Housing and Tenancy

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Compensation

What is the correct section of the RTA?

The main sections of the RTA relating to compensation are section 209 and 210. The differences between these sections depend on the following:

  • if the tenancy is ongoing or has ended
  • if the compensation issue relates to (a) breach of duty or (b) breach of tenancy agreement (c) an other breach of RTA

Although it is not entirely clear from these provisions, the RTA largely relies on the duty provisions of the Act when dealing with compensation. Given the importance of the duty provisions, it is important therefore to always issue a breach of duty notice when a repair issue arises. Commentary to the RTA indicates that a breach of duty notice is not required once the tenancy has ended however in our view it is prudent to ensure that the landlord has written notice of the breach/issue for which compensation may be claimed.

This chart shows the various situations in which the different sections of the RTA apply:

Tenancy status

Compensation issue

RTA section

Tenancy ongoing

Breach of duty

Section 209

Tenancy ongoing

Breach of tenancy agreement

Section 210

Tenancy ongoing

Breach of RTA

Section 210

Tenancy ended

Breach of duty

Breach of tenancy agreement

Breach of RTA

Section 210

When may compensation be claimed by the tenant?

Compensation may be claimed under the RTA (by either the tenant or the landlord) where there has been a breach of (1) duty provisions (2) the tenancy agreement, or (3) the RTA.

Duty provisions are closely related to compensation: The main basis on which compensation is claimed by a tenant is for a breach of the duty provisions. Generally speaking, it is important to advise clients that they need to issue landlords with a breach of duty notice. This notice is an essential component of compliance procedures and for most compensation applications.

What procedure must be followed when applying for compensation?

As discussed above, in most cases the tenant will be claiming compensation for the failure of the landlord to comply with duties under the RTA. Both tenants and landlords have duties under the Act. The landlord owes the tenant specific duties which include:

  • A landlord must take all reasonable steps to ensure the tenant has quiet enjoyment of the rented premises (section 67)
  • A landlord must ensure the rented premises are maintained in good repair (section 68)

The RTA provides that where a duty provision is breached, a tenant (or landlord as the case may be) is required to give the landlord a Notice of Breach requiring it to comply with the duty and/or pay compensation.

If the tenancy is ongoing: A tenant must issue a Notice of Breach in order to claim compensation as a result of the failure of the landlord to comply with a duty under the RTA. Despite this, VCAT has been known to order compensation in addition to non urgent repairs orders without a notice of breach.

Has a breach of duty occurred?

A breach of duty notice (breach notice) is an essential component of compliance procedures and for most compensation applications. A breach notice must specify the breach, give details of the loss or damage caused by the breach, state that a breach must not reoccur and provide details of the remedy/compensation required. The breach notice must also specify what may occur if the notice is not complied with (ie application for compliance, notice to vacate).

Has the tenant incurred loss as a result of the breach of duty?

The tenant must prove on the balance of probabilities that there has been a breach of duty and that she has suffered loss as a result of this breach of duty.

The tenant should then apply to the Tribunal and include the breach of duty notice with the application.

If the tenancy has ended: A tenant should have issued a Notice of Breach in order to claim compensation as a result of the failure of the landlord to comply with a duty under the RTA. If a tenant has not issued a Notice of Breach she may still rely on other documentary evidence (letter/email/maintenance request form) in which the landlord was advised of the compensation issue. While the tenant may also provide oral evidence that she advised the landlord of the compensation issue, this will be less persuasive evidence.

Is a Notice of Breach required for compensation even where the tenant has moved out and is claiming under section 210?

 

Example: Cassandra moved out of her Director of Housing premises as a result of an infestation of cockroaches and serious plumbing problems. Prior to moving out of the premises Cassandra had repeatedly called the service centre and complained about the insects in her flat and the plumbing issues. She did not issue a Notice of Breach because she assumed her calls to the service center were sufficient. As the tenancy had ended she made a claim under section 210 of the RTA for compensation from the landlord.

 

Answer: In this case Cassandra made a claim under the correct section of the RTA but had difficulties with her claim because she had not issued a Notice of Breach. Section 210 of the RTA does not explicitly require a Notice of Breach but practically the Tribunal will generally require proof a landlord was aware of a repair issue. The tenant is a stronger position if she can produce documentary evidence demonstrating that the landlord had been told about the repair issue. For example, Cassandra may have written a letter/email. Alternatively, it may be a good idea to issue a Freedom of Information request of the landlord to see whether there are any notes on file.

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Other breach of Act / breach of tenancy agreement:

If a landlord has breached its agreement with the tenant or breached a part of the Act that does not relate to duties, an application to the Tribunal for compensation should be made under section 210 of the Act.

As section 210 refers to 'tenancy agreements' and therefore excludes rooming house residents who have not signed a tenancy agreement. Residents in this situation who are seeking compensation should make an application under sections 452 (general applications to the Tribunal) and 472 (general power of the Tribunal to make determinations).

What evidence is relevant to these applications?

There are 3 main types of evidence required in compensation applications:

  1. Evidence of loss to the tenant arising from the compensation issue. Where tenants are claiming compensation they will need to prove their loss (quotes, invoices) to the Tribunal. Where tenants are unable to prove their loss they may attempt to argue that the actions of the landlord caused a 'reduction of amenity' (which may be calculated as a percentage of the rent). It will be helpful to show calculations of lost amenity - for example, show the number of days from notification (of the repair issue) until the date of repair multiplied by a percentage of the daily rent. It is possible to claim both reduction of amenity and financial loss.
  2. Evidence of the compensation issue (such as repairs or breach of quiet enjoyment). This evidence might be provided by photographs, film, witnesses, evidence of the tenant.
  3. Evidence that the other party was put on notice (ie Notice of Breach is preferable but this may also be an email or letter)

What loss can the tenant claim?

The general principle is that VCAT will only award compensation for direct loss or damage and not for pain and suffering (section 447). 

In addition to claiming direct financial loss/damage it is generally worthwhile advising clients to think about claiming compensation for the 'loss of amenity' of their premises. This is particularly important for clients of the HPLC who may difficulty proving their loss because while they can be significantly inconvenienced and disadvantaged by the actions of the landlord (ie ending up homeless or living without electricity or running water) - they cannot point to any direct financial outlay as a result of these actions.

Example

If a tenant had no running water for 1 month but was unable to afford alternative accommodation, it may be worth attempting to claim a 75% reduction in rent for that period. This figure takes into consideration that despite the massive inconvenience to the tenant but also acknowledges that the tenant still had the benefit of living in the premises during that period. 

See also Reardon v Ministry of Housing (unreported, Supreme Court of Victoria, 13 November 1992, Smith J)

See also EL v EA (Residential Tenancies [2006] VCAT - 2049 (11 October 2006))

What will the Tribunal consider when hearing a compensation application?

In considering an application for compensation, the RTA sets out considerations to be taken into account by the Tribunal in section 211. The Tribunal's considerations include whether:

  • the landlord has taken all reasonable steps to comply with the duties under the Act or the tenancy agreement
  • the tenant has already been paid or offered compensation, whether there has been any reduction of rent or other allowance
  • whether action has been taken by the tenant to mitigate the loss or damage

Considerations in compensation matters

When assisting clients to claim compensation or respond to such applications from the landlord there are a number of issues that must be kept in mind.

  1. Relevant sections of the RTA (section 209 or section 210)
  2. Has written notification been given to the landlord of the compensation issue?
  3. Has there been direct loss or damage as a result of the compensation issue?
  4. Is there (sufficient) evidence or proof of (a) the compensation issue and (b) the loss of damage arising from that issue?

Are there limits on the amount of compensation?

Section 447 of the RTA specifies a $10,000 limit on compensation claims to be heard by the Tribunal. In order to increase this jurisdictional limit, the tenant has a number of options that include:

  • (1) abandoning the amount of the claim which exceeds $10,000
  • (2) Reaching agreement with the other party to increase the jurisdictional limit (not easy!)
  • (3) Making an application under the Fair Trading Act.

Fair Trading Act claims: If your client wishes to make a compensation claim which exceeds $10,000 and intends to rely on the Fair Trading Act (FTA), the compensation application should specifically refer to the FTA.

Where will the claim be heard? The annotated commentary to the RTA suggests that where an application is made under the FTA, the matter will be heard by the Civil Claims List of the Tribunal. By contrast, where an application is made under the RTA and subsequently amended to include an FTA claim, this matter will likely be heard by the Residential Tenancies List.

It is important to think about which list will hear the application because there are significant differences in application fees between the Civil Claims and Residential Tenancies Lists.

When may the landlord claim compensation?

Similar to tenants, the landlord may claim compensation from the tenant for breach of duties set out in the RTA. Some of the main duties of tenants in the RTA include:

  1. Tenants must not cause nuisance or interference
  2. Tenant must avoid damage to premises or common areas
  3. Tenant has a duty to permit entry
  4. Tenant has a duty to keep the premises in a reasonably clean condition

How can the tenant defend a claim for compensation?

Where a tenant is the respondent to an application for compensation she may need to:

  1. resist the basis for the claim on the grounds that they did not breach a duty under the RTA or an obligation under the tenancy agreement (ie denying responsibility for damage or breach of duty), and/or
  2. reduce the quantum (attack the quotes/invoices/evidence of the landlord on the basis they are inflated, repetitious, fail to consider fair wear and tear)
  3. resist any claim that goes beyond the actual loss, for example the cost of painting a whole room for a mark on one wall

If the tenant disputes the claim t is necessary to understand the evidence on which the landlord makes its claim. It is equally necessary to understand the evidence upon which the tenant resists the compensation claim. Unfortunately tenants do not always have the evidence relied upon by the landlord and VCAT can occasionally allow applications without this material. If possible it is good to try and raise an argument based on the Charter "fair hearing" right - see the tenancy at VCAT chapter.

Practice tip: Even if the tenant admits the compensation issue (ie if the tenant admits she caused the damage), it is extremely important to assist the tenant to try and reduce the amount or quantum of the compensation claim.

What evidence does the landlord require?

In assisting a tenant to defend an application for compensation, you should obtain all documentation including

  1. Tribunal documents including the application where the landlord is claiming compensation for breach of a duty under the RTA 
  2. evidence from the landlord the compensation issue (ie photographs of the alleged damage)
  3. evidence of the loss of damage to the landlord (ie receipts/invoices etc).

What can a tenant do if the Tribunal has already made a compensation order?

If the Tribunal has already made a compensation order there is generally very little that can be done to assist the tenant. The main issue is whether the tenant attended the hearing at which the compensation order was made. If the tenant did not attend the hearing, she may be able to apply for a review hearing.

Compensation - practice issues

 

 

Getting instructions? What to ask a tenant who wants compensation...

In assisting a tenant to prepare a compensation claim you should think about asking the following questions:

  • 1) Is the tenancy ongoing/ended?
  • 2) What is the compensation issue? (ie repairs, breach of quiet enjoyment)
  • 3) What is your loss? How can your loss be proved?
  • 4) Did you tell the landlord? When? How can this be proved?

 

Getting instructions? What to ask when a tenant wants to defend compensation proceedings...

In assisting a tenant to defend an application for compensation, you should obtain all documentation and consider all the heads of loss or damage claimed by the landlord. Are these claims inflated or unreasonable. Further, you should think about asking the tenant the following questions:

  1. Is the tenancy ongoing/ended?
  2. Has the landlord issued compensation proceedings? Does the tenant have the Tribunal documentation (ie Notice of Breach, application to the Tribunal)?
  3. What is the alleged breach of duty or the tenancy agreement? 
  4. Did loss arise from the alleged breach?
  5. What is the tenant's reponse to these allegations? That is, did they breach the duty or tenancy agreement?
  6. If the tenant admits liability, is the amount claimed equivalent to the actual loss? Is it a fair or inflated price? If the latter, a tenant may need to get alternative quotes to defend the claim. 

What should you tell tenants about compensation procedures?

In advising clients about compensation issues it is important to advise tenants about:

  1. the realistic prospects of a compensation order being made
  2. the possible size of a compensation order
  3. other possible outcomes of compensation proceedings (ie eviction).

In relation to (1) and (2), these issues depend on evidence. In addition to obtainin evidence about the compensation issue, your client may also require evidence which demonstrates that she advised the landlord of this issue.

By obtaining instructions about the evidence for and against your client, you will be in a far better position to understand the strengths and weaknesses of your client's claim/defence.

In many cases we assist clients who have difficulty in gathering evidence about their compensation claim. They may have difficulty in proving a compensation event existed or that they actually told the landlord about this issue (if required). In these cases it is important to assist the tenant to identify and pull the relevant evidence together. It is also important to advise the clients about the difficulties and challenges that confront their application.

 

What should you tell the tenant? 3 important pieces of advice

In addition to considering the legal and evidentiary issues, it is also very important to try and provide your client with practical advice about compensation procedures. Some of the issues you may wish to raise with your client include:

  1. If your client is seeking compensation against her landlord and the tenancy is continuing, will the landlord seek to evict your client? (see defending notices to vacate given in retaliation)
  2. If your claim is seeking a large amount of compensation, is the client aware that the Tribunal is very conservative in the amounts of compensation awarded.
  3. Even though your client may have legitimate and serious concerns about the premises and/or breaches by the landlord - compensation issues depend on evidence. If your client does not have documentary or other strong evidence about the claim, this will influence the size of the Tribunal's award

Part 2, Division 5 of the Act prescribes general duties of both tenants and landlords. Part 3, Division 5 prescribes the general duties of residents and RMOs. LINK