Contributors

Ben Cording

Principal Solicitor, Tenants Victoria

Lulu Banay

Solicitor, Tenants Victoria

Compensation claims related to tenancy

Last updated

1 July 2021

Compensation claims by the renter

Under the Residential Tenancies Act 1997 (Vic) (‘RT Act’), a renter may claim compensation from a rental provider if:

  • the renter has suffered loss or damage as a result of a breach of duty, under the RT Act or a rental agreement by the rental provider; or
  • the renter has paid more to the rental provider than required under the rental agreement or RT Act; or
  • the rental provider has not reimbursed the renter for urgent repairs within seven days of receiving written notice; or
  • the renter has suffered loss or damage due to discrimination against them by the rental provider or agent (ss 209, 209AA, 209AAB, 210AA, 210 RT Act).

The RT Act distinguishes between compensation claims based on breaches of a ‘duty provision’ and claims based on other breaches.

Where a rental agreement remains in effect, a renter must usually serve a Breach of Duty Notice on a rental provider before claiming compensation for a breach of duty. If the rental agreement has terminated, a renter does not need to serve a Breach of Duty Notice before applying for compensation. An application (under ss 209, 210 RT Act) may be made immediately to VCAT. (See also ss 209AA, 209AAB, 210AA RT Act.)

A compensation claim should include evidence of the breach and loss, the first communication of the issue to the rental provider, the number of days the issue persisted for, and when or if the issue was rectified. Parties should identify each issue and the loss they suffered as a percentage of their daily rent. Or, parties can identify issues as a separate loss where appropriate (e.g. the cost of making urgent repairs to the property). Evidence of the report is essential as this dictates the start date from when the compensation can be considered.

A renter may also claim discrete losses in addition to losses as a percentage of their daily rent. For example, an electrical fault is reported to a rental provider and the rental provider fails to attend. Two weeks later, the electricity goes out and cannot be restored without intervention. The rental provider does not arrange repairs until seven days later, when an electrician arrives and restores power. All the food has been spoiled and the family has been unable to use much of the prem-ises. The renter may claim for loss of quiet enjoyment of the premises due to not having electricity for seven days. If the daily rent is $50 and the renter believes the loss is 50 per cent, then the sum claimed is $175 (i.e. $50 x 0.5 x 7), plus loss of food and other reasonable expenses for which the renter should provide receipts.

A renter can also claim for the ‘general inconvenience’ they have experienced. The general principle of claiming compensation for ‘general inconvenience’ arises from the Supreme Court decision of Reardon and Reardon v Ministry of Housing (SCVCA, unreported, 13 November 1992, per Smith J). ‘General inconvenience’ is normally only considered in cases where there has been a serious interference with a renter’s rights and those rights can be tied to a renter’s right to the quiet enjoyment of the property. It is recommended that renters claim $1000 as a starting point for ‘general inconvenience’.

Ultimately, VCAT may reduce any claim. Generally, VCAT will not increase the amount claimed for a renter. Therefore, parties should be reasonable, and err on the side of making a larger claim, but expect that they will likely be reduced to a more reasonable amount.

Parties should also pay particular attention to factors outlines in section 211, 211A and 211B of the RT Act regarding what VCAT considers when determining fault and amounts of compensation payable. Section 211 allows VCAT to consider a wide range of factors including the parties’ conduct and reasonable offers, actions and inactions leading up to the point of VCAT’s determination. 

One of the factors considered under section 211(h) of the RT Act relevant to compensation related to repairs, is whether the renter gave the rental provider written notice of the damage or disrepair as soon as practicable, as required under section 72AA of the RT Act. Therefore, it is important that renters always give this written notice as soon as practicable, when repairs are required so that they do not jeopardise any potential future compensation claims.

When determining a compensation claim, VCAT is required to consider certain guidelines issued by CAV. These guidelines cover the following topics: maintenance, cleanliness, damage, fair wear and tear, and urgent repairs (s 211B RT Act). Refer to the director guidelines on CAVs website.

Jurisdiction

VCAT has jurisdiction to hear claims of up to $40 000, or a higher amount if the parties agree (s 447(1) RT Act). VCAT cannot hear claims for compensation for death, personal injury, or pain and suffering (s 447(2)).

Interstate parties

In the Supreme Court decision of Meringnage v Interstate Enterprises Pty Ltd [2020] VSCA 30 (25 February 2020), the court confirmed that VCAT does not have jurisdiction to determine matters where one party lives in another state. This does not apply to companies, territories, or parties who live overseas. People affected by this issue should seek legal advice (see also s 510 RT Act).

Cost

The cost of a basic VCAT application is $66.30; this fee is indexed annually. Under the VCAT Act (s 132), parties may be eligible for fee waivers. Parties are presumed to bear their own costs of proceedings (s 109(1)). However, if a party’s conduct causes delay or procedural disadvantage to other parties, VCAT has discretion to award costs (s 109).

Costs may be awarded against a party, where an offer has been rejected and the subsequent VCAT decision is less favourable than the offer made (s 112). Rejected offers that may give rise to such costs must comply with sections 113 and 114 of the VCAT Act.

If a party is successful (or has substantially succeeded) in their VCAT application, the unsuccessful party may be directed to reimburse the successful party their application fee. An applicant should include in their application a request to have their application fee reimbursed. This is at the discretion of VCAT (s 115A–D VCAT Act). 

Refer to the VCAT fee schedule, the no fee, and the fee waiver grounds on VCAT’s website.

Australian Consumer Law

Parties may concurrently invoke the Australian Consumer Law and Fair Trading Act 2012 (Vic) (‘ACL&FTA’).

Since the reforms made to the RT Act made on 29 March 2021, these provisions may be less relevant. However, they may still be of benefit, in particular for rental agreements that commenced before 29 March 2021.

Invoking the ACL&FTA can be done by referring to section 184 of the ACL&FTA and checking the correct box on the general application form. This means applications may be made for amounts greater than $40 000. Such applications may attract higher application fees. However, it is necessary to show the relationship was in trader dispute (s 182 ACL&FTA).

Under the ACL&FTA, VCAT may also consider the Australian Consumer Law (ACL), which is contained in schedule 2 of the Competition and Consumer Act 2010 (Cth).

If cited as part of the application, VCAT may consider issues such as:

  • ‘misrepresentation’ (ss 29–30 ACL) (see also s 30E, 30G RT Act);
  • ‘unconscionable conduct’ (ss 21–22 ACL) (see also s 27B RT Act);
  • ‘unfair contract terms’ (ss 23–28 ACL; s 185 ACL&FTA) (see also s 28 RT Act);
  • ‘bait advertising’ (s 35 ACL) (see also s 30F RT Act);
  • guarantees as to ‘fitness for purpose’ (s 61 ACL) (see also s 68 RT Act);
  • whether goods or services have been rendered with due skill and diligence (s 60 ACL) (see also ss 6, 12 Estate Agents (Professional Conduct) Regulations 2018 (Vic)).

Previously, the RT Act did not clearly set out a renter’s right to cancel a rental agreement where the renter had been misled about the rental agreement. However, the RT Act now has clear mechanisms that allow renters to claim for compensation or (potentially) to obtain an order to end the rental agreement without incurring lease-breaking costs. These mechanisms only apply if the renter can show they were induced to enter the rental agreement by misleading and deceptive conduct (s 30E). Whether misleading conduct extends to and includes a failure to make statutorily required disclosures (s 30D) remains to be seen. Renters who believe they have been misled in this way cannot cancel the rental agreement themselves, but they can apply to VCAT for compensation or for an order to end the agreement (s 472(1A)).

The ACL&FTA also provides VCAT with a wide range of remedies to resolve disputes (ss 184–185; pt 8.2 ACL&FTA).

Personal injury claims

It may also be possible to make personal injury claims under the ACL&FTA for claims less than $10 000 (s 182(3) ACL&FTA). However, it is strongly advised to consult a personal injuries expert before proceeding with any such claim at VCAT. Given the complexity, gravity, unique time limits and other issues arising out of such claims, parties should seek legal advice.

Limitation of action period

Contract claims can be made any time up to six years after the alleged loss or damage has occurred (s 5 Limitation of Actions Act 1958 (Vic)). After such time, an application may be statute barred. In some cases, a persistent breach will have a reduced eligibility for compensation; in other matters, it may be fatal to a claim. It is advisable to take action as soon as practicable or pay careful attention to limitation dates.

Evidence

The success of a claim depends on what the renter can prove at VCAT.

If the renter makes a claim, the renter has the onus of producing evidence that establishes on the balance of probabilities that:

  • the rental provider breached the tenancy agreement or the RT Act; and
  • the breach caused loss or damage (or occasionally, substantial quantifiable inconvenience); and
  • that the amount the renter is claiming as compensation is reasonable.

Rental provider’s breach of duty provisions

If a rental provider or agent has breached the RT Act or the rental agreement, the renter should serve them with a Breach of Duty Notice in order to claim compensation (ss 208, 209 RT Act).

The types of breaches for which a notice might be served are discussed in ‘Duties of rental providers and renters’ in ‘During a tenancy‘.

This notice must:

  • specify the breach;
  • detail the loss/damage caused by the breach;
  • require the rental provider to remedy the breach or pay compensation within a required timeframe (seven days for a breach of quiet enjoyment and 14 days for any other breach);
  • state that the rental provider must not commit a similar breach again; and
  • state that if the notice is not complied with, an application may be made to VCAT; or a Notice of Intention to Vacate can be given if there have been multiple breaches (ss 3, 208 RT Act).

The notice must be in writing, addressed to the person allegedly in breach of the duty (or their agent) and be signed by the person giving the notice (s 208 RT Act). The renter can give this notice in the form of a letter; however, given the requirements of section 208, it is advisable to use the prescribed Notice of Breach of Duty to Rental Provider form.

It is recommended that the renter send the notice by registered mail in case of a dispute about service. Alternatively, if parties have consented within the meaning the Electronic Transactions (Victoria) Act 2000 (Vic), the notice may be served via email (see ‘Serving Notices to Vacate’ under ‘Notice to Vacate: Form and serving of notices’ in ‘Procedure for ending a rental agreement‘).

If the rental provider does not pay the compensation claimed or comply within the required timeframe (seven days for a breach of quiet enjoyment and 14 days for any other breach), the renter may apply to VCAT for a compensation order or a compliance order (ss 3, 208, 209 RT Act).

Other breaches

If a rental provider or agent has breached the RT Act or a tenancy agreement, but the breach was not of a duty provision (e.g. damage was caused to the renter’s goods during entry by the rental provider or their agent), or if the claim is for repayment of moneys overpaid (e.g. invalid rent increases, or rent paid beyond a vacate date), or the loss or damage is due to discrimination, the renter may apply to VCAT without first serving any notice (ss 209AA, 210, 210AA RT Act).

However, in some cases, it is recommended that the renter serve a notice on the rental provider or agent even if the breach was not of a duty provision. This gives the rental provider details of the claim, and an opportunity to agree to payment.

The renter’s application to VCAT for compensation must give details of the breach and of the loss or damage caused by the breach (r 8.10(2) VCAT Rules).

Compensation claims by the rental provider

A rental provider may claim compensation from a renter if:

  • the rental provider has suffered loss or damage as a result of a breach of duty under the RT Act or a breach of the rental agreement by the renter; or
  • the rental provider has paid more to the renter than required under the rental agreement or RT Act (ss 209, 209AA, 210 RT Act).

Defending compensation claims

If making a claim for compensation, the rental provider bears the onus of proof and must establish that on the balance of probabilities:

  • the renter breached the rental agreement or the RT Act;
  • the rental provider has sustained loss or damage;
  • the loss or damage sustained by the rental provider resulted from the renter’s breach of the rental agreement or the RT Act; and
  • the amount they are claiming is reasonable.

The rental provider must provide evidence to support their claim and must give the renter copies of any documents or photos they present to VCAT.

It is prudent for parties to ask for, in writing, any document they wish to see before the VCAT hearing. If a document is not provided before the hearing, parties may wish to consider requesting an adjournment on the basis of procedural fair-ness, or to raise the issue with VCAT with respect to credibility. It may also be possible to compel a part to produce a particular document (s 104 VCAT Act).

According to VCAT Rule 8.10(1), an application for compensation must state the amount of compensation being claimed.

While it is the rental provider’s obligation to prove their claim, it is prudent for the renter to provide any evidence that shows:

  • they did not breach any duty under the RT Act or the rental agreement;
  • the breach did not cause the loss or damage claimed by the rental provider; or
  • the amount claimed is excessive/unreasonable in the circumstances.

Rental provider to minimise loss

If a renter agrees that they are liable for some of the rental provider’s losses, but believes the amount the rental provider is claiming is unreasonable, the renter should provide evidence of this. The rental provider has a duty to keep any loss they suffer to a minimum, and if they have not done so, they may not be entitled to claim compensation from the renter (s 211(e) RT Act).

Compensation for repairs or replacements

If a rental provider is claiming an amount for repairs or for the replacement of property or fixtures (e.g. to replace carpet or repaint rooms) that the renter believes is excessive, the renter should get quotations from tradespeople or shops to show this. If the property was damaged or worn before the renter moved in, the renter should also point this out. The renter may make a written request for the original receipts or invoices of when the particular items being claimed as needing repair were purchased as new, to raise the issue of age and whether the effective life of the item has been exhausted.

The rental provider cannot claim the full cost of replacing something that was not new when it was damaged. VCAT must allow for ‘fair wear and tear’ (s 61 RT Act). VCAT must also consider the depreciation life-spans listed in the ATO’s guide when it calculates the amount of compensation the renter pays (s 211A(2); reg 90).

The rental provider’s actions in repairing the damage must also be reasonable and in proportion to the amount of damage caused.

The renter should be prepared to argue about both their responsibility for the damage, and about the amount they should have to pay if VCAT finds that they are responsible.

Costs for ending a rental agreement early

If a renter ends a rental agreement before the end of the fixed term without getting the rental provider’s agreement or a VCAT order, the rental provider may ask for compensation for any reasonable costs they have to pay because the rental agreement ended early. (See ‘Breaking a fixed-term rental agreement (lease-breaking)’ in ‘Ending a rental agreement: Renter wants to leave‘, for more information about how to defend this kind of compensation claim.)

There are certain circumstances where a renter can leave early without paying costs. (See Ending a rental agreement: Renter wants to leave’.)

Director guidelines

When determining a compensation claim, VCAT is required to consider guidelines issued by CAV on the following topics: maintenance, cleanliness, damage and fair wear and tear, and urgent repairs (s 211B RT Act). Refer to the director guidelines on CAV’s website.

Insurance claims

Insurance operates under a legal principle called ‘subrogation’. This means that the rights of the rental provider are given to the insurer in exchange for the insurer paying an amount of money (call an ‘insurance excess’) and the insurance fixing the issues covered by the insurance policy. It is important that renters understand that just because a rental provider makes a claim under their insurance policy, this does not necessarily protect the renter unless there is a clear settlement agreement to the contrary.

Further, if the rental provider elects to make a claim on their insurance, the renter is not liable for an excess fee (s 27B, r 11(h)). See Matthews v Huppert (Residential Tenancies) [2017] VCAT 395 (10 March 2017).

If a debt has not been before VCAT or any court to be decided, a claim by an insurer against a renter may be challenged. It is not a decided debt or issue, it is an allegation.

If an insurer or their agent alleges a renter owes money, the renter should not immediately admit liability. The renter should first ask to see a more detailed outline of the evidence, and a breakdown of the amounts that the renter pays. If the matter relates to a fire and a fire report was created, this may be requested under freedom of information. 

As with any other claim by a rental provider, they must prove that the renter is at fault. Also, any alleged losses are subject to depreciations and the other principles set out earlier in this chapter. Also, the proper forum to resolve disputes in most cases remains VCAT (see ‘Proper forum’ in ‘Hearings, appeals and offences under the Residential Tenancies Act‘). Forcing an insurer to litigate in VCAT will substantially improve negotiations if the issue is disputed. Insurance is a numbers game, and renters should not be afraid to seek waivers, or assertively negotiate low lump-sum payments.

Prior to reaching any settlement with an insurer, renters should read Chapters 10 and 11 of the General Insurance Code of Practice and seek both legal and financial advice as soon as practicable after initially being contacted.

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