Barratt v Liu (Residential Tenancies) [2024] VCAT 165

Pursuant to section 124 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), the Tribunal declares that the notice of rent increase dated 24 August 2023 is invalid because it does not comply with section 44 of the Residential Tenancies Act 1997 (Vic).

1. Xin Liu (the residential rental provider) ('RRP') rents premises to Samantha Barratt ('the renter'). The RRP served a notice of rent increase dated 9 August 2023 and the renter seeks a declaration that the rent increase is excessive.
2. For the reasons set out below I have found that the notice of rent increase was not valid.
3. The matter was heard on 24 January 2024 and I reserved my decision.
4. This proceeding raised the following issues:
   • Which provisions of the Residential Tenancies Act 1997 (Vic) (the 'RT Act') apply?
   • Whether the notice was valid?
   • If the notice was valid, was the rent increase excessive?

1. Section 44 of the RT Act sets out the requirements for a rent increase notice and section 46 provides that a renter may apply to VCAT for a declaration that a rent increase is excessive.
2. It was common ground that the renter first entered into a 12 month fixed term rental agreement in 2018. There had been a series of further fixed term rental agreements with the last fixed term being from 16 October 2022 to 16 October 2023. The rental agreement had then continued on as a periodic rental agreement in accordance with section 91Q of the RT Act.
3. The current section 44 of the RT Act came into operation on 29 March 2021.[1] The amendment inserted an additional requirement that the notice must include the method by which the rent increase was calculated.[2]
4. The renter entered into possession of the rented premises prior to the date of commencement of that provision which raised the question of whether the previous provisions relating the challenging notices of rent increases, which did not require the calculation method to be included, applied, or the current provisions.
5. The transitional provisions contained within Schedule 1 of the RT Act relevantly state:
   1. Fixed term tenancy agreements

(1) The amendments made to sections ... 44, ... by the Residential Tenancies Amendment Act 2018 do not apply to -

(a) a fixed term tenancy agreement entered into before the commencement of the applicable amendment until that agreement is terminated; and

(b) a periodic tenancy agreement that commenced before the commencement of the applicable amendment until that agreement is terminated.

1. Here a new fixed term rental agreement was entered into after the commencement of the amending act, namely on 16 October 2022. (Unlike a periodic tenancy which continues on the same terms and conditions as a prior fixed term and so does not create a new rental agreement). I find that a new fixed term was entered into after the commencement of the amendments.
2. I am therefore satisfied that the current RT Act applies.

1. The renter did not dispute that the notice was in the prescribed form,[3] provided for at least 60 days' notice, was served to her email address and that it only provided for one rent increase. It therefore complied with the requirements of sections 44(1) and (2) of the RT Act.

Does the notice include the method by which the rent increase was calculated?

1. The prescribed form sets out the following requirements:

Method used to calculate rent increase [insert method, for example 'Consumer Price Index', used to calculate rent increase. Provide details of the process and calculation used to reach the new rent amount].

I intend to increase the rent as follows:

Current rent amount ($) 430 per week

New rent amount ($) 530 per week

Amount of rent increase ($) 100.00 per week

Start date of increased rent: 28 November 2023

Method used to calculate rent increase:

(For example: 'Consumer Price Index', used to calculate rent increase. Provide details of the process and calculation used to reach new rent amount)

17 CLOUGHS ROAD MERNDA VIC 3754 - $495

44 LANGDON DRIVE MERNDA VIC 3754 - $500

44 DALZIEL DRIVE MERNDA VIC 3754 - $580

1. The notice did not specifically state the method by which the rent increase was calculated. It merely listed three properties in the same suburb. It could possibly be inferred that the properties listed were somehow comparable but it did not state this.
2. When asked at the hearing what method was used to calculate the rent increase, the RRP's agent said it was by fixed dollar amount however the notice did not state this.
3. In Boyce v Mariella Nominees Pty Ltd ATF Lorusso Family Trust,[4] VCAT found that a notice of rent increase when setting out the method used to calculate the rent increase "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".[5]
4. The matter was further considered in Barlow v Fedele 1175 Pn Rosebud Pty Ltd,[6] where the Member considered the requirements when a fixed dollar amount method was used to calculate the rent increase. Member Buljan stated:

The Tribunal accepts that there is no precise formula or single test for determining the validity of a notice of rent increase. However, the underlying purpose of the legislative changes made to section 44 appear to reflect an intention to move away from rent increases that are arbitrary in nature. Given the wording of paragraph 44(3)(b), the case law to date suggests that whatever method is used to calculate the rent increase in such notices must include sufficient detail regarding the process for calculating the rent increase, not the new rental amount as suggested by the rental provider's agent. The focus on the rent increase means that the method used to calculate the rent increase must include relevant information regarding how any fixed dollar amount was arrived at, what considerations were taken into account, what the rental provider relied on to justify the rent increase and why the notice was given.[7]

1. I find that the notice did not provide the relevant information that allowed the renter to understand how the amount of the rent increase was actually calculated or determined. It was not clear whether it was comparing the rented premises to the three listed properties. The notice did not set out the attributes of those properties to enable a comparison to be made. It also did not state that a fixed dollar amount method was being used to calculate the rent increase. It therefore did not meet the requirements in section 44(3)(b) and is invalid.

1. Although not necessary to decide this question, I make the following observations. I accept that the Consumer Affair Victoria (CAV) report obtained under section 45 of the RT Act concluded that the rent increase was not excessive and referred to a number of properties in the area. The Tribunal is required to have regard to this report, but it is not determinative.
2. In her evidence to the Tribunal, the renter provided details of 14 comparable properties including those in the CAV report to support her assertion that the rent increase was excessive.
3. The RRP provided no further information to the Tribunal. The RRP did not provide details of the three properties listed in the notice or even how they were comparable.

[1] By operation of the Residential Tenancies Amendment Act 2018 (Vic).

[3] The prescribed form is Form 5 in Residential Tenancies Regulations 2021 (Vic) sch 1.

[4] [2023] VCAT 89.

[6] [2023] VCAT 64.