This is an application by Panagiotis Hassiotis (the tenant) for an order from the Tribunal pursuant to section 111 of the Residential Tenancies Act 2010 (RT Act) that would declare that a termination notice dated 31 May 2017 relied upon by Feng Zhi Jiang (the landlord) as terminating the residential tenancy agreement (RTA) that subsists between the parties with effect on 25 July 2017 was not given in accordance with Part 5 of the RT Act. This application was made to the Tribunal on 10 July 2017 (the application).
For the reasons outlined following, the Tribunal is satisfied on the evidence before it that there subsists between the parties a fixed term agreement that is in force until 25 July 2018. The notice terminating the RTA relied upon by the landlord purports to terminate that agreement on 25 July 2017. A landlord can only terminate a fixed term agreement (relevantly to this case) in the circumstances permitted by section 84 of the RT Act. Sub-sections 84(1) and (2) provide that the termination notice can only take effect on or after the end of the fixed term. In this case the landlord seeks to terminate the RTA and recover possession of the premises prior to the end of the fixed term. The Termination Notice therefore has not been given in accordance with sub-sections 84(1) and (2) and the tenant is entitled to an order this effect. The landlord's termination notice dated 31 May 2017 is therefore of no effect. The tenancy continues unaffected by it.
[2]
Procedural history
The application was first listed before the Tribunal for conciliation and hearing on 21 July 2017. Both parties attended that listing of the application in person. In accordance with the Tribunal's usual practice where both parties are present in person, prior to the case being called, the parties were offered the opportunity to attempt to resolve the dispute in conciliation with the assistance of a Tribunal conciliator. Those efforts were not successful. When the parties returned to the hearing room, the Tribunal adjourned the application for hearing at a special fixture and gave directions to the parties for the filing and service of documentary evidence. The Registrar subsequently set the matter down for a special fixture hearing on 25 August 2017.
[3]
Evidence
Both parties have complied with the Tribunal's directions for the filing and service of evidence. Mr Hassiotis and Ms Jiang both gave oral evidence to the Tribunal under a solemn promise to tell the truth. Ms Jiang also called as a witness Ms Lingzi Lu who gave oral evidence at the hearing under a solemn promise to tell the truth. Mr Hassiotis had the opportunity to ask Ms Jiang and Ms Lu questions and to make submissions to the Tribunal. Ms Jiang had the opportunity to ask Mr Hassiotis questions and to make submissions to the Tribunal.
The evidence of the parties will be referred to, as relevant, following.
[4]
Material facts
The material facts to emerge from the evidence may be stated as follows:
6.1 The dispute arises from a RTA that was made on or about 25 July 2016 and which commenced on that date. I do not have every page of the RTA before me in evidence. However, I am satisfied the agreement is in standard form and that it is a residential tenancy agreement within the meaning of section 13 of the RT Act to which that Act applies pursuant to section 6;
6.2 The residential premises is the upper floor of a dual occupancy dwelling with a ground level garage which has a common driveway and front and back yard with the ground floor premises. The upper and lower units have separate titles and addresses;
6.3 Both the upper and lower units were purchased by the current landlord (and respondent to these proceedings) in or about June 2014. However, in or about September 2014, Ms Jiang sold the upper unit to Ms Ya Mei Zhang. Ms Zhang lived in the unit with her family until July 2016;
6.4 In July 2016 Ms Zhang moved out of the upper unit, appointed a Managing Agent, and offered the unit for lease. On or about 25 July 2016 the Managing Agent accepted an offer to lease the premises from Mr Hassiotis;
6.5 The term of the lease originally offered to Mr Hassiotis was 12 months. However, Mr Hassiotis told the Managing Agent that as he was relocating from overseas with his family he wanted additional security of tenure. He requested comfort that he could lease the premises for at least a further 12month period after the end of the fixed term;
6.6 The Managing Agent agreed to this, indicating that Mr Hassiotis would have the option of leasing the premises for a further 12 months at the end of the initial fixed term. To give effect to this agreement the Managing Agent made a handwritten annotation on the front page of the agreement in the section which reads "The term of the agreement is" which states "12 plus 12 months";
6.7 Included in the tenant's evidence is a signed statement made by Ms Zhang dated 16 June 2016 which confirms that it was the parties' intention at the time the agreement was made that a tenancy was created for a period of 12 months with the option of a further 12 month term at the end of the initial fixed term:
…I'm the previous owner of property located at [address]. I signed a lease with the current tenant Panagiotis Hassiotis for 2 years at $630./pw from 25/July/16 to 24/July/18. The lease is a 12 months + 12months as stated in the lease.
6.8 On or about 10 March 2017 Ms Jiang (the current landlord) re-purchased the premises. She did so subject to the terms of the existing lease held by the tenant. She later appointed a Managing Agent for the premises. This was not the Agent that had previously managed the property for Ms Zhang;
6.9 By notice dated 31 May 2017 the landlord purported to terminate the RTA at the end of the fixed term on 25 July 2017. The notice relied upon by the landlord is in her evidence. It is a standard form termination notice signed by her Managing Agent. The Managing Agent has completed the section dealing with service of the notice by stating that it was served by post. Also in the landlord's evidence is a copy of a covering letter on the letterhead of the Managing Agent and signed by the Managing Agent dated 31 May 2017. The copy has been stamped "Entered" and under that stamp there is a handwritten date "31/05/17" and signature;
6.10 Mr Hassiotis denies that a copy of the termination notice was ever served on him by any means. He has included in his evidence a copy of an email sent to his teenage son by the Managing Agent on 31 May 2017. That email has the subject line ""TERMINATION NOTICE WITH END OF FIXED LEASE TERM" and the body of the email states:
Re Termination Notice: [address of premises]. Please find attached termination notice regarding above mentioned property. You are required to give vacant possession of the premises on 25/07/2017. Should you have any queries regarding this matter please do not hesitate to contact me on [telephone number].
It is clear that there is a pdf attached to the email. Mr Hassiotis claims that this was an unsigned copy of the Managing Agent's cover letter dated 31 May 2016 only. He has submitted a copy of this letter in evidence;
6.11 By email dated 20 June 2017, Mr Hassiotis notified the landlord's Managing Agent that he intended to exercise the option to renew the lease for a further 12 month period at the end of the fixed term. At the same time he provided the Managing Agent with a copy of the statement made by Ms Zhang dated 16 June 2017, referred to in paragraph 6.7 above, to confirm that the lease contained this option;
6.12 The landlord's Managing Agent responded to Mr Hassiotis' email later that day in the following terms:
Thanks so much for your notice.
This statement cannot be proving anything. Because the name of this letter is not current owner, and also the date of signature is 16/06/17, which means is anything to effective current owner's decision.
Previous owner have not any authorities to enforce current owner have any decisions once she sold abovementioned property.
For original contract, you have one year fixed lease term and one year optional lease term. Your one year fixed term will be expired on 27/07/17/
For another one year optional term, which is subject to the current owner. Due to current owner health condition and doctor's order, she have to decline your optional lease term and ask he relatives to come back to Sydney to take care owner's daily life.
Therefore, you have to vacate above mentioned property once fixed term will be expired (errors in the original).
6.13 On 28 June 2017 the tenant served a formal notice on the landlord's Managing Agent by email purporting to exercise his option to extend the term of the lease by a further 12 months from 26 July 2017. That email is in the following terms:
NOTICE TO EXERCISE LEASE OPTION
Date: 28/6/17
To: [name of agent]
Please be advised that the undersigned, as Lessee under a certain lease under date of 25/07/2016 and ending on 25/07/2017, for premises known as [address of premises] does hereby exercise its option to extend or renew said lease for the next option of 12 month period commencing on 26/07/2017 and ending 26/07/2018.
For your reference attached is the original tenancy agreement and letter from the original landlord in that regard.
6.14 The landlord's Managing Agent replied to Mr Hassiotis by email dated 29 June 2017 in the following terms:
Please be advise that we are current managing agency above mentioned property.
According to owner final decision, she declined your optional lease term on 31/05/17.
The reason why she rejects renew your tenancy lease, because she got heart condition and unable live herself as solo residents.
She needs someone who can look after her 24/7. So, she informed her relatives to come back to Sydney to take care of her as soon as possible.
Therefore, you have no option to vacate premises on 25/07/17. (errors in the original)
6.15 I note that there is no evidence before the Tribunal as to any "heart condition" that Ms Jiang may have. There is in evidence a doctor's certificate dated 7 August 2017 which states that Ms Jiang is suffering from anxiety and depression for which she is prescribed medication. The certificate states that Ms Jiang reported sensitivity to loud noise and that she was advised to live in a quiet environment. In any event, I do not consider this evidence relevant to the issues I must determine in this application;
6.16 I also note for completeness that the parties have each filed evidence about a noise dispute that subsists between them. In short summary, the landlord contends that the tenant and his family are noisy and that this disturbs her quiet enjoyment. The tenant denies that he and his family make excessive noise and contend that the landlord engages in behaviour that disturbs their quiet enjoyment and ordinary use of the premises. I do not consider this dispute relevant to the issues I must determine in this application.
[5]
Jurisdiction
Sub-section 111(1) of the RT Act provides that a tenant or a landlord may apply to the Tribunal for an order in relation to a dispute about a termination notice. In this case there is no dispute that the applicant remains a tenant living at the premises. He thus has standing to make this application.
Section 111 does not specify a time period within which an application may be made to the Tribunal for an order in relation to a dispute about a termination notice. Rule 23 of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) therefore applies in these circumstances. An application must be made within 28 days from the day on which the applicant became entitled to make the application, unless the time for the making of the application is extended under section 41 of the Civil and Administrative Tribunal Act 2013 (NCAT Act).
There is a dispute as to whether the tenant was ever served with the notice of termination relied upon by the landlord by a method authorised by section 223 of the RT Act. However, for the purposes of establishing jurisdiction I will set that issue to one-side.
The landlord contends that the termination notice was served by post to the tenant's address on 31 May 2017. If so, section 76 of the Interpretation Act 1987 provides that it is deemed served on the fourth working day later, which was 6 June 2017. On this analysis, the tenant therefore had until 4 July 2017 to make an application to the Tribunal in relation to the disputed termination notice. His application was actually made 6 days later on 10 July 2017. The application has thus been made outside the time period permitted by Rule 23.
Section 41 of the NCAT Act provides the Tribunal with discretion to extend the time in which an application may be made. The principles that apply in the exercise of that discretion were articulated by the Appeal Panel of this Tribunal in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22. In short summary, time limits are to be strictly enforced unless to do so would work an injustice to an applicant. In determining if time should be extended the Tribunal must consider the length of the delay, the applicant's explanation for the delay, any relevant prejudice that would be suffered by the respondent if time were to be extended, and whether the applicant has an arguable case. If the delay is extensive, the applicant's case must be more than merely arguable, it must have substantial merit.
[6]
Applicable law
Sub-section 111(1) of the RT Act provides that a landlord or tenant may apply to the Tribunal for an order in relation to a dispute about a termination notice. Sub-section 111(2) provides that in determining such an application the Tribunal may declare that a termination notice was or was not given in accordance with Part 5 of the RT Act. Sub-section 111(3) makes it clear that sub-section 111(2) does not limit any other order the Tribunal may make on an application under section 111.
The dispute concerns a termination notice that purports to terminate a fixed term agreement. Section 84 of the RT governs termination of a residential tenancy agreement in these circumstances. It provides:
84 End of residential tenancy agreement at end of fixed term tenancy
(1) A landlord may, at any time before the end of the fixed term of a fixed term agreement, give a termination notice for the agreement that is to take effect on or after the end of the fixed term.
(2) The termination notice must specify a termination date that is on or after the end of the fixed term and not earlier than 30 days after the day on which the notice is given.
(3) The Tribunal must, on application by a landlord, make a termination order if it is satisfied that a termination notice was given in accordance with this section and the tenant has not vacated the premises as required by the notice.
(4) This section does not apply to a residential tenancy agreement if the tenant has been in continual possession of the same residential premises for a period of 20 years or more and the fixed term of the original fixed term agreement has ended.
Sub-section 15(1) of the RT Act provides that the regulations may prescribe a standard form of residential tenancy agreement. Pursuant to sub-section 15(5) a residential tenancy agreement of a kind for which a standard form is prescribed is taken to include the terms of the standard form. Regulation 4 of the Residential Tenancies Regulation 2010 (RT Regulation) provides that the standard form of a residential tenancy agreement is set out in Schedule 1 of that Regulation. Sub-section 15(4) of the RT Act provides that a residential tenancy agreement for which a standard form is prescribed may include additional terms, but only if the terms do not contravene the RT Act or RT Regulation and the terms are not inconsistent with the terms set out in the standard form.
[7]
Consideration
The questions the Tribunal must pose and answer in order to determine in this application may be stated as follows:
1. did the RTA entered into by the tenant and the former landlord on or about 25 July 2016 contain a term entitling the tenant to exercise an option to extend the agreement by a further 12 months at the end of the fixed term?
1. If so, is such a term void on the basis that it is a prohibited term, or a term that is inconsistent with the standard form residential tenancy agreement?
2. If so, what effect did the sale of the premises to the current landlord have on that term, if any?
3. If so, does the exercise of the option by the tenant require the current landlord's agreement?
4. If so, did the tenant validly exercise the option of a further 12 month term of the agreement?
1. if the tenant has validly exercised the option to extend the agreement by a further 12 months, what effect does this have on the landlord's attempt to terminate the agreement at the end of the fixed term?
2. in view of the answers to these questions, is the tenant entitled to a declaration that the termination notice relied upon by the landlord was not given in accordance with Part 5 of the RT Act?
3. What is the legal effect of such a declaration if it is made?
4. Should the Tribunal make any other orders in the circumstances of this case?
[8]
Did the agreement contain an option of a further 12 month agreement?
On the evidence before me there can be no doubt that the residential tenancy agreement entered into between the tenant and Ms Zhang on or about 25 July 2016 was for a term of 12 months commencing on that day, with an option of a further twelve month term at the end of the initial fixed term. This term is in very rudimentary form, but there is no uncertainty about it that would render it void and necessitate its severance: cf Birks & Gilbertson v Winton Partners Pty Ltd [2010] NSW CTTT 128; Newnham v Carroll [1995] NSWRT 52. The terms upon which the tenancy would continue, including the rent that would be payable during the period of the further term, are set out in writing in the agreement that was signed. If there is any potential for doubt about this, Ms Zhang has dispelled that doubt in her statement dated 16 June 2017. Moreover, the existence of the term is not really in dispute between the parties.
[9]
Is the option a prohibited or inconsistent term?
Terms that are prohibited from being included in a residential tenancy agreement are set out in section 19 of the RT Act and Regulation 5 of the RT Regulation. As I have already noted, an option for a further term of an agreement is not prohibited by the Act or Regulation.
I note that in McDonald & McDonald v Stanley & Dale [2001] NSWRT 187, a Member of the then Residential Tribunal of New South Wales determined that a special condition included in a residential tenancy agreement that was to the effect that "[t]he owners have agreed to an option to renew the lease in twelve months' time at a rent of current market value" was void on the basis that it was inconsistent with section 45 of the then Residential Tenancies Act 1987. Section 45 dealt with rent increases. The inconsistency apprehended by the Member is not stated.
In this case, I cannot ascertain any inconsistency between the option and its terms and any provision of the RT Act or RT Regulation. The option is merely a contingent right granted to the tenant by the landlord, exercisable by the tenant, to extend the fixed term agreement by a further 12 months on the same terms as the current agreement. Residential tenancy agreements are routinely continued beyond the end of an initial fixed term under further fixed term agreements or as periodic agreements. There is nothing inconsistent between the effect of the option and the routine operation of residential tenancy law.
[10]
What effect did the sale of the property to the current landlord have on the option?
When the current landlord purchased the premises she did so subject to the terms of the lease between the previous landlord and the tenant. Her right to exclusive possession of the premises is a reversionary interest within the meaning of section 118 of the Conveyancing Act 1919 that does not crystalise until the estate in the land granted to the tenant by the previous landlord comes to an end. She must fulfil the previous landlord's covenants (or promises) to the tenant under the terms of the lease.
[11]
Does the exercise of the option by the tenant require the current landlord's agreement?
The landlord contends that the tenant only has the right to exercise the option with her consent and she refuses that consent. This is a misunderstanding of the nature of the option: cf Gamble v Watts Unit Trust [2004] NSWCTTT 475. The option is a contractual obligation accepted by the former landlord that grants the tenant the contingent right to renew the residential tenancy agreement by a further period of period of 12 months at the end of the initial fixed term if he exercises this option. The option does not require any further agreement between the parties. The option takes effect if the tenant exercises it. The former landlord did not reserve any right to refuse the exercise of the option in any circumstances.
For the reasons stated above, when the current landlord purchased the property subject to the residential tenancy agreement the former landlord's obligation to honour the option passed to her. She must honour that obligation. The Tribunal must give effect to agreements consistent with the foundational legal principle that 'promises must be kept' (pacta sunt servanda): Whitlock v Brew [1968] 118 CLR 445. This includes agreements about options: Prudential Insurance v Health Minders (1987) NSWLR 673 per Kirby P.
[12]
Did the tenant validly exercise the option?
There does not appear to be any term in the agreement as to how the tenant was to exercise the option. However, the Tribunal may imply a term into the contract to give effect to the presumed intentions of the parties: Codelfa Construction v SRA (1982) 149 CLR 337 [at p 345] per Mason J. The implied term is that the tenant would notify the landlord on or before the lapse of the initial fixed term of his intention to exercise the option.
Section 223 of the RT Act deals with the service of notices required by a residential tenancy agreement. In my view a notice to the landlord that the tenant exercises an option falls within the scope of that section. The RTA stipulates that the landlord's address for service is her Managing Agent. However, these details are those of the former, not current, landlord and Managing Agent. There is no evidence before the Tribunal of any notification to the tenant of a new address for service of documents on the landlord or Managing Agent.
However, it is clear on the evidence that the current landlord's Managing Agent was prepared to accept notice by email. Since 27 June 2017, this has been a form of service permitted by section 223 of the RT Act provided that it has been notified as an address for service. No issue has been raised that the tenant was not entitled to serve notice of the exercise of the option by email. As noted above, the tenant's notice was sent to the Managing Agent by email on 28 June 2017. There is no doubt that it was received and acted upon by the Agent.
Having regard to the date of the notice and its manner of service, as well as the explicit terms of the notice itself, I am satisfied that the tenant has validly exercised the option.
[13]
What effect does the exercise of the option have on the landlord's attempt to terminate the agreement?
The tenant's exercise of the option has the effect of extending the fixed term of the RTA to 25 July 2018.
As outlined above, sub-section 84(1) of the RT Act provides that a landlord may at any time before the end of the fixed term of a fixed term agreement give a termination notice for the agreement that is to take effect on or after the end of the fixed term. Sub-section 84(2) of the RT provides such a termination notice must specify a termination date that is on or after the end of the fixed term and not earlier than 30 days after the day on which the notice is given.
The effect of the tenant's valid exercise of the option is that the landlord's termination notice has not been given in accordance with sub-sections 84(1) and (2) of the RT Act. It specifies a date of termination that is prior to the end of the fixed term.
[14]
Is the tenant entitled to a declaration that the termination notice was not given in accordance with Part 5 of the RT Act?
Section 84 is in Part 5 of the RT Act. The tenant has thus established that he is entitled to a declaration pursuant to sub-section 111(2) of the RT Act that the landlord's termination notice was not given in accordance with Part 5 of the Act because it does not satisfy the requirements of sub-sections 84(1) and (2).
[15]
What is the legal effect of this declaration?
The legal effect of this declaration is that the landlord's termination notice is of no effect. The tenancy continues unaffected by it.
[16]
Should the Tribunal make any other order?
Neither party has established grounds upon which the Tribunal should make any other order to the declaration sought by the tenant under sub-section 111(2) of the RT Act. As I have noted above, the noise dispute that subsists between the parties is not relevant to the issues to be determined in this application.
I note that the tenant also sought to contend that he was not served with the termination notice by a means authorised by section 223 of the RT Act. This is potentially an alternative basis upon which a declaration pursuant to sub-section 111(2) that the termination notice was not given in accordance with Part 5 of the RT might be made. However, in view of my finding that the option had the effect of extending the fixed term of the agreement, thus invalidating the termination notice because it did not comply with sub-sections 84(1) and (2) of the RT Act, it is unnecessary for me to consider this alternative basis for the claim.
[17]
Conclusion
For the foregoing reasons, the tenant is entitled to a declaration pursuant to sub-section 111(2) of the RT Act that the landlord's termination notice dated 31 May 2017 was not given in accordance with Part 5 of the Act. The termination notice is of no effect.
P French
General Member
Consumer and Commercial Division
31 August 2017
[18]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
[19]
Amendments
13 October 2017 - to correct errors on cover page
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 13 October 2017
In this case, the tenant's delay in making this application is a relatively short period of 6 days.
The tenant's explanation for the delay is in substance that he was attempting to resolve the dispute with the Managing Agent by proving that he was entitled to exercise an option to extend the term of the lease for a further 12 months from 26 July 2017. He contends that the landlord's Managing Agent sent an unsigned letter by email to his son on 31 May 2017 purporting to terminate the RTA which did not attach a termination notice. He says that his son brought that email to his attention and he then sought advice about it, and contacted his former landlord to obtain proof that he was entitled to exercise an option to renew the lease for a further 12 month period at the end of the initial fixed term.
This resulted in him contacting the Managing Agent by email on 20 June 2016 to notify the Agent that he intended to exercise his option of another 12 month term from 26 July 2017. At the same time, he provided the Agent with a written statement from the former landlord dated 16 June 2017, confirming the existence of the option. The Managing Agent refused to accept the exercise of the option. This resulted in the tenant issuing formal notice to the Managing Agent on 28 June 2017 exercising his option to renew the lease for a further 12 month period from 26 July 2017. The Managing Agent rejected that notice by email to the tenant on 29 June 2017 insisting that vacant possession be given on 25 July 2017. After obtaining further advice the tenant learned that he could make an application to the Tribunal under section 111 of the RT Act to resolve the dispute. He did so promptly after obtaining that advice.
I am satisfied that the circumstances outlined above provide a satisfactory explanation for the tenant's short delay in making this application to the Tribunal.
I do not apprehend any relevant prejudice to the landlord that would arise from extending the time in which this application may be made. The delay is short, and the landlord has been on notice at all material times that the tenant disputed the termination notice. The delay has not had any discernible impact on the landlord's capacity to respond to the application.
For the reasons outlined following, the tenant has succeeded in obtaining the declaration he seeks. I accepted that his claim was arguable on a prima facie basis.
Taking each of these factors into account I am satisfied that it would work an injustice to the tenant if the time limit for the making of this application to the Tribunal were to be strictly enforced.
I therefore exercise the discretion conferred by section 41 of the NCAT Act to extend the time in which this application may be made to the Tribunal to 10 July 2017, being the date the application was made.
Sub-section 21(1) of the RT Act provides that a term of a residential tenancy agreement is void to the extent to which it is inconsistent with any term included in the agreement by the RT Act or RT Regulation. Sub-section 21(2) of the RT Act provides that the Tribunal may, on the application of a landlord or tenant make an order declaring that a term of a residential tenancy agreement is void or partly void if satisfied that the term is inconsistent with any term included in the agreement by the RT Act or RT Regulation or is prohibited by the RT Act or RT Regulation.
Prohibited terms of residential tenancy agreements are set out in section 19 of the RT Act and Regulation 5 of the RT Regulation. None of the prohibited terms specified are relevant in this case.
Section 118 of the Conveyancing Act 1919 deals with the subsisting obligations of a lessor on the sale of the property, such as the terms of a lease, including the duration of that lease. In simple terms, the property is sold subject to those obligations. This includes any contingent obligations the lessor may have to the lessee. The new owner's reversionary interest in exclusive possession cystalises when those obligations come to an end.
Section 223 of the RT Act sets out the requirements for the service of notices under that Act. The section was amended by the Electronic Transactions Legislation Amendment (Government Transactions) Act 2017 to include the sending of a notice to an email address specified by the person for the service of documents of that kind. This amendment commenced on 27 June 2017.