Notices to leave and instructions from lessor clients

We recently wrote about the upcoming rental reforms and the impact the changes will have on issuing a Form 12 Notice to Leave after 1 October 2022.

In particular, we considered a lessor’s ability to bring a periodic agreement to an end, given the removal of the right to end a tenancy agreement 'without grounds’.

We referred to the best practice recommendations from the REIQ that from 1 October 2022, following the introduction of the amendments to the Residential Tenancies and Rooming Accommodation Act (RTRA Act), property managers seek instructions from their lessor clients to commence issuing Notices to Leave on grounds of end of fixed term, at the commencement of each fixed term tenancy agreement.

The REIQ has adopted this best practice recommendation to avoid the significant risk associated with missing the two month notice requirements (and associated delivery of notice requirements and timeframes).

Property managers may have lessor clients who choose not to issue the Form 12 contemporaneously with the fixed term agreement, however, this may give rise to a risk that the fixed term tenancy may default into a periodic agreement if the notice period is not complied with and/or other technical omissions arise in connection with the issuing of the Form 12. If this were to occur, a lessor may involuntarily end up in a periodic agreement with severely limited grounds for termination.

The Residential Tenancies Authority (RTA) has recently updated its website in relation to the upcoming rental reforms to include a number of frequently asked questions.

One of the questions outlined is “When should a Notice to Leave be issued for the end of a fixed term tenancy?”. The response set out on the RTA website is as follows:

“A Notice to Leave can be issued for the end of a fixed term tenancy up to one day prior to the end of a fixed term tenancy without the tenancy reverting to a periodic tenancy, providing the correct timeframe has been applied. For example, a Notice to leave has been issued on 14 November 2022 providing two months’ notice to leave for the end of a fixed term tenancy that expires on 15 November 2022, after the 15 November 2022 the tenancy does not revert to a periodic tenancy and the tenants have until the expiry date on the notice to vacate.”

We are not aware of any published decisions by the Queensland Civil and Administrative Tribunal regarding the above scenario and the interpretation of section 70 of the RTRA Act.

Accordingly, it is unclear from the above example how the fixed term agreement is extended for the duration of the notice period in circumstances where the fixed term agreed by the lessor and tenant has expired. Section 70 of the RTRA Act does not address the issue presented by the above example and the REIQ has sought further clarification in this regard.

In any event, in circumstances where a lessor client has provided instructions to a property manager to end the tenancy at the end of the fixed term agreement, the property manager must ensure that the Notice to Leave is issued in accordance with the required notice period so that the tenancy ends at the end of the fixed term.

Property managers are no doubt aware that section 22 of the Property Occupations Regulation (PO Regulation) provides that a property agent must act in accordance with a client’s instructions unless it is contrary to Part 5, Division 2 of the Regulation (relating to conduct standards) or otherwise unlawful to do so.

Accordingly, if a property manager is instructed by their lessor client to end the fixed term agreement at the end of the fixed term and the property manager fails to issue a Notice to Leave within the appropriate timeframe, they may find themselves the subject of an investigation for a breach of section 22 of the PO Regulation.

Section 22 of the PO Regulation is a prescribed conduct provision in accordance with section 235 of Property Occupations Act (PO Act), and contravention of a prescribed conduct provision is grounds for starting disciplinary proceedings as set out in section 172 of the PO Act.

In the circumstances, it remains the REIQ’s best practice recommendation that property managers seek instructions from their lessor clients to commence issuing Notices to Leave on grounds of end of fixed term, at the commencement of each fixed term tenancy agreement.[1]

Agencies wishing to adopt the REIQ’s recommendations for the issuing of a Form 12 on grounds of end of fixed term at the time of presenting a new fixed term tenancy agreement are urged to utilise the template letter available via the Realworks subscription, which clearly sets out the parties’ right to negotiate a new tenancy agreement toward the end of the fixed term should that be their preference.

Property managers should, however, remain mindful of the retaliation provisions set out at section 246A of the RTRA Act[2] and urge their lessor clients to seek independent legal advice in the event that the lessor intends to decline a tenant’s request to enter into a new tenancy agreement at the end of the existing tenancy agreement, if the tenant has exercised a right under the agreement at any time during the course of the tenancy.

REIQ members are urged to seek advice via the REIQ’s Property Management Support Service and/or Legal Advisory Service, or a qualified legal practitioner should they be in any way uncertain as to their obligations regarding Notices to Leave and complying with their lessor client’s instructions following the amended legislation coming into force on 1 October 2022.

References

[1] Property managers must remember that a Notice to Leave on grounds of end of fixed term can only be issued from 1 October 2022.

[2] As amended and in force from 1 October 2022.