section 31 of the RT Act limits the power conferred on the Tribunal by subsection 83(e), such that an order against the bond is limited to those matters listed in section 31. While that is a possible interpretation of section 31, I do not consider that this was the intended operation of these provisions, and as a consequence this interpretation should not be preferred.
Section 31 on its terms refers to amounts that the lessor may ‘deduct’ from the bond. It does not refer to amounts that the Tribunal may order paid out of the bond. Should it be interpreted as though it had the second meaning? The explanatory memorandum to the RT Act stated that the intention of this provision was to implement the first part of Recommendation 48 of the Report No 8 of the Community Law Reform Committee of the Australian Capital Territory in 1994 on Private Residential Tenancy Law (CLRC report). That was, that only straightforward claims against the bond could be paid out on joint application or undisputed application. To give effect to this part of the Recommendation, the limitation imposed by section 31 must, in my view, be interpreted as applying to payments out of the trust account by agreement or by undisputed application. That is, payments under paragraphs 34(1)(a) and (b) of the RT Act.
The CLRC report also commented that it was ‘vital that a lessor have a practical and swift remedy to recover any losses due to a breach of the tenancy agreement.’ This was to be achieved in two ways, the creation of a specialist Tribunal with processes and powers to enable it to deal quickly and fairly with claims by the lessor or tenant, and by vesting that Tribunal with powers “to order compensation to be paid to the lessor out of any existing bond money irrespective of the subject matter of the claim. In this case the merit of the claim, however complex, is assured by the ruling of the tribunal and deductions from the bond for any matter is appropriate.” [CLRC report paragraph 206].
Consequently the second part of Recommendation 48 provided: “where a claim for compensation for any breach of the tenancy agreement is upheld by the Tribunal, the Tribunal should have the power to authorise that money be taken from the bond and paid to the lessor as compensation whatever the subject matter of the claim.”
The powers conferred on what was then the Residential Tenancies Tribunal under (then) section 104 of the RT Act included a power to order compensation and the power to order payment to the lessor of an amount out of the bond (in the same terms that are now provided by subsection 83(d) and (e)). Subsection (e) on its terms operates in the manner contemplated by second part of Recommendation 48. There is no suggestion in the extrinsic or intrinsic material that the subsection is not to operate in such a manner. I therefore consider that the preferable interpretation of subsection 83(e) is that it is open to the Tribunal to make an order directing payment out of the bond irrespective of the subject matter of the claim.

What is the correct mechanism for a claim on the bond for compensation to be made?

I have noted above the provisions of Division 3.4 of the RT Act whereby applications may be made for release of bond monies, and disputed applications referred to the Tribunal. I am not cognisant of and therefore cannot comment on the processes within the Office of Rental Bonds for ascertaining whether an application by the lessor for a deduction from a bond goes beyond the matters listed in section 31.
When a referral of rental bond dispute is received by the Tribunal, the matter is listed for conference and the issues underpinning the dispute discussed and clarified in that forum. At the conference, the matter may settle by the agreement of the parties. The Office of Rental Bonds is directed to release the disputed funds in accordance with that agreement.
If the dispute does not settle at conference, it will be listed for hearing on a date in the future and directions made for the filing of documents which clarify the basis of the dispute. In some cases the parties may be directed to file an application or cross-application.
In the current case, a referral was received from the Office of Rental Bonds, and subsequently an application for compensation was filed. A hearing was conducted, and I found that the lessor was entitled to a certain sum by way of compensation. I made orders directing that that sum be paid to the lessor out of the bond, and the remainder of the bond released to the tenants. Each of these steps were in accordance with the legislation and the usual procedure for the referral of such a dispute.

The reference to abandonment and the break lease fee in the ‘official vacating letters’ of 15 March 2012

Issues were raised by the tenants, both in email correspondence sent to the agents after the final inspection and in written submissions to the Tribunal, that the ‘official vacating letters’ of 15 March 2012 were incorrect in the reference to abandonment of the premises, and in the attempt to impose a ‘break lease’ fee.
The Tribunal has become aware of a number of matters in which agents have proposed to impose a ‘break lease’ fee upon a tenant as a consequence of early termination of a tenancy agreement. Accordingly, it is worthwhile noting in these written reasons, as I commented at the hearing of this matter, that there appeared to be no legal basis for the imposition of such a fee in the current matter. There is no provision for a ‘break lease’ fee in the prescribed terms, and the RT Act sets out what may be sought by a lessor as a consequence to early termination of the tenancy agreement. Such a break lease fee is an inconsistent term which is unenforceable unless endorsed by the Tribunal. The Tribunal has in the past refused to endorse such a term on the basis that it goes beyond being merely inconsistent with the prescribed terms but is contrary to the RT Act. I note that no claim was made in these proceedings for payment of the ‘break lease fee’.
In relation to the reference to abandonment in the correspondence of 15 March 2012, given that there was at the time no effective notice of termination, this reference may have been appropriate. Nonetheless, in hindsight the letters could have been better worded.
While the tenants have requested that I make findings in relation to the propriety or professionalism of the actions of the agent, I do not consider that this is appropriate and I decline to do so. Such issues are to be determined in a different forum.

Conclusion

The matter before me was instituted in the Tribunal by way of a referral of a rental bond dispute. The grounds for the lessor’s claim against the bond were for compensation for loss of rent due to early termination of the tenancy agreement, and an application setting out those grounds was filed with the Tribunal.
Having heard the lessor’s application I was satisfied that the tenancy agreement was breached by early termination by the tenants. Although a Notice of Intention to Terminate was given, that Notice was defective. I considered it appropriate in the circumstances of this case to waive the defect in the Notice. I found that the Notice was not accepted by the lessor, and the lessor was entitled to seek compensation under section 84 of the RT Act.
In assessing the amount of compensation, I was satisfied that the early termination of the tenancy agreement led to a loss of rent for 9 days. I was satisfied that the lessor through their agent took all available steps to mitigate their loss in this regard. I found that additional rental of $212.50 be offset against that loss of rent.
………………………………..
Mary-Therese Daniel, Member

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A

FILE NUMBER:	RT 12/411
PARTIES, APPLICANT:	LUTON PROPERTIES REPRESENTING EILEEN PATEMAN
PARTIES, RESPONDENT:	HUGH GRIFFIN & CATHERINE GAUTHIER
COUNSEL APPEARING, APPLICANT
COUNSEL APPEARING, RESPONDENT
SOLICITORS FOR APPLICANT
SOLICITORS FOR RESPONDENT
TRIBUNAL MEMBERS:	Mary- Therese Daniel
DATES OF HEARING:	21 June 2012
PLACE OF HEARING:	Canberra

PART B

RECOMMENDATION:

FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )

COMMENTS: