Ending a fixed term tenancy early

Industry News, Investors, Journal, Property Management, Property Market, Tenants,  Buyers and sellers,  Property Managers

Introduction

In the decision of Vision Real Estate Qld Pty Ltd v Eagle & Anor [2019] QCATA 63, the Queensland Civil and Administrative Tribunal (the Tribunal) considered whether or not tenants were liable for compensation to a lessor for reasonable reletting expenses as a result of the tenants’ early termination of the fixed term tenancy.

 Background

 The tenants left the premises after just 11 days into a six-month fixed term tenancy.  The suspected reason for vacating the premises early was due to domestic violence, however, there was no evidence to support this.  A new tenancy commenced at the premises approximately two months later.

The Residential Tenancies Authority (RTA) refunded the $800 bond (which was one month’s rent) to the property manager on behalf of the lessor.  The property manager made a claim for an additional $1,091 for loss of rent of $400 and reletting expenses, including $214.50 for a “dust over” and $476.50 for maintenance.  The Tribunal initially rejected the lessor’s claim on the basis that the parties’ tenancy obligations had been discharged by “mutual consent”.

The Appeal

The property manager appealed the decision of the Tribunal and argued that the lease was binding until at least reletting and that the tenants were liable for the lessor’s relatable losses because they terminated the tenancy in a way not permitted by the tenancy agreement or the Residential Tenancy and Rooming Accommodation Act 2008 (Qld) (RTRA Act).

Justice Carmody observed that a fixed-term lease is a promise by the tenants to stay and pay rent for the full term. He further noted that the parties can be legally released from their respective obligations under the tenancy agreement only by ending the tenancy in a way mentioned in section 277 of the RTRA Act, which includes a tenant abandoning the premises.

The Tribunal originally dismissed the lessor’s claim on the basis of the lessor’s inferred consent to the termination and implied waiver of the tenants’ abandonment breach.

However, Justice Carmody asserted that consent is a state of mind denoting volition and choice. He observed that the Tribunal did not inquire into this issue in any depth, nor did it explain why the lessor’s conduct in the circumstances was more consistent with assent rather than accepting what had already happened.

Instead, Justice Carmody found that the tenancy was ended early by way of ‘abandonment’ which was permitted by both the tenancy agreement and section 277(5)(b) of the RTRA Act.

 Subject to section 362 of the RTRA Act (which requires the tenants to take all reasonable steps to mitigate the loss or expense suffered by the lessor) and the considerations in section 421 of the RTRA Act, Justice Carmody noted that the Tribunal has the discretion to order payment of rent arrears and lost rent until reletting under either sections 357 or 420 of the RTRA Act.

We examine the operation of sections 420 and 421 of the RTRA Act in further detail in the article called “Compensation for early termination of a tenancy agreement”, which appears in this month’s Journal.

Justice Carmody noted that whilst not every breach or termination event gives rise to a right to compensation for future rent, discretion will usually favour it where the loss to the reletting date was caused by the tenant’s renunciation of all their essential obligations under the tenancy agreement.

Justice Carmody held that in this instance, the tenants were liable for mitigated reletting costs, as well as lost rent and service charges until the new tenancy started. He stated that in deciding to the contrary, the Tribunal applied the wrong law and, therefore, the order could not be considered a “fair and equitable” one for resolving the dispute between the parties.

The appeal was therefore allowed, the Tribunal’s order was set aside and an order for payment was made in favour of the property manager for reletting costs, in addition to lost rent and service charges until the new tenancy commenced.

Domestic violence provisions

 Whilst no evidence was adduced in the case discussed above to demonstrate that domestic violence was involved, Justice Carmody noted that a domestic violence victim can apply for a termination order, without notice, under either sections 312, 321 or 322 of the RTRA Act.

Section 312 of the RTRA Act provides:

“(1)      A cotenant may apply to a tribunal for a termination order because the other cotenant, or another cotenant, has intentionally or recklessly caused, or is likely to intentionally or recklessly cause—

(a)         serious damage to the premises; or

(b)         injury to—

(i)          the applicant; or

(ii)         someone else occupying, or allowed on, the premises.”

 

Furthermore, section 321 of the RTRA Act provides:

“(1)      The domestic associate of the tenant occupying the premises with the tenant may apply to a tribunal for a termination order because the tenant—

 

 (b)         has committed domestic violence against the domestic associate.”

 

“Domestic associate” is defined as a person in an intimate personal relationship, a family relationship or an informal care relationship.  The RTRA Act states that when deciding whether a relationship exists, a Tribunal should have regard to the references in the Domestic and Family Violence Protection Act 2012.

In addition, section 322 of the RTRA Act provides that an occupant of the premises under an agreement who is not the tenant may apply to the Tribunal for a termination order because the tenant has intentionally or recklessly caused, or is likely to intentionally or recklessly cause, serious damage to the premises or injury to the applicant or someone else occupying, or allowed on, the premises.

In deciding an application for a termination order, the Tribunal must have regard to:

(a)       Whether the applicant has applied for a domestic violence order against the applicant’s domestic associate;

(b)       If the domestic violence order was made, if it is in force; and

(c)        If a domestic violence order is in force, whether a condition was imposed prohibiting the applicant’s domestic associate from entering, or remaining in, the premises.

Conclusion

The case of Vison Real Estate Qld Pty Ltd v Eagle & Anor [2019] QCATA 63 demonstrates the importance of obtaining clear instructions from lessor clients in relation to whether they agree or disagree with a tenant ending the fixed term tenancy early.  Property managers should ensure that they document the intentions of the parties and record it on the property management file so that there can be no dispute in relation to the intentions of either party to the tenancy agreement.

YOU MAY ALSO LIKE

Subscribe