Property Law Table of Contents
In this chapter- Generally
- Essential Terms of a Lease
- Types of Tenancy
- (a) Leases for a Term
- (b) Tenancy at Will
- (c) Tenancy at Sufferance
- (b) Tenancy at Will
- (a) Leases for a Term
- Requirements of Form for Leases for Fixed Terms
- (a) Land under Torrens Title
- (b) Land under Common Law Title
- (a) Land under Torrens Title
- Lease Covenants
- (a) Generally
- (b) Covenants to pay rent, rates and taxes
- (c) Covenants to Insure
- (d) Covenants for User
- (e) Covenants Relating to Building or Alteration
- (f) Covenants Restricting Parting with Possession
- (g) Covenants Relating to Repair
- (h) Covenant for Quiet Enjoyment
- (b) Covenants to pay rent, rates and taxes
- (a) Generally
- Termination of Leases
- (a) Effluxion of Time
- (b) Surrender
- (c) Forfeiture
- (d) Notice to Quit
- (b) Surrender
- (a) Effluxion of Time
- Fixtures
- Bond Money
- Landlord & Tenant (Amendment) Act, 1948
- (a) The History & Objectives of the Legislation
- (b) Prescribed Premises
- (c) Fixing or Varying the Rent of "Prescribed Premises"
- (d) Determining Fair Rent Under Division IVAA
- (e) Fixing Rent of Prescribed Premises by Agreement
- (f) Exclusion of Premises Under Section 5A
- (b) Prescribed Premises
- (a) The History & Objectives of the Legislation
- Jurisdiction of the Courts
- Procedure for Recovery of Possession at Local Court
1. Generally. A lease is a grant of an interest in land, conferring on the lessee (also called the tenant) the legal right to exclusive possession for a specified term whether fixed or periodical or at will. If the grantor of the lease is the owner in fee simple of the land, the grantee of the lease has a lease. If the grantor (also called the lessor or landlord) is only a lessee of the premises a lease granted by him is a sublease. Some owners or lessees do not wish to grant a leasehold interest. If the occupant does not have the legal right to exclusive possession but has a right to enter and occupy premises that is normally a licence. A licence does not create an interest in land and only creates a contractual relationship between grantor and grantee. Shared accommodation involving the letting of a room with cleaning and provision of linen where the boarder does not have the legal right to exclusive possession normally constitutes a licence. Where the owner of the house in which rooms are let lives in it as his home this is a strong circumstance that he letting is only a licence. The existence of a family relationship between the owner an occupant indicates a family arrangement constituting a licence especially if no rent or remuneration is payable or has been paid for occupation but this is not conclusive eg. a wife maybe a licence or lessee. Where an employer lets an employee into exclusive occupation of a dwelling it is a question of fact whether the employee is a lessee or a licensee. Where occupation of the premises is necessary for the due performance of the employee's duties as employee or for more satisfactory performance of these duties then his occupation will be in the capacity of employee and constitutes only a licence. A licence may be a bare licence, contractual licence or licence coupled with an interest. There is also a distinction between an agreement for a lease and a lease. A lease comprises of a grant of the estate in land ie. the right of exclusive possession whether immediately or at some future date. An agreement for lease only constitutes a binding agreement to grant and/or to accept a lease without vesting in the lessee any estate in land. An indication that an instrument is only an agreement for a lease is where the lessor is not yet in a position to grant a lease eg. where work has to be done on the premises before the lease can commence. 2. Essential Terms of a Lease. An enforceable lease or agreement for lease should contain:- (a) The parties. The landlord and tenant should be identified or identifiable with certainty. (b) The premises. The precise premises to be leased must be ascertained or the agreement is unenforceable. (c) The duration of the lease term. The lease should specify the duration of the lease term or provide the means of ascertaining it, without further agreement between the parties, otherwise the term as to duration of the lease would be uncertain and being an essential stipulation of the agreement or the lease, it would be void for uncertainty. (d) The rent or consideration payable. The reservation of rent is not essential to a valid lease nor need the rent be expressed in terms of money. Where some consideration is expressed in the lease it should be specified or be capable of being ascertained with certainty eg. a provision that rent should be "as is mutually agreed upon by the lessor and lessee" the lease is void for uncertainty. (e) A lease cannot exist without covenants. There can be no lease without some covenants whether express or implied otherwise the contractual elements would be lacking. 3. Types of Tenancy. There are the following types of tenancies:- (a) Tenancy for a term whether a fixed or periodical term. (b) Tenancy at will created at common law or by statute. (c) Tenancy at sufferance. (a) Leases for a Term. (i) Leases for Fixed Terms. A lease for a fixed term must be created by agreement which must define the length of the lease term. The term may be as short as one day or a number of years. At common law a lease in perpetuity is void although it may be created by statute eg. Crown Lands. A lease can be created for the term of some persons life. A lease must have a definite commencement and termination. (ii) Periodical Tenancies. A periodical tenancy is a lease for a fixed term (the initial period) continuing for an identical period repeated indefinitely until the tenancy is determined. The term is usually yearly, monthly or weekly. It is normally terminated by a notice to quit by the lessor or by notice of intention to quit by the lessee. Frequently periodical tenancies are created by agreement arising by the lessee holding over after expiry of a lease term. Periodical tenancies may also be inferred from the conduct of the parties eg. from payment and acceptance of rent weekly or monthly. (b) Tenancy at Will. (i) Common Law Tenancy at Will. This is a tenancy which is determined at the will of either party conferring a lease for an indefinite period. It may be created by express words but more often it is inferred eg. where a purchaser is allowed into early occupation pending completion of a sale or pending negotiations for a lease the lessee is permitted to enter into possession. The Courts prefer to regard a tenancy as a periodical tenancy rather than a tenancy at will. A common law tenancy at will can not be transferred nor can the lessee grant a sublease. The expression of will of either party is sufficient to terminate a tenancy at will eg. by demanding possession, asking for the keys or instituting proceedings for possession without requiring the service of any notice to quit. (ii) Statutory Tenancy at Will. This tenancy arises pursuant to s. 127 of the Conveyancing Act:- "No tenancy from year to year shall ... be implied from the payment of rent; if there is a tenancy and no agreement as to its duration, then such tenancy shall be deemed to be a tenancy determinate at the will of either of the parties by one months notice in writing ..." Where it may apply eg. is where there is a lessee in possession under a void lease, entry under agreement or option for a further lease or where the tenant holds over after the expiry of a tenancy for one year or a term of years. (c) Tenancy at Sufferance. This tenancy arises not from agreement but from implication of law after a person who has entered under lawful title continues in possession after his title is determined without the assent or dissent of the person entitled to possession. The assent of the person entitled to possession converts this tenancy into some tenancy arising by agreement eg. a periodical tenancy. The dissent of the person entitled to possession makes the tenant a tresspasser. An example of a tenancy at sufferance is where a tenant for a fixed term remains in occupation after the term expired without holding over an without having paid rent. The lessor may only recover remuneration for such occupation when the tenancy has ben terminated by claiming it in and action for use and occupation being a reasonable sum for use of the premises. 4. Requirements of Form for Leases for Fixed Terms. Note should be taken of the provisions of the Conveyancing Act and Real Property Act in relation to leases. The provisions of the Conveyancing Act apply to old system land as well as land under the Real Property Act (notwithstanding s. 23B(3), see s. 7(1).) A lease of a strata unit is under Torrens title. For some Crown Land where a certificate of title has issued the requirements of the Real Property Act must be complied with other wise the lease should be similar to a lease under common law title. The effect of the statutory requirements are as follows:- (a) Land under Torrens Title. (i) Where the lease term exceeds 3 years it must be in the approved form and registered. This is because the Conveyancing Act applies to Torrens Title leases and sections 23B & 23D(2) of the Conveyancing Act and s. 53 of the Real Property Act operate. If the lease is not in the approved form and registered it is void. However s. 127 of the Conveyancing Act implies a tenancy at will determinable on one months notice. An unregistered lease may be effective in equity as an agreement for a lease. If the Court grants a decree of specific performance it would compel the parties to execute and register the lease. (ii) Where the lease term is 3 years or less the lease can be registered but need not be. The same rules apply as for leases under common law title. This is the proviso contained in s. 42(d) of the Real Property Act and only applies where the registered proprietor had notice of the tenancy. Presumably, if the tenant is in actual occupation of the premises it will be virtually impossible for the purchaser to deny that he had notice, actual or constructive, of the tenancy. The purchase is protected from notice received after completion of a purchase but before registration of the memorandum of transfer. (iii) Where the lease includes and option for renewal eg. a lease for 3 years with an option for renewal for any period is effective without registration (s. 53 Real Property Act). However s. 42(d) only extends to a lease where the term and option are not greater than 3 years. Therefore where a property subject to an unregistered leas for 3 years with an option for a further 3 years is sold the purchaser acquires an indefeasible title free from the tenants interest, even if he is aware of the tenant. The purchaser is entitled to recover immediate possession from the tenant. A tenant or occupant cannot prevent a vendor from selling premises, but this does not necessarily leave the tenant or occupant without recourse against the vendor in the event of later eviction by the purchaser. In particular, a tenant who, without relevant default on his part, is evicted by a purchaser prior to the expiration of the term granted by the vendor, has an action in damages against the vendor for breach of the covenant for quiet enjoyment express or implied in the lease. Further, a vendor faced with such an action by the tenant cannot call in aid the fact that the property was sold "subject to existing tenancies" 2. (b) Land under Common Law Title. (i) Where the lease term is for more than 3 years the lease should be in the form of a deed (see ss. 23B with 23C Conveyancing Act). It is possible to give some priority to a common law title lease by registration under the Registration of Deeds Act. Note also s. 127 of the Conveyancing Act. (ii) Where the lease and option total less than 3 years the lease may be created orally or in writing. However this is only so where the rent is the "best rent which can reasonably be obtained without taking a fine" (s. 23D(2) of the Conveyancing Act.) 5. Lease Covenants. (a) Generally. In a lease there are some express covenants which are expressly agreed upon by the lessor and lessee. There are also some implied covenants:- (i) The implied terms of express covenants. (ii) The Court may imply terms into a contract terms which are necessary to give efficacy to the bargain ie. terms which parties would have intended to include if they had considered the matter, where such terms are necessary to make the contract workable. For some examples see Lang Leases & Tenancies 3 p. 196. (iii) There are some covenants implied by statute. See ss. 84 & 85 Conveyancing Act. (b) Covenants to pay rent, rates and taxes. Most leases express the rent in terms of money payable at regular weekly or monthly periods. The rent must be stated as a specified amount or be capable of determination with certainty. it is common in commercial leases to provide for a variation in the amount of rent in accordance with the Consumer Price Index. Normally the lessor covenants to pay all rates and taxes however the lessee should be liable for rates and charges arising as a result of the lessee's use of the premises eg. garbage, excess water, electricity and telephone. Frequently the lessee is made responsible for increases in rates over the rates due at the commencement of the lease (relative to their part of the building) or for increases in insurance premiums because of substances stored on the premises by the lessee. On non-payment of rent the lessor may take proceedings to recover rent and any arrears or terminate the lease for breach of the covenant to pay rent and recover possession of the premises. Note s. 84(1) of the Conveyancing Act in this regard which contains an implied covenant to pay rent including a proviso for abatement of rent in certain circumstances. Tenants have no legal right to withhold rent except where the provisions of s.84(1) of the Conveyancing Act apply ie. the premises are wholly damaged by fire, lightning, flood, storm or war damage. Failure to keep up rent payments would allow the lessor to immediately commence eviction proceedings. (c) Covenants to Insure. Unless there is some express covenant in the lease neither lessor or lessee is required to insure the premises. It is usual in commercial leases to require the lessee to insure in respect of damage to plate glass, public risk and workers compensation. But it is wise for the lessor to also insure for public risk and all possible damage. (d) Covenants for User. Where no lease covenant deals with the topic the lessee can use the premises in anyway he wishes. However it is common to provide that the premises not be used for certain things or to allow only certain uses. Breach of the covenant relating to user entitles the lessor to claim damages for breach of covenant or to terminate the lease. In some cases the lessor may also be able to seek an injunction to prevent breach. (e) Covenants Relating to Building or Alteration. Unless expressly provided for the lessee can not alter, add to or demolish part of the premises. If alteration was contemplated the work to be done, how it is to be done and who is to pay should clearly be defined. If repairs interfere with the lessees use and enjoyment of the premises the lessee would be entitled to damages or an injunction for breach of covenant for quiet enjoyment. (f) Covenants Restricting Parting with Possession. All leasehold estates, other than tenancy at will or tenancy at sufferance, may be assigned or sublet. The lease may provide an absolute or qualified prohibition on parting with possession. Note sections 132 and 133B of the Conveyancing Act and also the short form of covenant. The general effect of such covenants is that the lessee is obliged to apply to the lessor for consent and should give him a reasonable time to consider the application. Consent should not be unreasonably withheld. However it is for the lessee to prove the lessor's refusal was unreasonable and the lessor is not bound to give reasons for his refusal. An assignment or subletting without consent exposes the lease to forfeiture. The lessor may accept the assignee or subtenant and sue for breach of covenant or terminate the lease or seek an injunction. Where the land is under old system title or Torrens title but the lease is unregistered an assignment must be by deed (s. 23B(1) Conveyancing Act). Where the lease is registered under the Real Property Act the assignment must be in the approved form of transfer of lease which should be registered. The effect of an assignment is not to release the assignor from liability under the lease covenants and if the assignee fails to pay rent the lessor may still sue the assignor. A sublease should not be granted for a term equal to or exceeding the headlease but only for a term less (at least by one day) than the head lease. Subleases are subject to the same formal requirements as leases. Where a sublease over Torrens title land requires registration it is noted on the lease and not the certificate of title. (g) Covenants Relating to Repair. At common law the lessor had no obligation to place the premises in fair or even habitable state of repair or to carry out any repairs during the term of the lease. At common law if the premises were furnished a condition was implied that the premises where fit for habitation at the commencement of the lease although not during the term. Where the lessor covenants to repair the covenant usually requires the lessee to give five days notice to the lessor that the premises require repair. Then the lessor has a reasonable time in which to effect the repairs. Normally lessee's covenants to repair are limited by the age, condition, nature and character of the premises at the date of letting. That is the lessees are not required to leave the premises in better condition than the condition at the beginning of the lease term. The typical repair obligations are as et out in ss. 84(1)(a) & 85(1)(c) of the Conveyancing Act. The short form of covenant in paragraph 4 of Schedule IV Part II of the Conveyancing Act is as follows:- "4. And maintain and leave the premises in good repair (having regard to their condition at the commencement of the lease) reasonable wear and tear, war damage, and damage by fire, lightning, flood and tempest excepted." Normally tenants are relieved from responsibility for fair wear and tear. As to what is fair wear and tear see Haskell v. Marlow 4. Note that there are also some statutory bodies dealing with local government and health that may have power to serve notices requiring rectification of the problem. Such notices may be bound by the lease to carry out work required by such notices but usually only where the notice arose because of the use of the premises by the lessee rather than defects in the premises because of age and dilapidation. Another example eg. is Electricity Development Act. (h) Covenant for Quiet Enjoyment. An example of this covenant is the short form of covenant in paragraph 21 Schedule IV Part II:- "21. The said (lessor) covenants with the said (lessee) for quiet enjoyment." The purpose of this covenant is to guarantee title acquired by the lessee under the lease and to ensure that the lessee has security of possession without interruption in his use. Examples of breaches of such a covenant might be removing doors and windows, disconnecting essential services, interferring with access to premises. The lessee may claim damages against the lessor for breach of this covenant including loss of profits. In some circumstances Equity may also grant an injunction. 6. Termination of Leases. At common law the doctrine of frustration of contract did not apply to a lease ie. if some intervening event occurred beyond the contemplation of the parties eg. if premises destroyed by fire or war it did not entitle either party to terminate the lease and the lessee's obligation to pay rent continued to the end of the lease. (a) Effluxion of Time. A lease for a fixed term comes to an end by the effluxion of time at the end of the lease term without requiring any notice to quit or other notice terminating the lease. (b) Surrender. Surrender may be express or by operation of law. Express surrender involves a reconveyance of the lessee's leasehold interest to the lessor. This requires a deed for old system land (s. 23B(1) Conveyancing Act) or in the case of a lease registered under the Real Property Act a memorandum of surrender of lease should be registered. Surrender by operation of law may occur in a number of ways when the parties to the lease act in ways inconsistent with the continuance of the tenancy and confirm the parties agreement for surrender eg. where the lessor relets the premises at the request of the lessee or grants a new lease tot he current lessee. A lessee can not force a lessor to accept a surrender of lease by abandoning the premises and abandonment followed by the lessor entering into possession does not in itself constitute a surrender. (c) Forfeiture. Forfeiture is the entitlement to terminate a lease because the lessee committed a breach of some of its conditions. The lessor may only exercise such a power if the lease contains a provision entitling the lessor to determine the lease on breach of some or all of the lessee's covenants. Such a power is implied by s. 85(1)(d) Conveyancing Act. If a lessee has committed such a breach as would entitle the lessor to terminate the lease the lease becomes voidable and the lessor must elect to affirm or avoid the lease. The lessor should demonstrate his election to avoid the lease by unequivocal conduct such as re-entering into physical possession or instituting proceedings for the recovery of possession. In the case of non-payment of rent at common law a formal demand or payment was required before forfeiture but this is normally dispensed with by express provision in the lease and also in s. 85(1)(d). In some circumstances the lessor will be held to have waived forfeiture. This depends on the lessor's knowledge of the breach, whether he has delayed taking action and whether in other ways he has indicated an intention to affirm the lease. Section 129 of the Conveyancing Act contains important provision regarding forfeiture. This section would not apply to most residential leases because of being normally for a term of one year or less. The Supreme Court has wide discretion to grant relief against forfeiture. (d) Notice to Quit. Notices to quit are only used to terminate a periodical tenancy and not a lease for a fixed term. A notice to quit is not a technical document as long as it is clear, unqualified and unequivocal that the tenancy is being terminated on a certain date. A notice from the tenant to the landlord is called a notice of intention to quit. If the premises are "prescribed premises" the notice must contain certain particulars. A properly appointed managing agent can sign a notice to quit on behalf of the landlord. Care should be taken to correctly address the notice to the tenant, describe premises and define the date of expiry. The safest method of service of the Notice is personal service upon the tenant. Although at common law service by ordinary post may be valid service the lessor may not be able to discharge the onus of proving service if the lessee gives evidence that he did not receive the notice. The notes on "Ending the Agreement" in the standard lease also provides various methods of service. At common law reasonable notice was required to determine a periodical tenancy but parties could regulate the length of the notice required by express provisions in the lease. Where parties have not otherwise agreed a half years notice is required to determine a yearly tenancy. In respect of shorter periodical tenancies notice equal to the length of the period is required eg. one months notice to determine a monthly tenancy. Care should be exercised with the acceptance of rent after service of a Notice to Quit 5. The problem is not so much accepting rent up to the expiry date contained in the Notice, which would be fairly safe, but after a valid Notice to Quit has expired. One method of inferring an agreement to create a new lease is from payment and receipt of rent. Lang suggests that mere payment and receipt of rent will not be enough unless the Court can find an intention to create a new tenancy which will not easily be imputed to the lessor. Lang suggests that it would be prudent in the receipt for the rent received to state that it is "without prejudice" to the Notice to Quit. Particularly if rent is received by way of an occupation fee after the date of expiry of the instructions should be obtained from the lessor. Acceptance of arrears of rent should not be a problem but it would be wise to specify the period to which they relate in a without prejudice receipt. 7. Fixtures. A fixture is something which was originally a chattel and has become attached to the land or built into the premises so that it becomes part of the land. To decide whether an object is a chattel or a fixture one must consider the degree of attachment and the purpose of the attachment eg. whether nailed or just resting there or attached as a permanent improvement. Tenants can remove fixtures originally their own property if the premises after the removal will be left in as good a condition as they were before the fixtures were attached. These "tenants fixtures" can only be removed during the tenancy or within a reasonable period thereafter. Awnings and wall decorations may be chattels but built-in items such as space heaters and hot water services may be fixtures. Where the lease provides that the tenant deliver up premises "with all addition, improvements and fixtures" the tenant will not be able to remove "tenant's fixtures". 8. Bond Money. A common condition of granting a residential tenancy includes the payment by the prospective tenant of a cash bond (also known as a security deposit and rental bond). A bond is a sum of money paid by the tenant before moving into the house or flat. This money is held by a N.S.W. government body, called the Rental Bond Board, as a security against the tenant being in arrears of rent or for damage done to the premises by the tenant. Premiums paid by the tenant on any insurance policy covering damage to property and loss of rent or cleaning fees are also forms of bond money and must be lodged with the Rental Bond Board. There is a limit on the amount of bond money a landlord or real estate agent can require. Bonds cannot exceed four weeks rent for an unfurnished house or flat, or six weeks rent for a furnished house or flat 6. There is no limit on the amount of the rental bond in respect of furnished premises whose weekly rental is in excess of$ 250.00 7. The landlord or agent should give a receipt when the tenant pays bond money. The landlord or agent will ask the tenant to sign a form called "Advice of Lodgement". the landlord or real estate agent sends this form with the bond money to the Rental Bond Board. The tenant is then sent a receipt with a Rental Bond Number imprinted on it. If the tenant does not get this number, it is possible that the bond money has not been sent to the Board. It must be lodged within 7 days of the landlord or agent receiving it. 8 The provisions of the Act cover boarding houses, caravans and mobile homes leased in fixed positions, but exclude holiday lettings of less than 6 weeks. The Act only applies to residential premises and not commercial premises. The tenant is entitled to the return of the bond money if he: (i) has looked after the house or flat; (ii) is up to date in rent payments; and (iii) has given proper notice that he is vacating. The tenant recovers his bond money after leaving a house or flat by:- (i) A joint application by the landlord and the tenant on a form called "Claim for Return of Bond Money" to the Rental Bond Board requesting it to return the bond money to the tenant. This may be done at any time during the tenancy if both agree. the tenant should never sign any blank form or one showing figures which he may dispute. The form is available from the Rental Bond Board and any branch of the State Bank. (ii) the landlord applying to the Board and directing it to return the bond money to the tenant. (iii) The tenant applying to the Board on the bond claim form. The Board must give the landlord notice in writing of this application. If the landlord does not inform the Board that he wishes to dispute the tenant's claim in Court or the Residential Tenancies Tribunal within 10 days of the serving or posting of the notice the Board will return the bond money to the tenant. If the landlord applies to the Rental Bond Board for return of the bond money to himself before the tenant makes any application, the Board must give the tenant notice in writing of this. The tenant should immediately lodge a claim with the Residential Tenancies Tribunal 9 and advise the Rental Bond Board. If the tenant does not inform the Board that he wishes to dispute the claim in the Tribunal within 10 days of the service or posting of the notice to the Board will return the bond money to the landlord. The tenant needs to be able to show that the premises were left in a similar or cleaner condition than when he first moved in. If they were left in a dirtier condition, the tenant should ask the landlord to prove any cleaning fee by, say, producing a receipt from the cleaning company. The Board will pay out the bond money as directed by the Court or tribunal subject to any appeals. If the landlord does not lodge the bond money with the Rental Bond Board he has committed an offence. On vacating the house or flat a tenant should lodge a "Claim in Relation to a Rental Bond" form with the Residential Tenancies Tribunal under the procedure discussed above. The tenant also should send a letter to the Rental Bond Board advising it of the situation. The Board may prosecute the landlord for not forwarding this bond money to the Board. In some situations a tenant can tell the landlord to use the bond money for the last few weeks rent. The landlord or agent may have a reputation for trying to claim the whole or part of a tenant's bond money, even when there is no legal justification for doing so. If this is the case the tenant may consider deducting an amount of rent equivalent to the bond money just prior to leaving the house or flat. However the tenant can only do this when there is no clause in the lease which specially forbids the use of bond money to cover rent. The tenant should give the landlord or agent reasonable notice in writing that he intends to leave a house or flat, and, in this letter, he should state that the bond held is to be used to pay rent. Be sure that the two balance exactly. The tenant should promise that the house or flat will be left clean. The tenant should keep a copy of this letter. Abuse of this procedure should be discouraged as it creates ill-will between tenants and landlords. 9. Landlord & Tenant (Amendment) Act, 1948. (a) The History & Objectives of the Legislation. The Landlord & Tenant (Amendment) Act, 1948 is described in the preamble to the Act as: "An Act relating to ... the control of rents of certain premises and the recovery of possession of certain premises." During World War II, the Commonwealth controlled the economy, including prices, through numerous National Security Regulations. The amount of rent which could be charged and the grounds for terminating tenancies were controlled through the National Security (Landlord & Tenant) Regulations. These regulations were based on the Commonwealth's defence power. After the end of the war the validity of these wartime controls was challenged and the controls finally ceased. The States adopted similar controls to the Commonwealth Regulations, N.S.W. in Landlord & Tenant (Amendment) Act, 1948. This Act severely controlled the right of landlords and tenants to determine freely some major terms of their relationship. Sir Garfield Barwick referred to this Act as "a permanent feature of ... the social legislation of the State. In form it is an amendment by way of an addition to the law of landlord and tenant." The legislation has been changed on many occasions, the last major changes having been effected in 1968. This Act imposes rent control and controls on ejectment of tenants of "prescribed premises" and includes other provisions enabling premises to be excluded from these controls. Prescribed premises are sometimes referred to as controlled premises. Currently there are between 20,000 and 25,000 prescribed premises in N.S.W 10., this number is gradually diminishing as tenants of prescribed premises die or surrender their rights. These controls have been discontinued in the other States and only persist in N.S.W., although certain features of the legislation, requiring grounds for notices to quit, and certain minimum periods for notices to quit of residential tenancies, have re-appeared in recent legislation of some States. (b) Prescribed Premises. Whether premises are "prescribed" premises determines the application of the major part of the Act, including the rent control provisions and the restrictions on terminating tenancies. In s. 8(1) "prescribed premises" is defined to mean a dwelling-house or boarding-house and any part of premises leased separately for the purposes of residence: s. 8(1A). Section 8(1B) substantially limits the scope of what is a dwelling-house by excluding each of the following:- (i) premises that are, by the same lease, leased partly as a dwelling- house and partly as a shop as defined in subsection (1) of section 9 of the Factories, Shops and Industries Act, 1962, as subsequently amended, or that are the subject of a lease, part of the demised premises being a dwelling-house and the other part being such a shop; (ii) premises that are at any time, on or after the 1st January, 1969, used partly as a dwelling-house and partly for business or commercial purposes where the use of the premises for business or commercial purposes constitutes the principal or a substantial use of the premises and where the use for business or commercial purposes does not arises by reason that the premises are sub-let for residential purposes; (iii) holiday premises; or (iv) any premises, or the premises included in any class of premises, excluded from the operation of Parts II, III, IV and V under subsection (2) of section 6. Broadly, the only premises which are still "prescribed" premises are those premises used solely for residences which have not been excluded from the Act by s. 5A. (c) Fixing or Varying the Rent of "Prescribed Premises". The legislation initially pegged rent to 1939 values, this caused continuous protest on behalf of lessors. Sir Gordon Wallace said: "How a "pegging" to 1939 capital values - re-enacted as it was twenty-one years after the end of the Second World War - can be reconciled with the concept of a "fair" rent is to me a somewhat obscure problem ... the word "fair" in relation to the control of rents has now a somewhat technical meaning and its relationship to equal and impartial justice may seem distant." Most premises which are "prescribed" would have at some time had a determination of the "base" rent under s. 18. On a first application to determine the fair rent, the Residential Tenancies Tribunal should determine the fair rent of the premises at the "prescribed date" (21st August, 1939),or if the premises were not then in existence, at the date when erection of the premises was completed (s. 20(4)). This is determined according to matters specified in s. 21 and the Board may increase the rent paid at the prescribed date if in its opinion the rent was at that date "insufficient" (s. 20(3)). After an initial fair rent has been fixed at a particular date, subsequent fixing of fair rent is a variation under s. 32 or s. 24A. There is provision for determining the rent of shared accommodation (ss. 26B, 27) and of caravans (Division 4A) which are of little current significance. Traditionally, rent advocates have appeared before Fair Boards on applications to fix or vary fair rent, as these applications have certain technicalities and the Boards developed procedures and methods of dealing with applications which are not specifically defined in the Act or Regulations, requiring expertise in appearing before them. Rent for controlled premises was originally based on the 1939 actual rental value of the premises, plus increases in costs and services since then. In normal circumstances an application by the landlord to the Residential Tenancies Tribunal would be decided this way:- 1939 Improved Capital Value (ICV) $ 500.00. Previous Current Determination Determination 1962 1982 _____________ _____________ $ $ Municipal Rates 68.61 268.28 Water Rates 16.49 208.37 Insurance Est. 100.00 Repairs 64.00 520.00 Bank Interest .60 49.25 (*) Depreciation 128.00 _____________ _____________ 156.60 1,273.90 Less 156.60 _____________ 1,117.30 Plus Agent's Management fee 7 % (**) 78.21 _____________ 1,195.51 Divide by 52 22.99 Present Rent Add Est. Fair Rent $ 4.15 $ 22.99 $ 27.14 say $ 28.00 * $ 49.25 is 9.85 % of 1939 ICV where 9.85 % is the interest rate difference between 1939 Commonwealth Bank overdraft rate (4.5 %) and the 1982 rate. ** If self managed the fee would be 2.5 %. The relevant information can be obtained from the Department of Consumer Affairs by any person. There is a small charge for viewing the file. ICV is shown in the file and the current value can be obtained from the Valuer Generals Department. Amounts for repairs, bank interest and depreciation are set from time to time by the Residential Tenancies Tribunal. (d) Determining Fair Rent Under Division IVAA. In 1968 this important Division was enacted, entitled "Determination of Rent of Current Values". A lessor of prescribed premises is entitled to require a lessee or a resident of those premises, within 28 days after service of a notice in writing on each of them, to furnish a statutory declaration stating the lessee's or resident's "attributable earnings" (as defined in s. 31MAA). If the Board is satisfied that the attributable earnings of the lessee and/or any "resident" (as defined in s. 31MAA(1)) are not less than the "prescribed amount" (currently $ 10,000.00) or where the lessee or any resident fails to make the declaration and the Board is not satisfied that the attributable earnings of the lessee and/or resident are less than the prescribed amount, then the Board "shall" determine the fair rent at the "current rental value" (as defined in s. 31MAA) of those premises. In other words, there may be a determination under Division IVAA Part II if the declarations disclose attributable earnings totalling over the prescribed amount or if the lessee and disclosed residents have failed to furnish declarations, the onus shifts to the lessee to satisfy the Board that the attributable earnings are below the prescribed amount. If the lessor succeeds on an application at current rental value, the determination is according to a formula which would yield, generally speaking, a considerably higher amount than the fair rent as determined under s. 18. The provisions of the Division, including several of the definitions, are complex and are not considered in detail here. However, to take an illustration, if the following persons occupy a residence, the lessee, his spouse, children, relatives and other persons, the 'attributable earnings" will be the total income of the following persons. For each boarder or lodger the sum of $ 208.00 is added to the attributable income. (e) Fixing Rent of Prescribed Premises by Agreement. A properly executed and registered agreement under section 17A Landlord & Tenant (Amendment) Act, 1948, can permanently increase the fair rent of prescribed premises to the rent stated in the agreement. There is a simple printed form of agreement which is normally used. The agreement cannot increase rent from a date prior to the date on which the lessee has executed the agreement, otherwise the agreement becomes wholly ineffective. The lessee should sign the agreement personally. It is most important that the agreement be executed by the lessee (and probably also by the lessor or his duly authorised agent) no later than the day when the agreement is to commence, and preferably at least a day earlier. The agreement must relate to "prescribed premises" and the rent fixed by it continues after the expiration of the agreement, until varied by further agreement, or pursuant to application under s. 17A(12) or (13) or under Division 4AA Part II. The lessee's execution must be witnessed by solicitor instructed and employed independently of the lessor or by a Clerk of the Local Court and the witness should complete the certificate as to execution. The agreement must be registered in the Rent Controller's Office within 3 months after the day on which it was executed by the lessee. Registration simply means sending the original and a certified copy of the agreement with the prescribed fee to the Rent Controller with a covering letter asking that the agreement be registered under s. 17A. The only means of overcoming this type of agreement, validly entered into, is if the lessee is able to rely on s. 17A(12), ie. the amount specified was harsh or unconscionable or that the agreement was obtained by fraud, duress, intimidation or improper means, allegations which would be difficult to establish. (f) Exclusion of Premises Under Section 5A. Section 5A was entirely re-enacted in 1968, operating from the 1st January, 1969. When considering whether pre-1969 leases comply with the provisions of s. 5A remain "prescribed premises" but with the exception of a few sections set out in s. 5A(7) & (8), Parts II V, do not apply to the premises, so that the fair rent and recovery of possession provisions have no application and the premises are effectively decontrolled. Under s. 5A there are six so-called "categories of exclusion" or circumstances when premises are excluded by virtue of this section. In some circumstances premises are covered by more than one of these categories, although exclusion under any one of these categories is sufficient. These categories are set out in s. 5A(1) as follows:- * a dwelling-house that was in the course of erection at or the erection of which commenced after the 16th December, 1954. * a residential unit that came into existence on or after the 1st January, 1969. * a dwelling-house or a residential unit that was at the 1st January, 1969 the subject of a lease that is registered under the former s. 5A. * a dwelling-house or residential unit of which vacant possession was obtained lawfully after the 31st December, 1985. * a dwelling-house or residential unit of which vacant possession was obtained on or after the 1st January, 1969 or that was occupied personally by the lessor or his predecessor in title prior to that day. That is the subject of a lease the execution of which by the lessee was witnessed by a solicitor instructed and employed independently of the lessor or by a Clerk of the Local Court and bears a certificate by that solicitor or Clerk that he explained the lease to the lessee before it was executed by him. Also the lease is registered in the office of the Rent Controller. * a dwelling-house or residential unit of which vacant possession was obtained before the 1st January, 1969 that is subject f a lease that was executed by the lessee before that day. Where the execution of the lease was witnessed by a solicitor or clerk of the Local Court and bears a certificate by that person that he explained the lease to the lessee before tit was executed by him. Also that is registered and would have been exempt from the provisions of pats II, III, IV & V under the former s. 5A. * a dwelling-house or residential unit to which the provisions of Parts II, III, IV & V have at any time ceased to apply by reason of the above. The first four paragraphs above exclude premises unconditionally. For the other paragraphs registration is necessary unless the lessee is a company or body corporate. Also note that were vacant possession is to be obtained from a protected tenant it is not sufficient to just get the tenant to sign a s. 5A lease. Strata units would be excluded from the Act because the strata title legislation was enacted in 1973. The residential units referred to would be older company title units. It should be noted that leases commencing on or after the 1st January, 1986 are automatically decontrolled and registration of the lease is not necessary provided that vacant possession was obtained lawfully, The tenant is no longer required to attend the Clerk of the Local Court or a solicitor to have their signature on the lease witnessed. Section 5A leases entered into prior to 1st January, 1986 should have been registered before the 1st July, 1986. If registration was not applied for before the 1st July, 1986 the Rent Controller 11 may refer the matter to the Residential Tenancies Tribunal if there is reasonable excuse for the delay. The Residential Tenancies Tribunal may then recommend the registration of the lease. Under no circumstances are leases to be registered after 31st December, 1988. The rights of existing protected tenants are in no way changed by these provisions. Once the lease ha properly excluded premises under the post-1969 provision, an extension of the lease, even at a varied rental, would not necessitate registration of a fresh lease. The variation could be effected by a new lease which need not be registered, or by some agreement or document evidencing he variation. Oral agreements involving variations are also valid, although unwise, as there should be some document evidencing the new arrangement regarding term and rental. To terminate a tenancy where the premises have been excluded under s. 5A a simple form of notice to quit is sufficient, when the tenant is holding over as weekly or monthly tenant. In proceedings at the Local Court, where s. 5A applies to the premises, the onus is on the lessor to establish all the ingredients necessary to entitle him to an order, including that he premises have been excluded by virtue of s. 5A. The lessor's task of bringing the premises within one of the categories of exclusion may involve proving the date of erection of the building, or if a registered lease is in issue, certificates under ss. 5A(11) and 94(3) should be obtained to prove the required formalities of registration and exclusion. 10. Jurisdiction of the Courts. The system of Courts in N.S.W. includes the Supreme Court, District Court and Local Court. For the recovery of rent each of these Courts has jurisdiction, but the Supreme Court would only be used in a very substantial matter, as Local Courts have jurisdiction up to $ 15,000.00 and the District Court up to $ 100,000.00. A claim for rent is for a liquidated (or fixed) claim as distinct from a claim for damages which is unliquidated and must be proved in court even if the claim is for a fixed sum eg. $ 159.00, as it must be established that the cost of repair was reasonable and was necessitated because of the tenant's default. If a summons is issued for rent and the tenant does not file a defence, judgment can be signed and enforced eg. by execution against the tenant's property or garnishee against his wages. The tenant can seek an order for payment of the judgment debt by instalments. Managing agents should be familiar with these procedures, but in cases of arrears or other problems should seek the owner's instructions whether they should take action or whether the owner desires that legal action should be instituted by his solicitor. Each of these Courts also has jurisdiction in proceedings for possession, except where the premises are "residential premises", but the District Court is rarely used and has only limited jurisdiction, so the choice is normally between the Supreme Court and Local Court, Where the premises are "residential premises" within the terms of the Residential Tenancies Act, 1987 the Residential Tenancies Tribunal has exclusive jurisdiction. Proceedings must be taken in the Local Court if the premises are "prescribed" or where s. 2A of the Landlord & Tenant Act, 1899 applies ie. the premises are or included a dwelling-house whose rental does not exceed $ 25.20 per week. In all other circumstances involving proceedings for recovery of possession of commercial premises by the lessor against the lessee, the lessor may proceed in the Supreme Court or in the Local Court. Proceedings in the Supreme Court will require solicitors to act for the lessor, in the Local Court managing agents may act for the lessor. 11. Procedure for Recovery of Possession at Local Court. The recovery of possession of residential premises is now governed by the provisions of the Residential Tenancies Act and it may be that some of the former technicality of ejectment proceedings will be reduced for matters within the jurisdiction of the Residential Tenancies Tribunal. For matters that come before the Local Court the following must be proved in proceedings for the recovery of possession:- 1. That the parties are in a landlord and tenant relationship. 2. If the tenancy was determined by notice to quit, proper service of the notice to quit. 3. That the notice to quit was valid in form and sufficient as to time. 4. Proper service of the summons. 5. The authority of the agent to "lay the information" for the issue of the summons. 6. The territorial jurisdiction of the Court. 7. That the tenant or some person claiming under him is in occupation of the whole or part of the land. At the Local Court there is no procedure available to give evidence by affidavit, each issue being proved by oral evidence, or by producing documents admissible in evidence or by the tenant formally admitting that issue. In proceedings involving a registered s. 5A lease the lessor must be able to prove valid exclusion of the premises and registration of the lease. A correct copy of the notice to quit should be tendered in evidence, to prove its form and contents. Managing agents should seek the owner's instruction whether he desires the agent to conduct the proceedings or his solicitor to act. Agents should only undertake acting if they have acquired some understanding of and experience in these proceedings. For prescribed premises s. 62(5) of the Landlord & Tenant (Amendment) Act, 1948 sets out the grounds upon which a tenant may be evicted. All the grounds upon which the landlord wishes to rely must be set out in the notice to quit. Section 62(5) sets out 25 grounds eg. (a) the lessee fails to pay rent for more than 28 days.
1 Stephen Leacock 1869-1944 Literary Lapses "Boarding-House Geometry". 2 Munro v. Stuart (1924). For a discussion of this see Real Estate Law in N.S.W. by Lang, 2nd Ed., p. 192 and The Standard Contract for Sale of Land by Butt p. 806. 3 Law Book Co., 1976. 4 See Lang Real Estate Law & Practice 2nd Ed., Law Book Co. p. 204 and [1928] Leases & Tenancies in New South Wales by Prof. Andrew Lang, Law Book Co., 1976 p. 142. 5 Lang Real Estate Law & Practice 2nd Ed., Law Book Co. [1625] and Leases & Tenancies [1547]. 6 Section 9(2) Landlord & Tenant (Rental Bonds) Act, 1977. 7 Landlord & Tenant (Rental Bonds) Regulation, 1977 clause 6. 8 Section 8(2) Landlord & Tenant (Rental Bonds) Act, 9 Formerly the Consumer Claims Tribunal until Landlord & Tenant (Amendment) Act, 1987 passed with the Residential Tenancies Act, 1987. 10 Lang Estate Agency Law & Practice 2nd Ed., Law Book Co., 1985. 11 Now the Residential Tenancies Tribunal since Landlord & Tenant (Amendment) Act, 1987 passed with the Residential Tenancies Act, 1987. The same legislation abolished the Fair Rents Board and replaced it with the Residential Tenancies.
