Housing and Tenancy

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Possession for rental arrears

Rent arrears refer to money that is overdue after missing one or more required payments.

Section 246(1) of the RTA states:

'A landlord may give a tenant a notice to vacate rented premises if the tenant owes at least 14 days rent to the landlord.'

How are rent arrears matters dealt with?

Generally, rent arrears matters rely on explaining to the Tribunal

(a) the way in which the arrears debt accrued (generally indicating that it was unforeseen or extraordinary circumstances, and

(b) the way in which the debt will be paid off, in addition to existing rental payments.

Practice tip

Arrears matters involve pointing to facts which explain the circumstances in which arrears accrued and how the debt will be paid off.

Instructions

Given the need to understand how arrears were accrued and how they will be paid off, it may be helpful to ask the following questions,

  • How long have you been in the rented premises?
  • Have you previously been in rental arrears? (If yes, how was this resolved?)
  • Why / how were the current rent arrears accrued? (Although this information is important, it is also necessary to proceed cautiously in light of the potentially sensitive personal information concerned.)
  • In relation to the reason for rent arrears - is there any corroborating proof of this reason? (for example, medical or employment records)
  • Was there a change in your circumstances that made it difficult for you to pay your rent?
  • Has any payment been made since the Notice to Vacate? Has the rent arrears amount been reduced?
  • How will you repay the owing rent arrears? (this needs to be realistic and take into account the client's financial circumstances and responsibilities)

How much rental arrears?

In accordance with the RTA, advocates should check that at least 14 days rent oweswas owed at the time the notice was given to the tenant - ie when it was actually served.

 

Tenants may only be issued with a Notice to Vacate for arrears when 14 days rent is owing (s 246(1)) . Accordingly, when advising clients who have been given a Notice to Vacate for arrears it is important to calculate the exact number of days rent that is owed. This calculation should be made from the date on which the notice is given to the tenant.

How is daily rent calculated?

Rent accrues from day to day (s 39).

  • Rent payable per calendar month: multiply monthly rental by 12 then divide by 365 (adjust for leap year) and multiply the daily rate by the number of days unpaid.
  • Rent payable per fortnight: divide fortnightly rent by 14 and multiply the daily rate by the number of days unpaid.

Does the Tribunal have any discretion with rent arrears applications?

Section 331(1)(b) of the RTA states that the Tribunal may dismiss or adjourn an application for possession based on arrears where 'the Tribunal considers that satisfactory arrangements have been or can be made to avoid financial loss to the landlord...'

In this case, the issue is avoiding financial loss to the landlord and require the tenant to agree to a payment plan to reduce arrears within a reasonable period.

Under this discretionary provision these matters are regularly dealt with by adjourning a possession application (arrears) for 3 months (although it may be longer) on the proviso that tenants are able to satisfy a repayment agreement. If a tenant falls behind in payments, the landlord can renew the original possession order application and can have another hearing without issuing a fresh Notice to Vacate. 

Practice tip

Where tenants are in arrears it is a good idea to refer them to Money Help before any VCAT hearing. Money Help can help clients to create a budget over the phone and advise them how much money they can offer to reduce the arrears. They can also send the tenant a copy of the budget and this can be relied upon in the hearing. 

www.moneyhelp.org.au