Hayden v Rigney

Evidence from the Tenants

1. The tenant gave evidence in writing and verbally to the Tribunal. They stated that they notified the agents verbally in May 2015 that they wished to break their lease early. They were aware of the penalties, so advised that they would stay until the end of the lease term and rent out the house they were buying if needed. They wanted to advise the agents as soon as possible in case there was someone looking for a similar house to their rental and ideally they would want to move when their purchase was vacant.
2. The tenants had requested an estimate of the rental of their new purchase from another local agent, who suggested it would fetch between $400.00 and $450.00 in rent. This was in the same price bracket as their current rental and would greatly assist a potential financial obligation on two properties.
3. They advised the agents in writing on 1 June 2015, that they would like to break the lease at the end of August 2015, only because they had to give a date and thought three months was enough time to find another tenant. They were clear that if someone was not available to take the lease over, they would stay until the lease expired in November. When they got a letter from the agent confirming they were leaving at the end of July 2015, they called to correct the position as this was not the case and the end of August was the date. They also said that their house was likely to be ready at the end of July if another tenant was found.
4. They then received a call from the agent on 11 June 2015, saying that there was good news. The landlord had decided that, as the tenants were planning to vacate, the property would be put up for sale, and as long as they were willing to allow viewings, there would be no penalty to break the lease early. The tenants were clear that no mention was made of staying to a specific date. Nothing was put in writing by them and they received nothing from the agents either. In retrospect they very much wished they had put something in writing. The tenants were under the clear impression that they could move out when they wanted as long as they allowed access for potential buyers. They were really happy at this news and told friends the outcome - they have provided two statutory declarations of this in the written evidence bundle.
5. They moved out on 13 July 2015. It was not until some weeks later that they became aware there was an issue with the lease break. They were not aware the landlord had claimed the bond and this was the reason they were now at Tribunal.
6. They agree that there is water outstanding and while they did do extra cleaning, and think the cleaning charge is high, they are prepared to pay the cleaning. They are not agreeing that they owe the rent.

Evidence from the Managing Agent

1. The agent gave evidence in writing and verbally. Her written evidence included a chronology of events, the lease agreement, the actions and conversation diary, rent ledger and other relevant correspondence related to the tenancy.
2. She was aware that the tenants wanted to break their lease and she thought they were building a house. The Senior Property Manager in the office contacted the owners to advise them of this and that the tenants would be leaving at the end of August. At that point (5 June 2015) the instruction was to place the property on the rental list and find another tenant.
3. The landlord then considered putting the property on the market for sale rather than find another tenant, and subsequently advised the agents that this is what they would like to do. There is no record of this conversation in the written diary notes.
4. The agent's evidence did not differ from the tenant's up to the conversation on 11 June. When asked about this conversation, the agent was clear that in the conversation with the tenant, she said that there was good news, the tenants were able to get out their lease penalty free if they allowed access for sales, as long as they paid the rent until the end of August. She was certain that the end of August was discussed in the conversation.
5. She stated she was on holiday at the time the tenants vacated and handed back the keys, and was unclear why the vacate date had changed from end August to middle of July.
6. She only became aware that there was a dispute at the end of August, when she wrote to the tenant outlining her understanding. The tenants disagreed and the agency then made the decision to claim the bond and apply to Tribunal to settle the matter. The tenants had previously agreed to pay the outstanding water and cleaning bill

Relevant Legislation

1. The provisions of the Residential Tenancies Act 2010 apply to this agreement and specifically the following section; Section 81 Circumstances of termination of residential tenancies (4) Other legal reasons for termination A residential tenancy agreement terminates if any of the following occurs: (e) the tenant gives up possession of the residential premises with the landlord's consent, whether or not that consent is subsequently withdrawn,

Findings

1. From the written and verbal evidence, it is common ground between the parties that the tenant discussed with the agent breaking their lease early.
2. The conversation between the tenants and the agent on 9 June is noted in the property management software used by the agent and was presented in evidence by the agent. This states that the tenant has called the agent to say they will vacate on 31 August, even though the house they are purchasing will be ready at end of July 2015. It is clear at this point that everyone agrees that the tenants are remaining until at least the end August 2015 unless another tenant can be found.
3. I am satisfied that the tenants would not have taken any action that would have resulted in a large financial penalty to them, and that the plan they had to lease out their own home if they were to be penalised was one they would have put into effect if required.
4. The conversation between the tenants and agent on 11 June is also noted in writing, and is about landlords deciding that the property is now being listed for sale. It records that the agent initiated the call and the entry states "Property for sale Talked to Matt about the property being listed for sale. They are free to stay until their house is ready and then vacate with no penalties as long as they give access for sales inspections. They are happy with this arrangement."
5. This entry was made by the agent at the time of the event. Any reasonable person reading this would conclude that an agreement had been reached in which the tenants are free to vacate the premises when they have somewhere to move to at no penalty. No mention is made of paying rent until August 2015, indeed they are able to "vacate with no penalties". Along with the tenant's evidence of their recollection of the conversation, and the statutory declarations, this entry provides more weight that this was the arrangement that the tenants were offered and that they accepted. It carries more weight than the verbal evidence of the same agent some months after the event, given with the benefit of hindsight and an understanding of the consequences.
6. I am satisfied that the conversation that took place between the tenants and the agent on 11 June 2015, did not, on the balance of probabilities, mention the tenants having to remain in the premises until the end of August 2015.
7. It is not at all clear what the landlord's asked the agents to convey to the tenants, or what their understanding of the agreement was. However it is a well-established principle that the landlord is bound by the actions of their agents.

Application of the Law and Reasons for Decision

1. S 81 (4) e makes no mention of the need for a termination notice for the tenancy to be validly terminated under this clause, and in "Residential Tenancies Act 2010 Anforth et al 6th Ed P182-183", termination under this clause is discussed in detail as termination by surrender of the tenancy, where both parties agree that the tenancy will end early. "The essence of a surrender is that no further rights accrue under the tenancy agreement after the surrender and hence no further rent is due from the tenant for the balance of the term of the tenancy. A surrender is not the same as an agreement between the parties that the tenant will vacate and the landlord will search for a new tenant, where the landlord makes it clear that the tenant is not being released from their obligations"
2. The verbal agreement between the parties made on 11 June 2015, was in essence a surrender of the tenancy when the tenants' new house was ready, in return for allowing access for viewings with no exit penalties due. Both parties agreed that the tenancy was ending, the agent recording the agreement on file. No subsequent letter was sent to the tenant stating a different position or outlining obligations that would continue.
3. In accordance with S 81 (4) e above, I am satisfied that the tenancy validly ended on 13 July 2015, and that the tenancy was ended with consent of the landlord. In these circumstances, no further rights accrue and no further rent is due for the balance of the term of the tenancy.
4. Additionally, I have considered whether, regardless of this agreement and Section 81 (4) e, if the landlord can demand compensation as the tenancy was ended before the expiry of the lease term.
5. The lease agreement had additional clause 19, stating that the tenant will be responsible for a number of charges and "rent owing up to and including the date the agreement expires or until a new tenancy commences".
6. In this case, the landlord did not decided to find a new tenant, but to sell the premises. The premises were not available for rent and the landlord was not making attempts to mitigate their loss.
7. Even if I am wrong in my interpretation of S81 (4) e and its application in this case, the fact that the lease agreement had the standard lease break clause crossed out and the agents' inserted their own additional Clause 19, means that the landlord would be under a duty to mitigate loss, and no attempts were made to find another tenant. The landlord, for their own reasons, decided to sell rather than re-let the premises. In these circumstances the tenants cannot be held responsible for rent once they have vacated and the premises are on the market for sale.
8. In considering whether any compensation could be made to the landlord for an early lease break, I am also mindful of S 100 of the Residential Tenancies Act, which allows the tenant to terminate a tenancy without compensation to the landlord if the premises are put on the market for sale, and this was not disclosed at the start of the tenancy. While this requires the service of a termination notice by the tenant which did not occur, and the landlords' action was prompted by the tenant and therefore S100 is not applicable in this case, it is a further circumstance where compensation to the landlord is not made for early termination.

Summary

1. In conclusion, taking account of all the circumstances of the case and the evidence presented by both parties, I find that there was a verbal agreement between the parties to end the tenancy early. That agreement suited both parties and was put into place by both parties. Neither party saw fit to ensure that the agreement was clear and in writing.
2. The onus of proof is on the landlord as they are claiming the tenants' bond. Even if I have erred in my application of S81(4) e and there was not an agreement to terminate the tenancy early, the landlord would not have a claim on the bond as they did not try and re-let the premises, but put it on the market for sale. They did not try and reduce any loss of rent by re-letting quickly. Additionally, if there was not an agreement and tenant had still been responsible for rent, they could serve a termination notice and relinquish the premises without compensation to the landlords as the property was for sale.
3. In the circumstances of this case, the tenant is due to have their bond refunded, less the sum due for cleaning and water consumption as previously agreed.

Orders

1. The landlord is to pay the tenant the sum of $1,571.52 immediately. This is made up as follows Outstanding Water Consumption $129.60 Outstanding cleaning $99.00 Total Outstanding $ 228.60 Bond with agent $1800.12 Amount due to tenants $1571.52 S Fenwick General Member Civil and Administrative Tribunal of NSW 5 January 2015

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 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: 12 February 2016