Method used to calculate rent increase: Market Rental Comparison

1. No other documentation was provided with this notice.
2. On 16 May 2022 the applicant began paying the increased rent per week.
3. On 10 March 2023 an agent of the respondent sent another Notice of Rent Increase by email. This stated:

Method used to calculate rent increase: Market Rental Comparison

1. No other documentation was provided with this notice
2. On 11 April 2023 the applicant wrote to Consumer Affairs Victoria (CAV) requesting a rent increase investigation.
3. On 2 May 2023 CAV wrote to the applicant advising that they had completed their investigation. The report summary stated:

My physical inspection of your property on 18.4.2023 and subsequent online research, it appears that your property could rent out between $307 to $337 per week. Therefore, a proposed rent increase by your rental provider to $315/week as on 16.05.2023 is deemed Not Excessive by Consumer Affairs Victoria (CAV).

1. On 30 May 2023 the applicant applied to VCAT challenging the rent increase.

1. The applicant argued that the notices of rent increase were invalid. They referenced recent VCAT decisions that have considered the issue of notices of rent increase and the use of the phrase 'Market Rental Comparison' or similar terms.
2. The applicant's submissions argued that the respondent had not provided 'the method by which the rent increase was calculated by relying solely on the wording "Market Rental Comparison"'.
3. Relevantly the applicant's submissions referenced the recent VCAT decision of Boyce v Mariella Nominees Pty Ltd ATF Lorusso Family Trust ('Boyce v Mariella Nominees')[2] whereby VCAT determined that the phrase 'Comparative Market Report', with no other materials provided in support, failed to satisfy the requirements of s 44(3)(b) of the RTA and was therefore invalid.
4. It was submitted that another recent VCAT decision, Kennedy v Pan,[3] determined that the term 'market review' on its own was not sufficient to provide the method of calculation.
5. The submission stated that while the Tribunal was not bound to follow these decisions, it was submitted that the Tribunal's reasoning in Boyce v Mariella Nominees and Kennedy v Pan should be adopted in the current case.
6. The respondent noted that they were now aware of the recent decisions of VCAT and it had altered its practices to ensure that relevant information was now included in the notices of rent increase it provided to renters of its properties. It had not been aware of this obligation prior to the application before the Tribunal.
7. The respondent stated there were a few factors that it relied on in its belief that the notices were valid. This included:
   1. As the manager of a complex of similar apartments, the market rental comparison was very specific to the apartments that were located at this site. The applicant was aware that this is what the respondent was referring to when comparing rental rates.
   2. The renter had been provided with a comparison when communicated with in the correspondence of 21 February 2022.
   3. That the renter had accepted the rent increase of 16 May 2022 and had been paying the increased amount to 16 May 2023.
   4. That CAV itself had not identified any deficiency in the notice in their investigation. The respondent submitted that CAV did consider if a notice was properly provided and valid and had not raised any concern with the document.

1. Most relevant to the current circumstances is section 44 of the Residential Tenancies Act 1997 (Vic) (the 'Act'). The relevant provisions state:

(1) A residential rental provider must give a renter at least 60 days notice in the prescribed form of a proposed rent increase.

(2) A notice of a proposed rent increase under subsection (1) may only provide for one rent increase.

(3) The notice of a proposed rent increase must include -

(a) the amount of the rent increase; and

(b) the method by which the rent increase was calculated; and

(c) a statement informing the renter of the renter's right under section 45 to apply within 30 days after the notice is given to the Director to investigate and report on the proposed rent.

(5) A rent increase in contravention of this section is invalid.

1. The Tribunal notes that section 44(3) states that the notice of proposed rent increase must[4] include the method by which the rent increase was calculated.
2. Relevant aspects of the Boyce v Mariella Nominees decision state:

[27] The notice of rent increase, like a notice to vacate, should contain sufficient information to the renters to enable them to not only answer the question as to why it is given, but also enough information for them to determine whether the rent being proposed is excessive and should be challenged.

[28] A simple reference to a "Comparative Market Analysis" with no further information about the properties that were used, their location or features, which would enable the renters to make a proper assessment about the "reasonableness" of the increase, is in my view against the spirit or purpose of the requirement to provide the method of calculation.

[30] I find that the reference to a "Comparative Market Analysis" with no further information about that analysis fails to satisfy the requirements of s 44(3)(b) that the method of calculation be provided, or the requirements of the prescribed form by providing details of the process used for that method of calculation.

1. I agree with the reasons as provided by VCAT in the decision of Boyce v Mariella Nominees regarding the need to provide appropriate information with the notice that provides the background for the calculation of the rental increase.
2. Rental providers, through their agents, have access to sophisticated reports that detail what would be an appropriate rental rate in the current market. The CAV report provided such an assessment when it investigated the 2023 rent increase.
3. In the circumstances of this respondent, they have access to information that is highly particular to the relevant rental market of the applicant, as they manage a number of similar apartments in the same complex. The email of 21 February 2022 details such knowledge and could be considered, perhaps with some further comparators, relevant information to be used as the method of calculating the rent increase.
4. This information was not provided with the notice of rent increase provided to the applicant in 2022 or 2023. The respondent used a term that indicated a process that they had used, but did not provide the comparative data that demonstrated how they reached the figure for the rent increase.
5. While the respondent had provided some information to the applicant regarding a comparative rent for a similar apartment in the complex, information of this nature must be provided with the notice, as stated in s 44(3). A failure to do so will make this notice invalid.
6. The Tribunal notes that the same terminology was used in both notices. Even though the applicant has been paying an amount of rent consistent with the 2022 increase for a year, the delay in lodging an application to contest the grounds for the increase does not mean that the applicant is not allowed to contest this increase or the notice that caused the increase. The applicant is well within the time allowed for such an application. The powers of the Tribunal to make orders or declarations with respect to the two notices are relevant considerations.
7. The respondent's contention that the CAV investigator would have commented on the validity of the notice if they were concerned by it misconstrues the role of the investigator and the powers that CAV has in this regard. Pursuant to s 45 of the Act, CAV are given powers to investigate and provide a written report to the renter and residential rental provider regarding the proposed increase, taking into account the matters referred to in s 47(3).[5] The CAV report provides information about the right to go to VCAT to challenge a proposed rent increase. No powers are provided to CAV to make determinations on any aspect of the rent increase.
8. It is the role of VCAT to make the determination whether the rent increase is excessive or not. It is also the role of VCAT to determine whether the procedural steps have been met in pursuing the rent increase, including the validity of the notices provided.

1. The Tribunal finds that the notice of rent increase dated 24 February 2022 is invalid.
2. The Tribunal finds that the notice of rent increase dated 10 March 2023 is invalid.

1. Having determined that these notices are invalid, the Tribunal finds that the rent that the applicant should be paying on this property from 16 May 2022 to present is $180.00 per week.
2. The applicant requested a declaration pursuant to s 124 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ('VCAT Act') regarding the rental position of the applicant, should the Tribunal make a determination that the notices of rent increase were invalid. The applicant provided a calculation regarding what the overpayment would be if the applicant was to have paid $180.00 per week over the rental period from 16 May 2022 to present, noting that there was a change in rent on 16 May 2023.
3. For the period 16 May 2022 to 15 May 2023 the applicant paid rent at $250.00 per week[6] when his rent should be $180.00 per week.[7] This is an overpayment of $70.00 per week. This equates to an overpayment of rent in the amount of $3,650.00
4. For the period of 16 May 2023 to 1 September 2023 (109 days) the applicant has been charged a rent of $315.00 per week[8] when his rent should be $180.00 per week. This is an overpayment of $135.00 per week.
5. The applicant's submissions noted that he has not been paying the full amount of rent for a period of time due to financial difficulties. The Tribunal accepts the modified calculation that provides for a lesser amount of compensation owing to the lower amount of rent actually paid by the applicant. The Tribunal accepts that the renter has overpaid his rent in the amount of $1,566.61.
6. The Tribunal finds that the applicant has overpaid his rent from 16 May 2022 to 1 September 2023 by the amount of $5,216.61.
7. Given it is two separate applications that have led to this matter being considered, the Tribunal is required to provide different outcomes.
8. With respect to application R2023/16492, the Tribunal has made an order regarding the overpayment of rent from 16 May 2023 to present. The Tribunal orders that the rental provider pay compensation to the renter in the amount of $1,566.61.
9. By mutual agreement, the parties can agree for this amount to be used as credit in the applicant's rental account.
10. With respect to the application R2023/20359, the Tribunal has made a finding regarding the overpayment of rent from 16 May 2022 to 15 May 2022. Pursuant to s 124 of the VCAT Act, the Tribunal makes a declaration that the applicant has overpaid his rent during this period by the amount of $3,650.00.
11. By mutual agreement, the parties can arrange how this declaration may be enabled. In the event that agreement cannot be met, the applicant is at liberty to lodge an application for compensation for this amount at VCAT.

[1] [2020] VSCA 30.

[2] [2023] VCAT 89.

[3] [2023] VCAT 529.

[5] It is noted that s 47(3) does not refer to the validity of the notice of rent increase.