Importance of Landlords signing the Lease – When a property is leased, or re-leased it is extremely important the landlord returns their executed copy to the managing agent. Why?
We will explore this issue using a real-life case of Herron Vs Agent. We inherited this property after the landlord became unhappy with their current agent and we were appointed to represent the landlord. This case was bought before VCAT (Victorian Civil & Administrative Tribunal) by the tenant under Section 452 – General Dispute.
“The tenant sought a determination as to whether a lease existed due to the landlord’s failure to comply with the Act”.
The tenant’s perspective – The tenant gave 28 days written notice they were vacating the property. The tenant perceived the tenancy to be on a month to month basis as they did not hold a copy of the executed lease signed by the landlord which was signed by the tenant 6 months earlier. As such, the tenant believed there was no binding contract and sought confirmation from Consumer Affairs Victoria (CAV) as to what their rights were in this situation. The tenants stated CAV advised they did not have a lease in place because they had not received an executed copy of the lease within 14 days of signing as per Section 26 the Residential Tenancies Act 1997.
The landlord’s perspective – The landlord was of the opinion the tenant had a fixed term lease in place given the tenant had signed the lease 6 months earlier despite the fact the landlord had overlooked returning the leases to the real estate. This meant the tenant did not have a copy of the executed lease agreement.
Whilst the landlord had not returned the executed lease to the previous agent the landlord was able to provide us with a copy of the executed lease. The tenant was then sent a copy confirming they had a lease.
Inexperienced Property Managers who are presented with this scenario may find this challenging to understand and present the facts to VCAT. In this case, the pertinent points to address were:
- Was a lease in place for the subject property; or
- Was the landlord’s failure to return the executed copy of the lease to the agent deemed that there was no lease in place on the subject property.
Based upon the facts:
- The tenant had intent and acknowledged signing the lease
- The landlord had failed to comply with the Act by not returning a signed copy of the lase within 14 days
Our Case Summary in VCAT:
- The landlord’s failure to return a signed copy of the lease did not reduce or mitigate the tenant’s responsibility and liability in relation to the lease itself and the conditions contained within the lease. The legislation allows for leases to be written or verbal as such there was a binding lease in place and the tenant was breaking the lease.
- The landlord had failed to comply with the legislation in the required time frame however that failure under Section 26 RTA 1997 did not deem a lease to be invalid. It did allow for a penalty to be imposed on the landlord.
- The tenant had a lease in place and was liable to pay break lease fees which amounted to more the $500 payable to the landlord.
These scenarios highlight the importance of your property manager having a thorough understanding of the legislation and knowing how to apply the legislation to obtain favourable outcomes for the client.
We do note however, VCAT members also consider which party would suffer a greater financial disadvantage when determining cases.
We have presented Property Managers with this exact scenario and asked – “Does a lease exist?”
The answer from the Property Managers each time is the tenant does not have a lease and the 28 days’ notice provided is sufficient.
This highlights a lack of understanding of the Residential Tenancies Act 1997 and results in the landlord being financially disadvantaged. Unfortunately, most landlords would not be any wiser as they are guided by the person they engage to handle the management of their property which means they rely on them for advice and guidance.