Landlord selling? Looks like you're free to go *

The new Residential Tenancies Act 2010 has now been in operation for five months. Regular visitors will recall that this Act marks the first comprehensive rewrite of renting laws in more than 20 years - fixing many flaws in the old 1987 Act, and bringing a few new measures in to reflect the changing of the times.

As with any new piece of legislation, what's written down by Parliament can mean different things to different people. It's only when disputes under a law are taken into the judicial system for arbitration that we can start to properly understand that law's meaning - because the courts generally get the last word on how to interpret a law. In the case of the Residential Tenancies Act, the first port of call for arbitration is the Consumer, Trader & Tenancy Tribunal (CTTT). Although decisions made by the CTTT do not set legal precedents (in fact it is not even bound by its own decisions), for the purposes of understanding how fiddly bits of our new renting laws work, we need look no further than decisions made in the CTTT.

Not all CTTT decisions make it into print, and there's often a lag as most juicy decisions take time to write up and publish. But luckily for us, we've got access to the collected works of the Tenants Advice and Advocacy Services, so we can spot 'em as they happen.

Recently, the CTTT decided a case that helps to clarify part of the new law*. At section 100(1)(c) the Act allows tenants to give notice to end a tenancy during a fixed-term (without having to compensate the landlord) - if the landlord tells the tenant that they're going to start selling the property. But there's a catch... the landlord must not have already told the tenant about the proposed sale before the tenancy began.

And, maybe, there's another catch. Another section of the Act - s26(2)(a) - requires a landlord to tell the tenant about a proposed sale before entering into a residential tenancy agreement (specifically, if a contract for sale has been prepared).

Until now, it has been unclear whether this would mean that tenants could not make use of the s100(1)(c) option, unless the landlord had failed to disclose an already existing intention to sell before entering into the agreement. In other words, if a landlord had no intention to sell at the beginning of the tenancy (and therefore had nothing to tell the tenant), could they later change their minds, and would this prevent the tenant from giving notice under section 100(1)(c)?

Tenants' advocates have formed a view on this - that the two sections of the Act can be read independently of one another - and this has now been successfully argued in the CTTT. In the case of Kutzner v Kamp (NSWCTTT unreported) the Tribunal stated:

The issue for determination is whether in these circumstances the tenants were entitled to give notice of termination under section 100(1)(c) of the Residential Tenancies Act 2010. I am satisfied that it is not a requirement of this provision that the landlord must have an intention to sell the property at the time of entering into the residential tenancy agreement which was not disclosed. It is only necessary for the landlord to have notified the tenant of such an intention during the fixed term without notice prior to commencement of the tenancy. "Disclosure" in the sense used in s100(1)(c) does not mean disclosing what was known to the landlord but rather whether prior notice had in fact been given of the landlord's subsequent decision.

The question arising upon the Tenant being told of the intention to sell, is whether the Tenant had been told at the commencement of the tenancy that this would happen. It is not an answer to say that the landlord did not know then that this would occur.

This is a good outcome for tenants, but we'll be keeping an eye on how landlords respond to it. Will we start to see blanket disclosure under section 26(2)(a)? Presumably, not all prospective tenants will be keen to enter into agreements on properties that are listed for sale, so even if landlords do start to try this on, we don't think it will take off. Most landlords wouldn't want to limit their pool of potential tenants in this way. Even so, if you're sitting down to sign a new lease and the agent says "oh, by the way, we need to tell you the landlord is going to sell, but it's nothing to worry about because they haven't listed it yet", it would be a good idea to press them for more information. If they can't give you any indication of when a listing for sale is likely to proceed, there's a good chance you'll be able to distinguish - when it matters - between what was known to the landlord then, and any subsequent decision to sell.
* This information is not to be construed as legal advice and should not be relied on in the making of any rash decisions about moving house. If in doubt, contact your local TAAS.