Starting a tenancy

Taking possession of the property key implies an agreement exists even if it is unwritten. Limits are placed on landlords to charge fees in addition to bonds. To sublet requires a landlord’s agreement. Tenants may transfer or assign their tenancy to another but there are pitfalls. Tenants who breach agreements can be listed on a tenancy database which can block any future rental.

Agreements

A residential tenancy agreement may be in writing or oral. It does not have to be expressed in terms of a tenancy – if the agreement has the character of a residential tenancy agreement, it will be considered as such, even if it is called something else, such as a licence or a commercial tenancy.

Terms of the tenancy agreement

If a tenancy agreement is in writing, it must be in the prescribed standard form. The RTA provides that a term of a tenancy agreement is invalid if it purports to exclude, restrict or modify or purports to have the effect of excluding, restricting or modifying the application of the Act (s 27(1)).

While the RTA is the main source of rights and duties for landlords and tenants, the parties are able to agree to bind themselves to additional rights and duties in the terms of the tenancy agreement. However, if there is a conflict between the tenancy agreement and the RTA, the RTA will prevail.

Under the RTA, the tenant can apply to VCAT for an order declaring invalid, or varying, a term of a tenancy agreement that is harsh or unconscionable (s 28).

Where there is an owners corporation, tenants must also be given a copy of the owner’s corporations rules by their landlord (s 136 Owners Corporations Act 2006 (Vic)).

Implied agreement

In some cases, an agreement may be implied and deemed (i.e. regarded as legally binding) when a party to the agreement acts in a manner consistent with the existence of an agreement. For instance, either the landlord letting the tenant into possession of the premises or the tenant taking possession of the premises might be acts sufficient to imply the existence of an agreement between the parties.

Possession can mean anything from moving in to taking possession of the key, and will depend on the circumstances.

Depending on the finding of fact, the tenant or landlord may then be compelled by VCAT to fulfil obligations under the agreement. They may also be held liable for compensation for any losses suffered by the other party.

Fixed-term and periodic agreements

A fixed-term tenancy agreement is an agreement that specifies the length of time the lease will run (usually 6 or 12 months). Fixed-term agreements are usually in writing, although it is possible for an agreement to be oral.

Any tenancy agreement that does not specify a fixed-term is a periodic tenancy agreement (s 3). A periodic agreement does not have a fixed term but continues from one period to the next, usually month to month, although it may also be fortnightly or weekly.

At the expiration of the fixed-term, if neither party gives notice to end the agreement, the tenancy continues on a periodic basis (s 230). The periodic agreement remains on the same terms as the original fixed-term agreement, unless varied by the parties.

Sub-letting

Subletting refers to when a tenant grants exclusive possession or whole or part of the premises to another person. The original tenant remains a tenant, and effectively become the landlord of the sub-tenant.

However, the RTA states that a tenant must not assign or sub-let the whole or any part of rented premises without the landlord’s written consent. Any assignment or sub-letting that is done without the landlord’s consent is invalid and unenforceable (s 81). Generally, consent cannot be retrospectively obtained. If the tenant has or tries to assign or sub-let the premises without the landlord’s consent, the landlord can give the tenant a 14-day Notice to Vacate (s 253) (seeNotice to Vacate – landlord wants tenant to leave”).

See also Janusauskas v Director of Housing [2014] VSC 650 (17 December 2014).

Assignment

Assignment differs from subletting in that a tenant may transfer their interest from themselves to another. They do not remain a tenant or become the head tenant of the person taking over their interest in the tenancy.

Parties being assigned into a tenancy should exercise caution, as they may inherit the liabilities (debts) of pre-existing tenants. Similarly, exiting tenants may still be pursued by the landlord or tenants assigned into the property. The latter may seek to be indemnified for losses they have suffered in relation to the land. However, the relationship between tenants is generally treated as a private civil matter and will not be heard by VCAT.

When seeking to assign a tenancy, the landlord cannot unreasonably withhold their consent to the assignment or sub-letting (s 81). If the tenant believes that the landlord has unreasonably refused to consent, the tenant may apply to VCAT for an order that the landlord’s consent is not required (s 82).

The landlord must not demand a fee for their consent or refuse to consent because the tenant has refused to pay a fee. If the tenant does pay such a fee they can apply to VCAT for an order that the landlord refund that amount.

While the RTA only requires the written consent of the landlord, the Residential Tenancies Bond Authorty (RTBA) tenant transfer form requires the consent of all existing and proposed tenants and the landlord. Generally, parties should not vacate and allow a proposed tenant to take over the property until they are certain the assignment has been processed, and the bond transferred accordingly. If there is delay by a landlord or their agents, they may wish to apply to VCAT pursuant to section 82.

Usually, when an assignment is done, no money is released from the bond held by the RTBA. Rather, the income or pre-existing tenants are paid out their proportion of the bond, in exchange for the outgoing tenant transferring their interest in the bond either to the existing parties, or the income tenant. It is advisable to consider a written agreement between incoming and outgoing tenants around the bond, as well as any adjustment that may be appropriate between co-tenants.

When the landlord is the Office of Housing, the Director may withhold consent to any assignment or sub-letting, on the grounds that the assignment or sub-letting would disadvantage people on public housing waiting lists (s 83).

Fees, costs and charges

Costs of preparing the tenancy agreement

A landlord cannot make the tenant pay any fees, costs or charges associated with the preparation of the tenancy agreement (s 27(3)).

Application and holding deposits

If the landlord, or agent, receives a payment from a tenant in relation to a proposed tenancy agreement as a sign of good faith, the landlord or agent must refund this payment:

when the tenancy agreement is entered into, if this occurs no later than 14 days after the payment was received; or

on the next business day after the 14 days, if the tenancy agreement is not entered into.

Commissions and inspection charges

The landlord, or agent, is not entitled to ask for or receive from a tenant a payment that is a premium, bonus, commission or key money in relation to the making, continuation or renewal of a tenancy agreement (s 51(1)).

The landlord, or agent, is not entitled to ask for or receive from a tenant under a proposed tenancy agreement a charge in relation to the inspection of the premises (s 51(2)). It is generally accepted that a request for a tenant to provide a deposit to ensure the return of keys used for the purpose of inspection does not breach this provision.

Rent cards and direct debit facilities

The landlord or agent is not entitled to charge the tenant for the first issue of a rent payment card, or the establishment or use of direct debit facilities (s 51(3)). This means that a tenant cannot be charged on an ongoing basis any fee for use of a direct debit facility. Further, a tenant cannot be forced into signing up to a specific contract that requires a fee to be paid, unless other means of payment are provided.

Even where a new real estate agency has taken over management, of a property, a landlord or real estate agent cannot unilaterally change the terms of a tenancy agreement to require the tenant to use a particular method of payment.

Assignment fees

While a landlord must not demand or receive a fee for the giving of consent to an assignment, the RTA does not prevent a landlord from requiring the tenant to bear any fees, costs or charges incurred by the landlord in connection with the preparation of a written assignment of a tenancy agreement (s 84(3)). This is usually referred to an “assignment fee”.

Most commonly an assignment is done using the prescribed Tenant Transfer Form available from the RTBA. It is therefore arguable, that there is little or no preparation of a written assignment of a tenancy. Parties seeking to challenge unreasonable fees in connection with the preparation of a written assignment may apply to VCAT be compensated (s 84(2)).

Bonds

A tenant is required to pay a bond only if this is required by the agreement between the parties.

Where a bond is paid, it must be lodged with the RTBA. Once lodged, the bond may only be released with your consent, or by order from VCAT. Landlord and real estate agents cannot simply deduct money bonds without your agreement.

A person must not demand or accept a bond greater than the amount of one month’s rent when the weekly rent does not exceed $350 (s 31). The landlord may apply to VCAT for an order increasing the amount of bond that may be charged (ss 32, 33). There is no restriction on the amount of bond where the rent exceeds $350 per week.

A person must not demand or accept more than one bond in relation to the continuous occupation of premises. However, if rent exceeds $350 per week and a tenant and landlord enter a new tenancy agreement for the same premises, then an additional bond may be sought by the landlord (s 34).

The tenancy agreement should set out the date by which the payment of the bond is required. Tenants who are in occupation of premises, but who have not paid the bond in accordance with the agreement, may be given a 14-day Notice to Vacate (seeNotice to Vacate – landlord wants tenant to leave”).

At the time the bond is paid, the landlord must complete and sign a Bond Lodgment form (s 405). The form must state if the Office of Housing has paid the bond on behalf of the tenant.

The landlord must then give the tenant a copy of the signed form for the tenant to sign. Failure to do so is an offence. Once the tenant has signed the form, the landlord must give them a copy. Failure to do so is an offence. Tenants should never sign a blank Bond Lodgment or Bond Claim form, as this would allow an unscrupulous landlord to provide false or misleading information to the RTBA.

The landlord then has 10 business days to lodge the bond and the completed form with the RTBA. Failure to do so is an offence (s 406). The RTBA has seven days after it receives the bond to give a receipt to the landlord, tenant and Office of Housing (if applicable) (s 407).

If the receipt has not been received within 15 days of paying the bond, the tenant should contact the RTBA.

It is an offence for a tenant to refuse to pay rent on the grounds that they intend to use the bond money as rent (s 428).

If the landlord fails to lodge the bond, even after the tenant has notified the RTBA, the tenant should apply to VCAT for an order compelling the landlord to lodge the bond and refer the matter to Consumer Affairs Victoria (for contact details, seeAdvice and contacts”).

Condition Report

If the tenant pays a bond, the landlord must give the tenant two copies of a completed and signed condition report before the tenant enters into occupation of the premises (s 35(1)). Within three business days of entering into occupation, the tenant must return one copy of the condition report to the landlord with their signature.

Tenants should make a thorough inspection of the property before they move in and note any problems (e.g. carpet stains) in detail on both copies of the report. If there is not enough room on the report to record all disagreements, the tenant may write “see attached” in the appropriate section and attach a separate sheet.

A Condition Report that is signed by the landlord and tenant is conclusive evidence of the state of repair of the property, except for problems that could not have reasonably been discovered on inspection (e.g. the roof leaks when it rains (s 36)). At the end of the tenancy, the Condition Report will help determine liability if there is any dispute about damage or cleaning.

If the landlord fails to provide a Condition Report at commencement, the tenant should record their observations of the condition of the premises nonetheless.

It is strongly recommended that tenants take photographs of all parts of the property at the commencement and termination of the lease.

Special attention should be given to walls, floors, and bench tops as these are items commonly disputed. Tenants may also wish video of testing items such as heaters, cooking elements or other mechanical services as these items are also frequently disputed. While not required by the RTA, the tenant may also wish to attach copies of their own photos to the condition report.

Tenancy databases

Listing on a tenancy database can effectively prevent a person from obtaining private rental accommodation.

The RTA regulates:

when a person may be listed in a database;

when a listing must be removed;

requirements prior to listing; and

applications to VCAT regarding a listing.

When a listing may be made

Personal information must not be listed on a database unless two conditions are satisfied:

1 the person was named as a tenant in a tenancy agreement that has ended; the person breached the tenancy agreement or certain provisions of the Act; and the person owes the landlord an amount that is more than the bond or a Possession Order was made for specific reasons; and

2 the person has been given a copy of the information; has been given 14 days to consider the information and object to it; and any objections have been considered.

Even if these conditions are satisfied, the listing must be accurate, complete, unambiguous and relate only to the breach.

Notification requirements

When a person applies for a rental property and the landlord usually uses a tenant database, the landlord must provide written notice of the database operator’s contact details. If the applicant is listed on the database the landlord must provide written notice of the listing and how it may be amended or removed.

Prior to making a listing, the landlord must give the person a copy of the information, allow 14 days for the person to consider the information and object to it, and consideration of any objections.

Checking and amending a listing

If a person makes a written request for information relating to them on a database, the operator must provide the information within 14 days. A fee may be charged, but it must not be excessive.

If a landlord becomes aware that information they have listed is inaccurate, incomplete, ambiguous or out of date, the landlord must give written notice to the database operator to amend or remove the listing. The database operator must amend or remove the listing within 14 days.

A listing can remain on a database for three years only. A listing must be removed if:

it arises from a debt which was paid within three months of falling due; or

it arises from a Possession Order which has been revoked on an application for review.

Applying to VCAT regarding a listing

A person may apply to VCAT for an order removing or amending a listing on the following grounds:

1 non-compliance with notification requirements;

2 the matter is not a matter permitted to be listed;

3 the listing is inaccurate, incomplete, ambiguous or out of date.

Contact the Tenants Union for more information. SeeAdvice and contacts”.

Privacy laws

Tenant databases are also subject to the “national privacy principles” in the following ways:

tenants have a right to access data held about them;

any data held must be complete, accurate and up-to-date; and

tenants must give their consent before information can be passed on to third parties for “secondary purposes”.

An agent may ask a tenant to sign a consent form to release their personal information to third parties, including database companies. Alternatively agents may take the view that they don’t need the consent of tenants to pass on information to databases because looking at a tenant’s history to assess “risk” could be seen as a primary, not a secondary purpose.

Compliance processes

Protection under the Privacy Act 1988 (Cth) is only effective if people make complaints when their privacy is breached. Tenants who think their personal information is being misused should contact the Office of the Australian Information Commissioner. Complaints should be made in writing. To make a complaint, visit the “How do I make a complaint?” page of the Commissioner’s website, or call the enquiries line.

Office of the Australian Information Commissioner

GPO Box 5218, Sydney NSW 2001

Tel: 1300 363 992

Email: enquiries@oaic.gov.au

Web: www.oaic.gov.au

For further information regarding privacy laws, see Privacy and your rights.

Landlord’s duty to provide information

If the landlord has no agent they must, on or before the day the tenant takes occupation, give the tenant:

written notice of their full name and address for service of documents; and

an emergency telephone number to be used in case of urgent repairs.

Failure to do so is an offence under the RTA (s 66(2)).

If the landlord has an agent acting for them, the landlord must give the tenant:

written notice of the agent’s full name, address and phone and fax numbers;

a written statement as to whether the agent can authorise urgent repairs and the maximum cost of urgent repairs they may authorise; and

the phone or fax number for urgent repairs.

Failure to do so is an offence (s 66(3)).

If any of this information changes, the landlord must notify the tenant within seven days. Failure to do so is an offence (s 66(4)).

Statement of rights and duties

The landlord must give the tenant the written statement of the rights and duties of landlords and tenants produced by Consumer Affairs Victoria (s 66(1)) (seeAdvice and contacts”).