The application for review of the rent increase is dismissed for want of jurisdiction.
[2]
Parties have liberty to request the Registrar to relist this matter for assessment of rent arrears at any time within 28 days of the date of this order.
[3]
This case concerned a number of matters, the majority of which were determined at hearing on 14 December 2016, with orders being pronounced and oral reasons provided on that date. However, at the conclusion of the hearing, I reserved my decision on a final issue, being whether a proposed rent increase from $420 to $450 was excessive, such that the Tribunal should disallow the increase pursuant to the rent review provisions in of the ().
The preliminary legal issue that arose was whether there is a time limit imposed on a tenant who wishes to apply for a rent increase review under clause 39 of the standard residential tenancies terms (standard terms)[1] and part 5 of the RT Act - and, in particular, whether the RT Act requires that the tenant apply for a review prior to the proposed rent increase taking effect.
The facts that are relevant to this issue may be succinctly stated. The parties entered into a fixed term agreement for the period 4 September 2015 to 3 September 2016. The agreed market rent at that time was $420 a week, although $70 a week of that was to be paid 'in kind', with the tenants undertaking certain work on the property. The agreement provided that the rent would revert to 'market rent' at the conclusion of the tenancy. On 27 June 2016 the tenants were given eight weeks' notice of a rent increase from $420 a week to $450 a week. The tenants considered the increase excessive, particularly having regard to market conditions and to the work they had done on the property.
The tenants did not agree to the rent increase, and declined an offer of a new fixed term lease at that rent. They also initially declined to pay the additional $30 a week, although one of the tenants has paid since and is now seeking recovery of that amount. Between the giving of the notice and date it took effect there were numerous communications between the tenants and the lessors' agents, and various matters were raised in those communications, but at no time prior to the rent increase taking effect did the tenants either provide the lessors with notice that they intended to seek a rent review, or apply to the Tribunal for such a review. The tenants only applied for a review on 15 September 2016, eleven days after the rent increase had taken effect.
The tenants vacated the property on 22 November 2016. The lessors seek to recover the difference between the $450 they say was payable and the $420 actually paid during the period from 4 September 2016 to 22 November 2016. The tenants seek a backdated rent review, disallowing that increase, and absolving them of any liability to pay it.
[4]
There is no dispute between the parties that the lessors gave the tenants the required eight weeks' notice of a rent increase required pursuant to clause 38 of the standard terms, and that the rent increase was proposed to take effect from
[5]
4 September 2016.
2. Clause 39 of the standard terms provides:
1. (1) The tenant may apply in writing to the tribunal for review of an excessive increase in rent (time limits for applying and the meaning of excessive is set out in the Residential Tenancies Act).
[6]
(2) On such application being made, no increase in rent is payable until so ordered by the tribunal
[7]
Additionally, section 66 of the RT Act provides:
Freezing rents
[8]
If an application for review of a rental rate increase has been made but not decided, no increase in the rental rate happens unless allowed by the ACAT.
[9]
Clause 40 of the standard residential tenancy terms provides:
If the tenant remains in occupation of the premises without applying to the tribunal for review, the increase in rent takes effect from the date specified in the notice.
[10]
It is not in dispute that the tenants remained in the property after 4 September 2016 and did not apply for review until 15 September 2016. As such, the rent increase plainly took effect on 4 September 2016.
If the application lodged 15 September 2016 was valid, then it appears that the rent increase would have been 'frozen' pursuant to clause 39(2) and section 66 of the RT Act from that date. The next question, therefore, is: can a valid application for rent review can be made after the rent increase has taken effect?
The terms of clause 39 of the standard residential tenancy terms, extracted above, provide that: "time limits for applying and the meaning of excessive is set out in the Residential Tenancies Act." Unfortunately those "time limits for applying" are not expressly stated in the RT Act.
The only reference to a time limit in part 5 of the Act is found in section 65(1), which provides:
Waiver of notice requirements
[11]
_(1) The ACAT may hear an application for the review of a rental rate increase even though the application is made less than 2 weeks before the day when the proposed increase is to come into effect, if the ACAT is satisfied that - _
[12]
(a) the application is late because of special circumstances; and
[13]
(b) to hear the application will not place the lessor in a significantly worse position than the lessor would have been had the applicant applied as prescribed.
[14]
The title of this provision ('waiver of notice requirements'), the opening words of the section ('even through the application is made less than 2 weeks before...') and the reference to an application process being 'prescribed' all seem to be premised on the existence of a provision in the RT Act that requires an application for review of a rent rise to be made at least two weeks (or some other time) before the increase is to take effect. The difficulty is there is no such express provision in the Act. There are also no relevant 'prescribed' processes in the Residential Tenancy Regulation 1998.
Still, reading section 65 as a whole, and within its context within part 5, it is apparent that the intention of the provision was to limit the circumstances in which an applicant could apply for a rent review "less than 2 weeks before the proposed increase is to come into effect" to those where the applicant can demonstrate exceptional circumstances. It is a restriction on the right to apply for a rent review.
Section 65 deals with situations where the application is made prior to the rental increase coming into effect. No provision deals with what happens to an application that is made after the rental increase has come into effect. Were such an application possible, however, the limitations imposed by section 65(1) would not appear to apply, because they only apply when the application is lodged 'less than two weeks before the date of effect' of the rental increase. The consequence of such an interpretation would be absurd. It would, potentially, make it easier to apply for a review of a rental increase after it had taken effect than two weeks beforehand.
Section 139(1) of the Legislation Act 2001 provides that (1) in working out the meaning of an Act, the interpretation that would best achieve the purpose of the Act is to be preferred to any other interpretation, and therefore I am not inclined to accept this interpretation.
I have considered whether I could instead interpret section 65(1) in such a way as to read it as meaning "less than two weeks before the date of effect or after the date of effect." This involves adding words to the section. This is permissible, but only where the Tribunal is duly satisfied that the Legislature has overlooked an eventuality which must be dealt with if the purpose of the Act is to be achieved, and it is able to state with certainty what words are needed to remedy that omission.[2]
Was it an intended purpose of the Act that a person is eligible to apply for a rent review after the rent increase has taken effect? The language of Part 5 would suggest not, but that is not the only consideration.
Section 141 of the Legislation Act provides that in working out the meaning of an Act, material not forming part of the Act can be considered. This includes any explanatory statement (however described) for the Bill that became the Act, or any other relevant document that was presented to the Legislative Assembly before the Act was passed.[3]
The relevant Bill was the Residential Tenancies Bill 1997 ('the RT Bill'). Section 65 of the Act is in substantially the same form as it is in the RT Act, save for a change in the numbering from clause 64 to section 65.
The Explanatory Memorandum to that Bill provides as follows in relation to clause 64:
[15]
Clause 64 implements Recommendation 70 - that a tenant who wishes to apply to the Tribunal to dispute a rent increase should give the lessor written notice of application to the Tribunal and make that application at least 14 days before the rent increase was to have taken effect according to the lessor's notice.
[16]
A tenant who wishes to vacate the premises as a result of the rent increase should give written notice of intention to vacate at least 14 days before the rent increase was to have taken effect. If the tenant does not give either of the above notices to the lessor within the required period then the tenant should be deemed to have accepted the rent increase.
[17]
The tenant should be able to apply to the Tribunal for an extension of the above notice periods in special circumstances such as the tenant being on holidays at the time of the notice of the rent increase.
[18]
The Explanatory Memorandum confirms that the drafters intended that a tenant who wishes to contest a rent increase do so in writing at least fourteen days prior to the rent increase taking effect, unless exceptional circumstances apply. While it does not expressly deal with what happens when a rent increase has already taken effect, the language of the explanatory statement, and particularly the reference to 'extension of the notice period', strongly implies that the notice period may be extended where a tenant did not receive the notice, but not necessarily that it may be re-enlivened where it has expired and the rent increase taken effect.
This interpretation of section 65, which provides for reviews up to the date of effect of the rent rise, but not after, is also consistent with the position stated in that explanatory memorandum, and reflected in the Act, that a rent increase that is not challenged prior to taking effect is deemed to have taken effect.
Accordingly, I am of the view that an interpretation of section 65 that requires that an application for review of a rent increase be made prior to that increase taking effect is the interpretation that best achieves the purpose of the Act.
In reaching this conclusion, I acknowledge that there may be occasions where this results in an injustice - for example, where a tenant is on extended travel or is unwell for a significant period. However, such circumstances are unusual, and must be weighed against the need for a majority of lessors and tenants to have certainty about the rent payable for a particular property is. A provision that would enable a tenant to retrospectively apply for a review of a rent increase at any time would undermine that certainty and, in my view, is unlikely to be what was intended, particularly having regard to the language of the Act.
On balance, therefore, I am satisfied that the tribunal does not have jurisdiction to review the rent increase, and I dismiss that final aspect of the application.
I note that the lessors have sought an order that the tenants pay the sum of outstanding rent. The raises two issues. The first is that the lessors have not filed a counterclaim, but the Tribunal probably has the jurisdiction to make the order anyway, pursuant to section 78(2)(a) of the Act, on the basis that the issue is ancillary to the matters in the application. The second is that there is evidence before the Tribunal that Ms Wilmington has already made certain payments to the lessors' agent, although the circumstances under which these payments were made, and accepted by the lessor, is not entirely clear.
Given the application for a rent review has been dismissed, the tenants are liable for the difference between rent paid and rent owed for the period 4 September 2016 to 22 November 2016. As at 22 November 2016, this amounted to $412.14, but the final amount owing will need to be adjusted having regard to any payments Ms Wilmington has made toward this debt. If there is any dispute between the parties as to the outstanding rent, the parties have liberty to approach the Registrar within the next 28 days and request the matter be relisted for a hearing on this issue.