The renters seek orders regarding a notice of rent increase dated 3 March 2022, including a determination of whether the notice is valid for failure to comply with s 44(3)(b) of the Residential Tenancies Act 1997.

That issue might be seen as a preliminary point, in that if the notice does not comply with s 44(3)(b) then it is invalid and VCAT cannot make any order regarding the issue of whether the rent is excessive under s 47 which orders are also sought in the application.

The renters have requested written reasons that they indicate will be used as a "test case" for the Renters and Housing Union of Victoria, which apparently has assisted them with their application. While noting that VCAT's role is not to decide test cases, and that a decision of one Member is not binding on other Members, given that this threshold issue regarding the requirements of s 44(3)(b) has not been the subject of any previous decision it is important that the parties are given the opportunity to make detailed written submissions regarding the meaning and import of the section. Consequently, having heard the oral evidence of the parties and reviewed previously submitted documentation, VCAT has determined to require further written submissions as outlined in this order.

Section 44(3) was introduced by the Residential Tenancies Amendment Act 2018. The sub-section relevantly provides that any notice of 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. (emphasis added)

Section 44(1) provides that any notice must be in the prescribed form, which is referenced in Regulation 21, and provided for as Form 5 of Schedule 1 of the Residential Tenancies Regulations 2021. The prescribed form also employs the terminology contained in s 44(3)(b), and includes the following text at paragraph 5:

Method used to calculate the 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.

Method used to calculate the rent increase

To assist the Tribunal, the partis are directed to provide to VCAT and to each other written submissions regarding the meaning and import of the words used in s 44(3)(b) and those used in the prescribed form, including "the details of the process and calculation used". The submissions should address the question of the requirements of the section. The renters should also clarify whether they argue that the alleged invalidity of the notice of rent increase is based on the use of the words "Comparative Market Report" in the notice alone, or the fact that no such report or indeed any documentation accompanied the notice.

The timetable for submissions is as follows:

By 12 October 2022: The renters are to send to VCAT and to the residential rental provider their submissions in support of the application.

By 26 October 2022: The rental provider is to send to VCAT and to the renters its response.

By 9 November 2022: The renters are to send to VCAT and to the residential rental provider their submissions in reply to the rental provider.

Once all submissions are received, VCAT's decision will be reserved.

1. In line with above orders, I am advised that VCAT received the following submissions:

On 12 October 2022 from the renters

On 13 October 2022 from the rental provider

On 9 November 2022 from the renters

1. Unfortunately, there was a significant delay in these submissions being referred to me. The renters' submission of 9 November 2022 was referred to me on 19 December 2022, and their earlier submission of 12 October 2022 and the rental provider's of 9 November 2022 on 4 January 2023. I apologise to the parties for the delay in providing these reasons.

1. The notice of rent increase is dated 3 March 2022, and states that the rent of $330.00 per week is to be increased to $590.00 per week from 2 June 2022. The notice is addressed to both renters and signed by the rental provider, and was sent by registered post on 3 March 2022, with a stated "expected delivery date" of 14 March 2022 (which is the deemed date of the notice). Under the section of the notice headed "Method used to calculate the rent increase" the words "Comparative Market Report" are inserted. The notice was not accompanied by any documentation, although by the time of the hearing the rental provider had submitted multiple documents to VCAT containing details of "comparable rental properties". Some of these documents appear to have been prepared after the notice of rent increase was sent.

1. On 13 April 2022, the renters applied to the Director of Consumer affairs for an investigation and report under s 45 of the Act. That report was made on 5 May 2022. The renters then applied to VCAT on 2 June 2022, so both these applications were made within the 30 day time periods respectively specified in s 45(2) and s 46(2) of the Act.
2. As mentioned above, the renters effectively seek to have two issues determined, namely whether the notice of rent increase was invalid for failure to comply with the Act, and whether the rent increase was excessive. Obviously if the answer to the first question is that the notice is invalid, then VCAT has no jurisdiction to entertain the second.

1. The renters rely on two bases for their position that the notice was invalid for failure to comply with the Act. They say that the notice was "in contravention of s 91P" and that "it did not comply with s 44(3)(b) since it does not contain details of the method used to calculate the rent increase".[4]

1. The renters say that the rental provider has contravened s 91P (1) of the Act which states that:

Offence to obtain possession etc. of premises

• (1) Except in accordance with this Act, a residential rental provider or a person acting on behalf of a residential rental provider must not require or compel or attempt to compel the renter under the residential rental agreement to vacate the rented premises .

Penalty: 150 penalty units in the case of a natural person;

750 penalty units in the case of a body corporate.

...was intended as a de facto means of attempting to compel them to vacate the rented premises in case the two notices to vacate he sent them at the same time were unsuccessful in terminating their tenancy. On 12 March, [the rental provider] emailed these notices to [the renters] with the message, "Please find below all three notices sent to you via registered mail: 1. Notice of proposed rent increase to renter of rented premises, 2. Notice to vacate to renter of rented premises - Threats and intimidation ((91ZK), 3. Notice to vacate to renter of rented premises - Premises to be sold (91ZZB).[5]

1. This issue was raised in the initial application and again in the renters' later submission of 9 November 2022 and was referred to but not pursued at the hearing. In these circumstances it is understandable that the rental provider has not made any submissions regarding s 91P((1). In any event, and quite apart from issues of proof, the renters' submission is misconceived. Section 91P(1) is a penalty provision. It effectively states that it is an offence to evict or try to evict someone other than in accordance with the law, and that penalties apply to those who contravene the section. VCAT does not impose penalties. The rental provider was entitled to give the renters a notice of rent increase under the Act. This action was not an action that had the effect of physically removing the renters from the premises, nor was it an action that was against the law. This contention is without merit and does not affect the validity of the notice of rent increase.

1. The requirements of this section and the corresponding regulation are substantially referred to in the order made on 27 September 2022, the text of which is set out above. It should also be noted that wording in the prescribed form specifies that "the notice must include the method by which the rent increase was calculated", stating that "the rent increase cannot be greater than the amount calculated using this method".

1. The renters' submissions in this regard, insofar as they refer to draft but not enacted legislation,[6] provisions in the Act covering site agreements,[7] or fixed term agreements of more than five years[8] provide a general background but are of limited assistance in determining this specific issue.
2. More relevantly, the renters say that:

The intent of s 44(3)(b) is to make it transparent to the renter that any rent amount included in the notice under s 44(3)(a) does not exceed the amount calculated using the formula described. Therefore, the rent increase dated 3 March 2022 is in contravention of section 44 because it fails to include any details describing how the new rent amount was attained, rendering the words "Comparative market report" in the notice as meaningless.

If it was the rental provider's intent to lawfully increase the rent then it was not onerous for him to have complied with the instructions on the rent increase notice to include "the method by which the rent increase was calculated". Upholding the applicant's right under s 44(3)(b) to be fully informed how any rent increase is calculated before to takes effect affords them the possibility to challenge "the amount of the rent increase" if the amount quoted in the notice exceeds, "the method by which the rent increase was calculated".[9]

The prescribed form was used. The method by which the rent increase was calculated (sic). This was clearly and correctly stated on the prescribed form. The method was the "Comparative Market Report". This has been raised and addressed in three previous VCAT hearings. The method described is accurate.[10]

The rental provider has clearly stated the method used to produce the new rent. The method is not CPI, nor is it fixed amount, nor is it related to an index, so there is no mathematical calculation to use, demonstrate, or produce an example of. The Market Comparison is the fairest method used to reflect the current, fair market rent based on accurate, actual comparable properties located near the assessed property at the time the rent is being assessed. There is absolutely no requirement for the rental provider to provide a copy of the report with the notice of rental increase. This was confirmed several times with CAV...this is the most accurate and most widely accepted method used to evaluate fair market rent in Australia....[11]

1. The renters' response to the rental provider is largely by way of providing background material and issues canvassed before the new laws containing s 44(3)(b) were passed.[12] While this makes interesting reading it is of little relevance, as I must consider what parliament chose to incorporate in the legislation, rather than what was contained in earlier drafts, or general statements made or concerns raised made during the public consultation process that preceded the enactment of the law.
2. The renters summarise their position thus:

...most renters would consider a proposed rent increase of around $1,000 per month to be unsustainable leading to their tenancy being terminated regardless of whether they could find cheaper alternative accommodation. If the notice included a verifiable method by which the rent increase was calculated based on official data, then it would not seem arbitrary and more likely affordable while still facilitating a fair return to the rental provider....[13]

Analysis

1. At heart is the question of whether this notice complied with the requirements of s 44(3)(b) and corresponding Regulation 21. The section is a relatively new provision and one which has apparently not been the subject of previous VCAT decisions. It is a particular form of notice, being one of rent increase, as opposed for example to a breach of duty notice or a notice to vacate. The Act is prescriptive about the requirements for these latter notices, which must all accord with s 91ZZO, and often be accompanied by mandatory documentation[14] which requirements do not apply in the present case.
2. Notices of rent increase must of course be in the prescribed form, and must be properly served within the relevant time frames. In this case I am satisfied that the notice complied with those standard requirements. Can it also be said that the notice contained "the method by which the rent increase was calculated" and "details of the process and calculation used to reach new rent amount" as required by s 44(3)(b) and Regulation 21 respectively?
3. To answer this, I must consider the sufficiency of the information contained in the notice. The Supreme Court has provided guidance regarding the sufficiency of notices, albeit not in this form, issued under the Act. The principles to be applied when considering the requirements of notices to vacate have long been established. In the oft quoted case of Smith v Director of Housing [2005] VSC 46 the Court held that the information contained within the notice to vacate must be to such a degree that on reading the notice, the renter knows why it is being given and has enough information to contest the allegations:

17. The requirement laid down in s.319(d) is designed to require advice to be given to the tenant as to the reason the landlord demands possession with a sufficient degree of detail to enable her to understand the facts being alleged as a basis for terminating the tenancy. It requires no technical expression, particular formal verbal formula and no particular legal knowledge to answer the question "Why is this notice being given?" A basic facility for communication in plain English is enough.

18. The answer, for the notice to comply with s.319(d), requires the setting out of the facts upon which the assertion that the tenant or her visitor has endangered or is endangering the safety of relevant neighbours with a sufficient degree of particularity to enable the tenant to understand why the landlord wishes to evict her and to contest those facts if she wishes.

19. In Atkins v Taip (unreported, 24 July 1987) Murphy J of this Court was dealing with a notice to a tenant under previous legislation, the Residential Tenancies Act 1980. The provision there under consideration required a landlord to specify what a tenant had done which the landlord alleged breached his tenancy agreement. Murphy J expressed the view that the landlord had to specify what the tenant had done so that the tenant might understand what provision of his tenancy agreement he had breached. Although, in this instance, one of the purposes of the notice was to enable the tenant to remedy a breach if he could, it was also to enable him to contest the existence of the breach if he wished.

23. The jurisdiction of VCAT to entertain the application by the Director of Housing for possession of Mrs Smith's flat was dependent upon a valid notice to vacate having been given to her. For the notice to vacate to have been valid it must, on its face, have identified, with a sufficient degree of precision, the facts said to constitute the endangering of Mrs Smith's neighbours by her or her visitor or visitors so as to bring the case within s.244 of the ACT: See Nestle Australia Ltd v The President and Members of the Equal Opportunity Board [1990] VicRp 71 relying up R v. Gray ex parte Marsh [1985] HCA 67; and Farquharson v Morgan [1894] UKLawRpKQB 19; [1894] 1 QB 552.

30 The Supreme Court decision of Atkins v Taip is particularly relevant to breach of duty notices, and notices to vacate based on a breach of a duty provision. This was an appeal of a possession order granted under the Residential Tenancies Act 1980 (the 1980 Act). Under section 120 of the 1980 Act, a breach of duty notice and subsequently a notice to vacate, could be given to a renter if they had breached a duty provision of the Act. In this case the application for possession was premised on a breach of section 93, being a duty not to use the rented premises to cause a nuisance.

31. Murphy J found that the breach notice, (and by implication the notice to vacate that followed) did not detail the reason the notice was given because it did not set out the duty provision section of the 1980 Act that had been breached-

3. To say of a tenant "you have behaved ... unacceptable of a tenant and that you have made it very difficult to have peace and quiet to other tenants therefore we ask you that it is against Residential Tenancy to create Disturbance and Noise to neighbours" was not to specify a breach of any particular provision of the Act, nor did it give sufficient particularity of the facts which gave rise to the complaint.

5. It is a fundamental rule of natural justice that in circumstances where a party is to be penalised if certain findings are made against him by a Tribunal on the strength of allegations made, the party liable to be penalised should not only be made aware of those allegations, but be given a reasonable opportunity to meet them.

(footnotes omitted)

1. The Court provided further guidance more recently in Jafarpourasr v Tancevski [2018] VSC 497 when it determined that the level or degree of information that needs to be included in a notice to vacate will vary according to the ground on which the notice is given:

49. The question is, then, to what level of particularity ought a notice to vacate descend in order for a Court to be satisfied that a landlord has sufficiently informed a tenant of his or her reasons for re-possessing the property? Smith makes it clear that the landlord's obligation to inform the tenant of the basis for termination is guided by the rationale that tenants should have the opportunity to respond to any relevant allegations, and the overarching objective of the RTA is to protect the rights of tenants. The decision in Smith also makes it clear that it is insufficient to simply restate the statutory provision relied upon by a landlord to issue a notice to vacate. However, it seems to me that the degree of particularity required in a notice to vacate will vary according to the circumstances.

50. While it is not necessary or appropriate to lay down hard and fast guidelines for the degree of detail required to be included in a notice to vacate, relevant factors would include:(a) the length of the notice period: the shorter the notice period, the more detail is required; (b) the nature of the reasons advanced in the notice, with greater detail required where some misconduct is alleged, or where an alleged breach is capable of being remedied by the tenant; (c) in cases where there might be genuine debate about whether there is a need to vacate the relevant property, such as where repairs and/or renovations are planned, more detail would be required; and (d) for notices relying on s 258, the notice to vacate should at least include details of the family relationship between the landlord and the person who was going to be living in the property.

(footnotes omitted)

1. These comments apply specifically to notices to vacate, but in my view this line of authority is of broader application. It contains a consistent theme and one that accords with the most basic principles of natural justice: that is, that a notice served on a renter should on its face contain sufficient information to enable the renter to understand the reason it has been given. They may then choose to challenge it or not, but they must be able to understand why it was given in the first place.

1. It is clear that a notice of rent increase must include the method by which the rent increase was calculated and the details of the process and calculation used to reach the new rent amount. In the present case, no documentation accompanied the notice. It contained simply the words "Comparative Market Analysis" as the basis for the rent increase.
2. "Comparative Market Analysis" is not a term in everyday parlance, although I accept it is commonly used within the real estate industry. While I see no issue with the use of the phrase "Comparative Market Analysis" as a basis for calculation, it is somewhat vague and unhelpful unless there is some information provided about what that actually means. What is that analysis? What is being compared to what? How has it been applied to the current situation to justify the rent increase? Without that information it is probable that the renter may not be able to properly answer the question - why is this notice being given to me?
3. 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.
4. 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.
5. It may well be that had the renters been provided with the report of the rent being charged for other "like for like" properties in the area, they may have considered that the almost 80 percent increase of their rent ($330.00 to $590.00) was not excessive and was a fair amount being charged.
6. 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.
7. The notice of rent increase is invalid.
8. As the notice is invalid, there is no requirement for me to address the issues of the reasonableness or otherwise of the increase by reference to s 47(3) of the Act.

1. In a final note, I make the following comments regarding this decision being a "test case". As with notices to vacate and breach of duty notices, the amount of information that must be included to satisfy the requirement to include the method of calculation of the rent increase will depend on the method used.
2. It is not a matter of a precise formula, it is simply, in the essence of decisions of the Supreme Court - that a notice must include sufficient information to enable the recipient to (a) understand why the notice has been given and (b) to determine whether the notice should be challenged.
3. At the heart of a challenge to a notice of rent increase is sufficient information to enable the renter to make an assessment of whether the increase is excessive.

[1] In R 2022/14305 the renters were ordered to vacate by 29 July 2022.

[2] R202/9567, R2020/22298, R2020/29966, R2021/21272, R2021/21023, R2021/17937, R2022/15544, R2022/12683, R2022/10907, R2022/14305, R2022/15911.

[4] Application to VCAT dated 2 June 2022.

[5] Renters' submissions of 9 November 2022 at [14].

[6] For example renters' submissions of 9 November 2022 at [12].

[7] For example renters' submissions of 12 October 2022 at [4].

[8] For example renters' submissions of 12 October 2022 at [5] and [6], renters' submissions of 9 November 2022 at [12].

[9] Renters' submission of 12 October 2022 at [9] and [10].

[10] Residential rental provider's submission of 13 October 2022 at [2].

[11] Residential rental provider's submission of 13 October 2022 at [8].

[12] For example renters' submission of 9 November 2022 at [2], [3], [5], [6], [7], [8], [9], [10], [11] and [12].

[13] Renters' submission of 9 November 2022 at [15].

[14] See for example sections 91ZW, 91ZX, 91ZY, 91ZZ, 91ZZA, 91ZZB, and 91ZZC.