Rent Increases under the Residential Tenancies Act 1997

1. The rent increase scheme is outlined at sections 44 to 48 of the RTA. In my view, the intent of this scheme can be synthesized as follows:

(a) Rent can only be increased at 12-month intervals.

(b) Rent increases can only be proposed by giving 60 day written notice in the prescribed form.

(c) Notices given should be sufficiently detailed for renters to access two important safeguards to prevent the imposition of excessive rents.

1. The first of those safeguards is provided at section 45. A free, independent investigation of whether the rent is excessive is available to the renter upon request. This right is open for 30 days from the notice being given. A report is provided by the Director of Consumer Affairs.
2. Within 30 days of receiving that report, the renter may apply to the Tribunal for a determination of whether the rent is excessive. There is also a pathway, upon grant of leave, for the renter who has not availed themselves of the right to seek a report, to proceed with an application regarding excessive rent before the Tribunal.
3. Section 47 provides that once seized of the application, the Tribunal can declare the rent excessive and set the rent or dismiss the application.
4. Section 48 provides that the Tribunal can order a refund of rent found to be excessive from the date that the renter invoked their rights to the date of the determination.
5. The principal mischief sought to be regulated by these provisions of the RTA is that rent increases should not be excessive and may only occur annually. To prevent this mischief renters are assisted by the State to assess whether the increase proposed is excessive and afforded the right to litigate the issue

before the Tribunal. It is clear that the statutory intent, having regard to the contracted timeline for these rights to be accessed and disputes determined, is that these matters ought to be resolved without delay - no doubt influenced by the obvious public purpose that there should not be lingering doubt as to the correct rent to be paid under any residential tenancy agreement.

Compensation for invalid notices - law and history

1. Section 44(5) makes clear that a rent increase in contravention of this section is invalid.
2. The difficulty that has somewhat vexed the Tribunal in recent times is s 44(5) and the application of it within the broader statutory scheme and particularly, as here, where long after the right to challenge excessiveness has passed and after having paid the rent as levied by the notice without complaint for many months, an application for a refund of the entire rent increase raised in the notice is brought, not on the basis of excess but of technical invalidity.
3. In recent times, consequent upon the legislative amendment to s 44(3) requiring the specification of the method by which the rent increase is to be calculated and the decision of the Tribunal regarding sufficiency of notices to comply with this requirement - Boyce v Mariella Nominees Pty Ltd ATF Lorusso Family Trust [2023] VCAT 89 ('Boyce') - there has been a flurry of litigation in this area and there have been cases demonstrating some measure of inconsistency of approach to the question of how compensation under the Act is to be approached where the notice is invalid.
4. This issue appeared to have been resolved in the decision Bergess v Semenow (Residential Tenancies) [2020] VCAT 193 ('Burgess'). Bergess concluded that the Supreme Court case of Jeffrey v the Fitzroy Collingwood Rental Housing Association Limited [1999] VSC 335 ('Jeffrey') could be distinguished from applications such as this under the RTA. I agree.
5. In Jeffrey, His Honour Justice Harper, was dealing with an application under the Rooming House Act 1990 which had no equivalent provisions to sections 210 or 211 of the RTA.[1] Thus, having no statutory criteria to assist in the resolution of the dispute under the Rooming House Act 1990, both the Senior Member at first instance[2] and Justice Harper reasoned that the law of restitution was the law to be applied.
6. In so far as there is there is a divergence of approach in Tribunal decisions in this area, in my view, broadly speaking, there are two approaches: the Jeffrey approach and the statutory approach.[3]

The Jeffrey approach, which is based upon the law of restitution as outlined by Justice Harper was expressly adopted in Tortorella v Brookfield Village Management Proprietary Limited [2012] VCAT 705 (noting importantly that akin to Jeffrey s 210B[4] and s 211 of the RTA whilst enacted did not retrospectively apply to the claim). This approach was impliedly adopted in Asif v Jian Ding Property (Residential Tenancies) [2023] VCAT 1042 - though no compensation orders were actually made.

The Jeffrey analysis was given significant weight in NSV v Zang (Residential Tenancies) [2024] VCAT 766, though it seems the presiding member was not assisted by the renter's advocate who neglected to bring the decision of Bergess to the Member's attention.

The statutory approach was distilled in Maurer v Sia (Residential Tenancies) [2024] VCAT 571 ('Maurer') and adopted in the unreported decision of Reich v Holmes R2023/38788.[5]

In my view the statutory approach to compensation is to be preferred as correct and the decision of Jeffrey can be distinguished and is not binding upon members of the Tribunal. It is to be noted that s 210(1)(b) - the provision specific to a claim for compensation for loss or damage suffered by the applicant because the applicant has paid to the other party more than they are required to pay under the Act or the agreement - may be subject to s 211 and the discretionary considerations thereunder. Plainly had the Parliament wished to impose the law of restitution as the law to be applied for overpayment cases it could have done so and did not. Plainly had it wished to make s 210(1)(b) applications not subject to s 211 or subject to other considerations as it saw fit it could have done so and did not.[6] In my view the fact that the s 211 considerations are discretionary rather than mandatory does not mean that those considerations can be disregarded and the general law of restitution imposed without any power to do so arising from the statute itself.

It might be thought having regard to the remarks of Justice Harper that the more nuanced and less legally complex framework for the resolution of these disputes outlined at s 211and elsewhere in the RTA bespeaks Parliament's wisdom in this area. His Honour grapples with the essential conundrum that these cases often manifest; "that the justice of the thing is not entirely one-dimensional" and that a renter who succeeds achieves a "windfall". His Honour further opines that "the proper disposition of issues such as these is not made any easier by the complexity of the law of restitution". When regard is had to the purposes of the Act "to provide for the inexpensive and quick resolution of disputes under this Act" it is perhaps unsurprising that the Parliament did not consider the complex law of restitution (particularly the very complex defences available) was a suitable framework for the resolution of disputes in a Tribunal setting where most parties appearing are not legally represented and will not have had access to legal advice.

I adopt as correct the reasoning of SM Campana in Wenger v Suwignjo [2024] VCAT 996 where at paragraphs 7 -12 the principles of compensation under the RTA are identified - in essence that statutory compensation is for genuine losses incurred not to penalise one party or unjustly enrich another party.

I also adopt as correct the reasoning of SM Campana in Maurer where the member states (at para 16 and 27) that an award of compensation for a refund of rent falls to be assessed by reference to the steps taken by each party, any mitigation by the renter, whether the rent paid is excessive or a fair price, and overarchingly that compensation is discretionary and that each case must be determined on its own facts having regard to relevant considerations and principles.

1. The notice was given by email 26 June 2023. It was in the prescribed form and the applicant raised no issues as to the mode of the giving of the notice or the statutory timeframe - nor could any such arguments have been raised. The rental agreement provided for consent to electronic service at the email address utilised to give the notice. The start date for the increase in rent was 8 September 2023, which was in excess of 60 days. The notice was compliant with the legislation in all respects other than the one identified below.
2. The claimed invalidity of the notice as referred to in the renter's application and their summary of claim presented at hearing is the absence of detailed information of any properties locations, features, or rentals relied upon to support the "comparative market analysis".
3. Verbatim the notice stated:

Method used to calculate rent increase

$480 per week divided by 7 days per week

X 365 days per annum

divided by 12 months per annum = $2086 per month

The increase is based on 2 bedroom apartments in the ST Kilda East/Balaclava area (comparable with courtyard/s) that are ranging around $500 - $550 per week.

1. The renter is correct in my view to characterise the method as being an exercise (or purported exercise) of comparable market analysis even if those words were not used. The words actually used do no more than articulate what would be an objectively reasonable process by which a comparable market analysis would be achieved by comparison of like properties in the same geographical area and the rents achieved for those properties within a time period sensibly referable to the subject premises for which rent is ought to be increased. In that sense the words do not add much more value than the expression comparable market analysis and are likewise subject to the vice identified in Boyce - in short that unless the properties asserted to be

comparable are identified then the reasonableness of that assertion and the validity of the asserted market analysis is obfuscated to the detriment of the renter who must be put in a position by the notice to consider whether to challenge the rent as excessive. Had this notice stated or been accompanied by information identifying the actual 2 bedroom apartments in the St Kilda East/Balaclava area with courtyards the renter could easily have satisfied themselves as to the validity of the assessment. This could have been easily done but was not done and in my view the notice was invalid as a consequence.

Is the renter entitled to a refund of rent taking into account relevant considerations and principles?

1. At the time the notice was given the Boyce decision was 5 months old and the legislative amendments that introduced the method of calculation requirement were more than 12 months old.
2. The evidence of the agent was that she believed that she had complied with the requirements of the Act.
3. The defect in the notice that I have identified above is of an entirely technical nature.
4. In my view the failure to issue a valid notice was understandable having regard to longstanding industry practice and the only recently emerging interpretation of the novel statutory provision by the Tribunal. This is an example, as so many of these cases have been, not of any bad faith but of technical non-compliance with an evolving (and increasingly complex) statutory scheme. The degree of non-compliance demonstrated does not tend in favour of a grant of compensation to the renter absent other compelling circumstances.

The actions of the renter - including consideration of Section 211 (e) whether or not action has been taken by the applicant to mitigate the loss or damage.

1. The renter gave evidence that he became aware of the invalidity after he had been given a subsequent notice of rent increase 12 months later in July 2024. At that time the renter had purchased an investment property of his own and had engaged a property manager. He sought advice from that property manager as to the July 2024 and June 2023 notices and became aware of the Boyce decision and its potential impact upon his circumstances in July 2024 and notified of his intention to make an application to VCAT at that time.

The application was made on 10 July 2024 at or around the time that the renter gave notice of intention to vacate the rented premises.

The Tribunal has long held the view that the failure to understand the rights to be exercised is not relevant to the failure to exercise them. The fact that the renter was ignorant of his right to take action does not absolve him of the duty to mitigate his loss (if any). Self-evidently the failure to act promptly to assert his rights led to at least two relevant consequences adverse to the rental provider:

(a) firstly, the amount of rent paid under the notice and in dispute accumulated and was distributed to the rental provider without any notice that the entitlement to those funds would ever be in question; and

(b) secondly, the rental provider was denied the opportunity to give a subsequent valid notice to rectify any defect found (or suspected) to have invalidated the notice already given.

1. This delay in action, or failure to mitigate his losses tends against an award of compensation to the renter absent other compelling circumstances.

1. The evidence of the agent regarding the market analysis was that she did not engage an external agency such as Corelogic to provide a comprehensive written market analysis but she conducted her own investigations which, combined with her 20+ years of experience as a Senior Property Manager in that locality, led her to set the rent as she did in the notice. She also gave evidence that this rent increase was given at a time post-Covid when a lot of rental providers were exiting the market. In her opinion[8] there was reduced supply yet rental demand in the area of East St Kilda and bayside more generally remained strong as it traditionally has been for obvious reasons of amenity and locale. I believe I can take on judicial notice the uncontroversial economic relationship between supply, demand and prices.
2. It also emerged at hearing that the rate of inflation in August 2023, proximate to the giving of the notice was 5.2% with arithmetic effect that the 7.3% increase proposed in the notice was a return for the provider of CPI+ 2%.
3. The renter was unable to identify any evidence to support a finding that the rent was excessive. Indeed his evidence was that it "wasn't an issue at the time" and "he could afford it". In this regard the history of the tenancy and the failure to pursue a CAV investigation for excessive rent is instructive.
4. The tenancy commenced pursuant to a residential rental agreement in the prescribed form commencing 8 September 2022 for 12 months to 7 September 2023.
5. The rent notice was given by email on 26 June 2023 - it was followed (by mail) by correspondence inviting the renter to sign another 12 month fixed term agreement at the increased rent fixed under the notice.

The renter responded on 26 June 2023 that he would like a fixed term lease but without any increase in rent and that whilst he "understands the rental market in some areas has increased..there are a number of reasons why I believe my current rent is reasonable".

The first reason proffered is no more than a self-serving statement that he has complied with the dictates of his lease which objectively has no bearing upon the reasonableness or otherwise of the rent to be charged.

The second reason given is potentially more substantive: "the place was listed as a 2-bedroom apartment but in reality the second room at the back cannot be used as a bedroom, it cannot fit a bed in the space and its only use is a study. The residence is a large 1-bedroom apartment and study and the current rental I am paying matches that well."

1. The renter concluded his correspondence, "If agreeable ..please re-send a contract for signing with the current rental with no increases for 12 months. If not, I would like to have this reviewed by CAV".
2. Given this emphatic statement as to the intention to have CAV review the matter, I sought to clarify with the renter why this did not occur. The evidence of the renter was that he did contact CAV by telephone and discussed with them the appropriateness of describing the back room as a bedroom. The renter's evidence was that the CAV officer advised that this was an appropriate description. The renter's evidence was that he then considered that he had exhausted his legal rights in relation to the rent notice.
3. I had the benefit of observing the evidence of all parties at an in-person hearing. The renter was plainly an intelligent man who gave his occupation as involving commercial property for a large telecommunications company. The renter's written submissions were of such a high order that I enquired whether he was legally trained and he revealed that he had studied one law subject. I therefore enquired, given that the renter had the prescribed notice of rights attached to the notice of proposed rent increase which makes clear the right and the process for challenging the notice, how it is that he could conclude that he had exhausted his legal rights. I found his responses unsatisfactory. I conclude that the renter had reasons other than a belief that he had exhausted his legal rights for not pursuing a CAV investigation or VCAT application.
4. The renter remained in possession subject to a periodic agreement for 11 months until given the 2024 rent increase notice which generated the giving of notice to end the tenancy and the commencement of this proceeding.
5. In conclusion upon the whole of the evidence, I am not satisfied that the rent levied under the notice was excessive.

1. In Maurer, the member stated that any claim for compensation falls to be determined on its own facts and emphasised that the Tribunal's power to make a compensatory order is discretionary. The member considered that it was not appropriate to exercise the discretion to order repayment of excess

rent arising from an invalid rent increase notice, if there was no demonstrable loss to the renter and if such an order would unjustly enrich the renter.

1. I am not satisfied therefore that the renter suffered any loss that would entitle him to compensation. To order compensation in this case would in effect amount to a windfall for the renter.
2. The application is dismissed.

[1] Section 210(1)(b) of the RTA being a provision which enables a party to seek compensation for any sum overpaid under the rental agreement, and section 211which sets out relevant considerations for the Tribunal when awarding compensation. Section 210A being the relevant rooming house provision.

1. [2] Unreported VCAT decision H9800353 Donald Jefferies v Rental Housing Association Ltd Fitzroy Collingwood. Member R Walker 25/9/98. Note spelled Jeffrey on appeal.

[3] It is trite law that the Tribunal is a creature of statute and has no more power than that given to it by the Victorian Civil and Administrative Tribunal Act 1998 or the enabling enactment in this case the RTA - the characterisation is used broadly.

[4] Section 210B being the relevant caravan park provision.

[5] Unreported decision of Member R Chamberlain 6 December 2024.

[6] Compare by contrast sections 52-55 of the RTA.

1. [7] I have not assessed the rental provider's conduct through the statutory lens of s 211(a) because, whatever the interpretive controversy as to the proper definition of 'duties under this Act or under the residential rental agreement', in my view the mere incompetent exercise for a right - here the right to increase the rent by notice - does not in my view constitute a breach of a duty under the Act or the agreement upon an available interpretation of the statutory language. As to the lack of legislative coherence or clarity in the compensation provisions of the RTA see QUI v BVO and FIU (Residential Tenancy) [2002] VCAT 112 at 12-20.

[8] I accepted that the agent was suitably qualified to give expert opinion evidence of this kind.