Tzotzis v Reeves (Residential Tenancies)
[2024] ACAT 92
•5 December 2024
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
TZOTZIS v REEVES (Residential Tenancies) [2024] ACAT 92
RT 786/2024
Catchwords: RESIDENTIAL TENANCY – break lease fee clause; calculation of break lease fee; Residential Tenancies Act1997
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 7, 48
Residential Tenancies Act 1997 ss 8, 31, 35, 83, 84 Sch 2 2.1
Tribunal:Senior Member Prof T Foley
Date of Orders: 5 December 2024
Date of Reasons for Decision: 5 December 2024
Date of Publication: 12 December 2024
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) RT 786/2024
BETWEEN:
ANASTASIA TZOTZIS
Applicant/Lessor
AND:
ISABEL REEVES
Respondent/Tenant
TRIBUNAL:Senior Member Prof T Foley
DATE:5 December 2024
ORDER
The Tribunal orders that:
ACT Rental Bonds on behalf of the Territory is directed to release the balance of any bond monies held in the following proportion:
(a)$684.29 to the lessor; and
(b)$670 to the tenant.
………………………………..
Senior Member Prof T Foley
REASONS FOR DECISION
This matter was listed for an in person hearing before the Tribunal on 5 November 2024. The applicant appeared on her own behalf assisted by the staff from Belle Property Kingston agency. The respondent was represented by Ms Jennifer Newman, the solicitor. The decision was reserved, and the following is a statement of reasons for the Tribunal’s decision.
Introduction
This matter is a dispute about part of a bond following a referral by ACT Rental Bonds under section 35 of the Residential Tenancies Act 1997 (RT Act).
Ms Reeves (respondent or tenant) was the tenant of a property in Stirling, ACT under a residential tenancy agreement with the owner, Ms Tzotzis (applicant or lessor). The respondent had entered into a series of fixed term agreements commencing 28 January 2022. The second of those agreements ended on 1 February 2024. On 31 January 2024, she was offered and signed a third fixed term agreement which was not to commence until 29 March 2024 and was to run for a further 12 months from then until 27 March 2025. On 13 May 2024, the tenant informed the lessor by email that she wished to break the rental agreement and intended to vacate the premises on 5 July 2024. This activated the Break Lease Clause which formed part of the residential tenancy agreement. The dispute concerns the effect of that clause on the distribution of the balance of the bond of $1,354.29 held by ACT Rental Bonds.
Each of the residential tenancy agreements entered into by the parties had a Break Lease Clause which formed part of the agreement by virtue of including Item 15 which brought into effect Additional Clause 102.
The Break Lease Clause in Additional Clause 102 is a creature of statute under section 8 (1)(g) and is taken in full from Schedule 2 of the RT Act:
2.1 Break lease fee clause
Termination before end of fixed term—fee for breaking lease101 (1) If the tenant ends a fixed term agreement before the end of the fixed term (other than for a reason provided for by the Residential Tenancies Act or the agreement), the tenant must pay a fee (a break fee) of the following amount:
(a) if the fixed term is 3 years or less—
(i) if less than half of the fixed term has expired—6 weeks rent; or
(ii) in any other case—4 weeks rent;
(b) if the fixed term is more than 3 years—the amount agreed between the lessor and tenant.
(2) The lessor agrees that the compensation payable by the tenant for ending a fixed term agreement before the end of the fixed term is limited to the amount of the break fee specified in subclause (1).
(3) However, the lessor and tenant agree that if, within the defined period after the tenant vacates the premises, the lessor enters into a residential tenancy agreement with a new tenant, the amount payable by the tenant is limited to—(a) the amount of the break fee under subclause (1) less the amount of rent payable by the new tenant for the defined period; and
(b) if the tenant vacates the premises more than 4 weeks before the end of the fixed term—the lessor’s reasonable costs (not exceeding the defined cost limit) of advertising the premises for lease and of giving a right to occupy the premises to another person.(4) In this clause:
defined cost limit means—
(a) if half or more than half of the fixed term has expired—an amount equal to 2/3 of 1 week’s rent; or
(b) if less than half of the fixed term has expired—an amount equal to 1 week’s rent.defined period means—
(a) if subclause (1) (a) (i) applies—6 weeks; or
(b) if subclause (1) (a) (ii) applies—4 weeks; or
(c) if subclause (1) (b) applies—N weeks.N is the number worked out as follows:
The tenant’s notice produced a sequence of invoices. On 14 May 2024, the lessor’s agent issued Invoice No 99777 for a break lease fee of $4,020calculated at 6 weeks rent of $670. On 16 June 2024, this invoice was withdrawn and replaced with Invoice No 102608 in identical terms. Each of these invoices recorded as its descriptor “Break lease fee - 6 weeks >50% lease term remaining”. The purported effect of these invoices was altered as from 21 June 2024 when a new tenant was found for the premises and a fresh tenancy was affected. That tenancy agreement was to commence on 29 July 2024 but was subsequently shortened to 26 July 2024. In consequence, on 21 June 2024, Invoice No 102608 was withdrawn and replaced with what was described as an “amended tax invoice” No 103461 for $670 with the new description – “Break lease fee >50% lease term remaining - 1 week break lease”. The tenant vacated as foreshadowed, but on 10 July 2024, a separate Invoice No 105180 was issued for $43.38 for final water consumption. This invoice (as was standard with the other invoices) included a “Statement of Outstanding Items” which listed the sum outstanding for Invoice 103461 and recorded a total outstanding sum of $713.38. On 12 July 2024, a receipt No 63205 was issued for the amount of $713.38.
There is no dispute a final payment was made which included an amount equating to a week’s rental of $670. But the parties characterise that payment differently. There is also a dispute as to whether a Break Lease fee was validly payable in any event, and as to its calculation. Finally, implicitly there is a dispute as to whether the tenant owed any outstanding rent at the time she vacated the premises.
The applicant’s characterisation of the payments & her contentions
The lessor contends that by initialling the tenancy agreement at Item 15 and signing the agreement the tenant accepted a potential charge of a Break Lease Fee of $670 if she broke the tenancy early. This is simply not correct. Accepting this clause merely incorporated a Break Lease Clause in the tenancy. On its own, Item 15 does not give rise to the payment of any specific monetary fee.
The lessor further contends that at the conclusion of the lease, the tenant had outstanding rent and her agent points to the trust account ledger (an extract of which was tendered in evidence) as “the one source of truth” which records this. A close examination of that ledger shows that as from about early 2023 rental payments made by the tenant slipped into arrears and remained outstanding across one further renewal of the rental agreement. Ms Loughnan’s evidence was this could not be an error in the ledger. But she also said that (curiously) the tenant was never specifically told about any arrears. She says a close examination of her rental receipts should have alerted her to this, but the tenant clearly remained unaware. This seems to be born out when she asked the agency to confirm (which they did) that the amount of $95.71 represented a single day’s rental and she paid that amount on 3 July 2024, thinking that brought her rental payments up to her date of departure on 10 July 2024. In fact, the ledger discloses this meant rent was only paid up to 4 July 2024, putting it a week in arrears. The tenant was blissfully unaware of this. Its significance only became apparent when the tenant made a final payment which included the amount of $670 (equivalent to a week’s rent) on 12 July 2024 which she intended as her payment of the break lease fee as per Invoice 103461 but which the lessor claimed for the outstanding rent.
The applicant contends the Break Lease Clause provides for a break fee calculated in a number of ways. She makes the following break lease fee calculations (for ease of reference I refer to the numbering in section 101 of the RT Act rather than that in the identical terms in clause 102 of the tenancy agreement):
(a)As the lease was a fixed term rental for less than 3 years, and as less than half the term had expired – a break fee of 6 weeks rent was payable[1] (the first calculation).
[1] Section 101(a)(i)
(b)This position changed when a new tenant signed a lease within the defined period (within that 6-week period).
(c)This negated the first calculation of the break fee and meant a new calculation under section 101(3) applied which reduced the break fee.
(d)The reduced break fee had two components:
(i)the first calculation less the amount of rent payable by the new tenant for the defined period;[2] and
(ii)the lessor’s costs of advertising the premises for lease calculated at $1,116 but reduced to the defined cost limit of an amount equal to one week’s rent, namely $670.[3]
(e)The reduced break fee totally $1,354.29 (the second calculation).
The tenant’s characterisation of the payments & her contentions
[2] This was calculated at $684.29. Section 101(3)(a).
[3] Section 101(3)(b) and 4(b)
The tenant says she was not properly required to pay a break lease fee. Alternatively, she says she has made any break lease fee payable.
The tenant contends as a want of jurisdiction that as it is not within the entitlement of the lessor under section 31 of the RT Act to deduct from the bond any monies payable under a Break Lease Fee Clause, the lessor can also not now make an application to the Tribunal in those terms. Certainly section 31 lists only specific defined items which the lessor is entitled to deduct and none of these is a Break Lease Fee. But this application has been initiated by ACT Rental Bonds referral under section 35 of the RT Act, not by the lessor. The powers of the Tribunal in dealing with the referral under section 83 are wide and section 83(m) specifically allows it to make extensive orders which do cover the distribution of a bond where a Break Lease Fee is in dispute. The Tribunal therefore finds it has jurisdiction.
The tenant further contends a Break Lease Fee is not payable. Section 101 permits a clause in terms of Additional Clause 102 in a residential tenancy agreement when there is a fixed term, it does not permit it where the tenancy is or has become a periodic tenancy. The respondent essentially contends that the applicant is estopped from characterising the tenancy agreement in place as a fixed term tenancy because of certain statements said to have been made to her by the lessor’s agent, Ms Amanda Loughnan, by phone in or about November 2022 near the end of the term of the first residential tenancy agreement. The tenant provided a Statutory Declaration dated 3 September 2024 detailing these statements and this declaration was accepted into evidence. Those statements were to the effect that the tenant had been told by Ms Loughnan that the lessor was not willing to accept to continue on a periodic tenancy after the conclusion of the fixed term in December 2022.
The tenant says these statements were misleading because Ms Loughnan presented the lessor’s position (refusal of a periodic term) despite knowing:
(a)that the lessor had no right to deny her a month-to-month lease as she had requested; and
(b)arrangements for a periodic tenancy were provided for in Item 7 of the tenancy agreement.
She says she relied on these statements and only entered into two successive fixed term tenancies to her detriment because of them. She says the statements were deliberately misleading and the lessor should be estopped from relying on any benefit she gained from them. Accordingly, the tenant says the tenancy should be construed as a periodic term which would mean no Break Lease Fee is payable.
Ms Loughnan was cross examined as to these statements. She could not recall any conversations in or about November 2022 about reverting to a month-to-month tenancy. She said nonetheless that it was her regular practice then and now to follow up any phone conversation with tenants with an email confirming its contents. She found no evidence of any such email sent to the tenant at that time. I accept her sworn evidence that she followed her standard practice and no emails were sent. As such on the balance of probabilities I find that the alleged misleading conversations did not occur.
The tenant further contends to her belief she was never in arrears in her rent during the three consecutive tenancy agreements. When she had given notice that she would vacate, she calculated on 10 July 2024 she would be one day’s rent in arrears. She calculated $95.71 equated to one day’s rent and confirmed this calculation with the agency by email on 28 June 2024. On 3 July 2024, she paid this amount thinking that now squared her rent.
Consideration
The tenant must pay a break lease fee. In the first instance, a break fee of 6 weeks rent was payable under section 101(a)(i) as the first calculation. However, as a new tenant was found within that 6-week defined period the amount of the fee is now limited to the sum of two components as section 101(3) provides. The first component is the amount of the first calculation less the amount of rent payable by the new tenant for the defined period. The Tribunal was told this gap was $684.29. There was no detail as to how this amount was arrived at but its calculation was not disputed. The tenant has not paid this component. The Tribunal orders that this amount should be deducted from the balance of the bond held by ACT Rental Bonds and paid to the applicant. The second component is the defined cost limit amount of the lessor’s costs of advertising the premises for lease which in this instance equals one week’s rent, namely $670. This amount was payable, but the Tribunal finds the tenant’s payment to the agency on 11 July 2024 was intended to, inter alia, cover that sum. The Tribunal therefore orders that this amount should be deducted from the balance of the bond held by ACT Rental Bonds and paid to the respondent.
It does appear the tenant was in arrears in her rent at the end of her tenancy, but this was simply not brought to her attention in any meaningful way. A close examination of her rental receipts would have alerted her, but this would have required a forensic examination which was frankly not reasonable to expect of any tenant with a busy life. This mistake had consequences when the agency allocated her payment on 12 July 2024 for outstanding rent. That rent is not part of the deduction sought from the bond in this matter. As I have found, I am satisfied the tenant intended that part of her payment to cover the break fee component of $670 and I accept it as paid.
Section 7 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act) requires the Tribunal to exercise its functions in a way that is “simple, quick, inexpensive and informal as is consistent with achieving justice”. Despite its best endeavours this has not been possible, and the matter proceeded to a full hearing (as well as to interlocutory disputes about subpoenaed material). All of this was complicated, slow and expensive over what was a relatively small amount of money.
The respondent says this protracted result was due to the unreasonable delay and obstruction by the applicant. The respondent contends the applicant’s conduct supports a cost order in her favour pursuant to section 48(2)(b) of the ACAT Act for the applicant’s “unreasonable delay or obstruction before or while the tribunal was dealing with the application”. I have no evidence before me to support such an order and the application is rejected.
The Tribunal orders that:
(a)ACT Rental Bonds on behalf of the Territory is directed to release the balance of any bond monies held in the following proportion:
(i) $684.29 to the lessor; and
(ii) $670 to the tenant.
………………………………..
Senior Member Prof T Foley
| Date(s) of hearing | 5 November 2024 |
| Applicants: | In person |
| Respondents: | Ms J Newman, solicitor |
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