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Pereira v GPS Pty Ltd t/as Ray White East Brisbane QCATA 178
Pereira v GPS Pty Ltd t/as Ray White East Brisbane  QCATA 178
GPS Pty Ltd t/as Ray White East Brisbane
On the papers
Senior Member Stilgoe OAM
14 December 2015
APPEAL – LEAVE TO APPEAL – MINOR CIVIL DISPUTE – RESIDENTIAL TENANCY – where tenants left tenancy early – where no claim for loss of rent – where claim for break lease fee – where tribunal ordered tenants pay break lease fee as a penalty for early termination – whether tribunal can order payment of a penalty – whether grounds for leave to appeal
Residential Tenancies and Rooming Accommodation Act 2008 (Qld) ss 172, 173, 362
Pickering v McArthur  QCA 294
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
- Lani Pereira and Adam Maxwell terminated their tenancy agreement five weeks into a twelve-month tenancy agreement. GPS Pty Ltd t/as Ray White East Brisbane, acting for the lessor, told Ms Pereira and Mr Maxwell that the lessor would not require them to pay rent until a new tenant was found but the lessor would require payment of the break lease fee, which was deducted from the bond.
- Ms Pereira and Mr Maxwell objected to paying the break lease fee and asked for a refund. Two Justices of the Peace, sitting in the minor civil disputes jurisdiction of the tribunal, dismissed the claim.
- Ms Pereira and Mr Maxwell wants to appeal that decision. Because this is an appeal from a decision of the tribunal in its minor civil disputes jurisdiction, leave is necessary. Leave to appeal will usually be granted where there is a reasonable argument that the decision is attended by error, and an appeal is necessary to correct a substantial injustice to the applicant caused by that error.
- Ms Pereira and Mr Maxwell have multiple grounds of appeal but they fall into two broad issues. Firstly, they say that the tribunal failed to apply s 362(3) of the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) (RTRA Act) in that the lessor failed to mitigate her loss. Secondly, they say the tribunal erred in finding that the break lease fee is a penalty they were required to pay under the tenancy agreement. They say that the tribunal did not consider ss 172 and 173 of the RTRA Act. They say that, in particular, the tribunal failed to apply s 173(3) of the RTRA Act.
Did the tribunal fail to apply s 362(3) Residential Tenancies and Rooming Accommodation Act?
- Section 362(3) of the RTRA Act states that a lessor must take all reasonable steps to mitigate loss or expense and is not entitled to claim loss or expense that could have been avoided by taking those steps.
- Ms Pereira and Mr Maxwell submitted that the lessor did not take all reasonable steps to mitigate its loss because: the lessor failed to accept the tenant Ms Pereira and Mr Maxwell proposed; the lessor increased the proposed rent by $45 per week; and the lessor prepared the house for sale and did, in fact, sell the house.
- I am not necessarily persuaded that the tribunal correctly applied s 362(3)(a) of the RTRA Act; I do not agree that a decision not to claim lost rent is the same as taking reasonable steps to replace that lost rent from another tenant. However, the distinction, in this case, is irrelevant.
- The tribunal was required to apply s 362(3) when considering the claim for the break lease fee and, in this respect, it failed to do so. Instead, it simply accepted that the lessor had a “right” under the tenancy agreement to charge a break lease fee. Whether the lessor had that “right” required a consideration of the terms of the tenancy agreement and the effect of s 173.
- The tribunal commented that a break lease fee was part of the conditions of 18A (Form 18A – general tenancy agreement). Ms Pereira and Mr Maxwell did not provide a full copy of the tenancy agreement to the tribunal. Clause 7 of that agreement states that the tenant must pay the reasonable costs incurred by the lessor in reletting the premises.
- The email traffic between GPS and the tenants refers to an “addendum” signed some five years ago. Neither party provided a copy of that addendum to the tribunal. In the absence of evidence about that term, there was no automatic right to a break lease fee. The tribunal was, in this respect, in error.
Did the tribunal err in finding that the break lease fee was a penalty that the tenants were required to pay?
- Section 172 of the RTRA Act refers to incentive amounts for entering, extending or continuing a tenancy agreement. It does not apply to the current situation.
- Section 173(1)(c) of the RTRA Act provides that a term of an agreement is void to the extent it provides that, if a tenant breaches the tenancy agreement, the tenant is liable to pay an amount as a penalty.
- If the break lease fee was a penalty, the term of the tenancy agreement imposing the terms was void and Ms Pereira and Mr Maxwell were not obliged to pay it.
- Despite the terms of s 173(1) of the RTRA Act, section 173(2) states that a term of a tenancy agreement is not void if it provides that, if a tenant terminates the agreement in a way not permitted under the Act, the tenant is liable to pay the reasonable costs incurred by the lessor in reletting the premises.
- Section 173(3) states that s 173(2) applies only if the reference to the amount payable is a reference to the reasonable costs incurred by the lessor in reletting the premises. In other words, a term that refers to a fixed amount, or a fee by reference to the weekly rental, will not be a term protected by s 173(2).
- It is clear that the tribunal erred in accepting that the break lease fee was a penalty that Ms Pereira and Mr Maxwell were required to pay because of the terms of the tenancy agreement. Leave to appeal should, therefore, be granted.
Should Ms Pereira and Mr Maxwell pay the break lease fee?
- I now have to decide whether, properly applying ss 173(3) and 362 of the RTRA Act GPS is entitled to recover the break lease fee from the tenants.
- Even if the lessor had accepted Ms Pereira and Mr Maxwell’s recommended tenant, there were administrative costs involved in securing the tenancy agreement. Unlike a continuation of Ms Pereira and Mr Maxwell’s tenancy agreement, GPS was obliged to search the TICA database to ascertain the prospective tenant’s suitability. It was obliged to create a new tenancy agreement, obtain and lodge a new bond, and set up a new ledger. It had to conduct an exit condition inspection and prepare an entry condition report. Presumably, it also changed its data base for the service of notices and the provision of newsletters.
- None of these activities is without cost. GPS was entitled to charge the lessor for those activities. Once charged to the lessor, they were expenses incurred because Ms Pereira and Mr Maxwell ended the tenancy early. They were expenses which could not have been avoided by taking steps in mitigation because they were necessary regardless of the identity of the new tenant, or when the new tenant took possession.
- Property managers do not provide an itemised account for these activities. They have developed a convention of charging one week’s rent to cover them. The question is whether that is a reasonable fee.
- One week’s rent may not be reasonable where the weekly rent is high, unless the property manager can demonstrate that additional work was required to put the premises back on the rental market. In this case, however, the weekly rental was modest and, in my view, a fair fee for the work required to secure a new tenant. Ms Pereira and Mr Maxwell have been fortunate that the lessor did not claim additional loss and expense through their early termination of the tenancy agreement.
- The tribunal did not have any document showing the lessor had paid the break lease fee to GPS. However, Ms Madden, for GPS, told the tribunal that the lessor incurred the break lease fee. Ms Pereira and Mr Maxwell did not dispute that fact. The tribunal was entitled to rely on Ms Madden’s evidence and I can see no reason to come to a contrary view.
- Although leave to appeal is granted, the appeal should be dismissed.
- Published Case Name:
Pereira v GPS Pty Ltd t/as Ray White East Brisbane
- Shortened Case Name:
Pereira v GPS Pty Ltd t/as Ray White East Brisbane
 QCATA 178
Senior Member Stilgoe OAM
14 Dec 2015