26/11/2020Property Law + Conveyancing
26/11/2020Property Law + Conveyancing
What if your flat/housemates are not going to be tenants?
Penalties + Potential Compensation Claims for unlawful eviction
Alternative Application of Registrable Boarding House Occupancy Principles ➲ NSW
No names have been used and specific details have been omitted to protect our client's identity.
It is hard to believe that what occurred is actually possible, but it did happen! and could easily happen again.
This is the reason we are writing this article.
Like many home owners across Australia: Our client had simple needs and did not expect to have any legal problems.
As a consequence, he took a shortcut.
He did not consult with a lawyer regarding his legal agreement with his flat/housemates.
What could go wrong? right …
There are many websites online which provide a convenient online service to easily locate potential flat or housemates.
The websites do not offer legal advice, but they do have some general legal guides which can assist in typical scenarios.
If the flatmate is to be a tenant, then the recommendation is to use the standard State/Territory tenancy agreement, condition reports, etc.
We agree with this recommendation as far as it goes.
If your flat / housemates are to be lodgers or boarders.... then these websites may provide a free "common law” flatmate agreement.
We do NOT recommend you use this free agreement under any circumstances.
It will not take into account the factors which the Tribunals/Courts actually use to differentiate between a tenant and a lodger/boarder.
A lack of clarity regarding the legal status of your flat/housemates translates into a lack of certainty of regarding enforceability.
This can make all the difference when you are seeking to identify + enforce legal remedies.
Therefore, as occurred for our real client, it is possible that you could:
1️⃣ Use a free "common law" flatmate agreement;
2️⃣ Call your flat or housemate a lodger/boarder in the agreement; and
3️⃣ Proceed to consider evicting them for breach of failure to pay rent; only to find yourself …
➲ Facing a penalty of up to $22k for unlawfully evicting a tenant.
This is because, under the law, it makes no difference what the agreement is called, or how the parties are referred to in the agreement. What is important is the substance of the agreement based on an assessment of the characteristics of the arrangement (refer below for examples of characteristics that tend to indicate a lodger arrangement as opposed to a tenancy arrangement).
➲ In NSW there is a potential $22k penalty for unlawfully evicting tenants in NSW without a Tribunal or Court Order.
➲ In Qld the maximum penalty is 40 penalty units (currently $133.45 per unit) which equates to $5,338.
The penalties in other States or Territories will vary, and in addition to any applicable penalties, tenants will generally also have a right to claim for compensation due to the illegal eviction.
“As for what is a Lodger …
In most of the cases in which the superior courts have considered this question, they have distinguished common law tenants from lodgers on the basis that common law tenants have a right to occupy exclusively, while lodgers have a right to occupy that is not exclusive.
The Residential Tenancies Act 2010 (NSW) (the RT Act), however, provides that an agreement for a right to occupy that is not exclusive may be covered, while a lodger’s agreement is not covered.
Apparently the RT Act 2010 has in mind that lodgers have a defining characteristic other than a non-exclusive right to occupy, but the Act does not say what that defining characteristic is (emphasis added here + throughout).
The case law does, however, indicate some other incidental characteristics of lodgers’ agreements.
In Noblett & Mansfield v Manley  SASR 155, the South Australian Supreme Court characterised a lodger as ‘one who resides as an inmate in another person’s house’, while the landlord ‘retains control over rooms and means of ingress and egress’.
In Street v Mountford  2 AC 809, the British House of Lords observed that a lodger’s landlord provides ‘attendance or services’, where a tenant’s landlord does not.
In Commissioner for Fair Trading v Voulon  WASC 229, the Western Australian Supreme Court used these incidental characteristics to set out a definition of ‘lodger’, as distinct from a tenant under residential tenancies legislation who has a right to occupy non-exclusively:
The decided cases indicate that an occupier of residential accommodation at a rent for a term is either a lodger or a tenant.
The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises. In other words, a lodger is entitled to live in the premises but cannot call the place his own.
He resides essentially as an inmate in another person’s house.
In determining whether an occupier is a Lodger or a Tenant, the Tribunal has considered factors such as:
➲ Whether the landlord or caretaker lives at the premises (tends to indicate a lodgement),
➲ Whether the occupier can lock the door to their room (tends to indicate a tenancy),
➲ Whether there are any ‘house rules’ (tends to indicate a lodgement) and
➲ Whether the landlord provides cleaning services, linen, newspapers or milk (tends to indicate a lodgement).
There is no single factor that always determines whether an occupier is Lodger or a Tenant.
Finally, an occupier is not a Lodger merely because their agreement calls them a Lodger.
It is the substance of the right to occupy that matters, not the form of the agreement (Radaich v Smith  HCA 45).”
If a lawyer had been consulted and arrangements had been made and conducted differently such that all of the above factors (as well as additional factors that could have been applied using common sense) then the result would have been very different.
Some additional factors that make common sense (if you consider that a hotel room or a short-term AirBnB stay are both clear cases of lodger arrangements) include:
✅ Providing consumables such as toilet paper, shampoo and conditioner, etc.;
✅ Free or paid access to Wi-Fi;
✅ Free entertainment subscription services - eg., Netflix, Stan, Disney+, Apple TV+, etc.
✅ A furnished room.
If all of the above-mentioned arrangements (both those taken from Court judgments as well as those applied using common sense) were ever considered by the Courts we can be fairly confident that they would clearly conclude that the arrangements constitute a lodgement.
In this case, the flat/housemates would be clearly + unequivocally categorised as lodgers/boarders.
Following any breach or breaches by the flat/housemates (depending on the circumstances + nature of the breaches) at least in NSW they could have been immediately or with sufficient and reasonable notice evicted using reasonable force (without the need for a Court or Tribunal order).
As a result, there would be no fear of a lawsuit + up to $22k penalty for "unlawful" eviction.
“At common law, a lodger’s right to occupy premises is given under an agreement known as a licence.
A lodger’s licence is a contract, nothing more or less.
The terms of this contract are those that the lodger and landlord have bargained for; in practice, this means that the terms are decided by the landlord.
A licence may be written, or oral. Where there is uncertainty as to the terms of a licence, the law will regard the licence as having such terms as the parties reasonably intended, and such terms as are necessary to make it effective as a contract.
The periods of notice required for rent increases and termination are those set out in the licence.
If none is set out expressly, it is reasonable to assume that the period for which rent is paid is the relevant period both for rent increases and for termination.
A lodging licence terminates on the date given in the termination notice.
If you stay past the termination of your licence, you may be evicted by the landlord.
No order or warrant is needed.
The landlord may use force to remove you, but no more than is reasonable (Imperial Acts Application Act 1969(NSW), section 18).
IMPERIAL ACTS APPLICATION ACT 1969 - SECT 18
18 Forcible entry
No person shall make any entry into any land except where such entry is given by law and, in such case, with no more force than is reasonably necessary.
8 Henry VI c 9--The Forcible Entry Act 1429 ; 31 Elizabeth c 11--The Forcible Entry Act 1588.”
In NSW special provisions are applicable in a Registrable Boarding House under the Boarding Houses Act 2012 (NSW). Other States and Territories may have similar legislation, and if so this article may be updated at a later date to expand this section to include possible additional considerations from other legal jurisdictions.
Under section 5 of the Boarding Houses Act 2012 (NSW) a Registrable Boarding House is defined as follows:
(1) For the purposes of this Act, a
"registrable boarding house" means any of the following:
(a) a general boarding house,
(b) an assisted boarding house that is required to be authorised under Part 4 for it to be lawfully used as such under that Part (a"regulated assisted boarding house" ).
(2) Boarding premises are a
"general boarding house" if the premises provide beds, for a fee or reward, for use by 5 or more residents (not counting any residents who are proprietors or managers of the premises or relatives of the proprietors or managers).
(3) However, a
"general boarding house" does not include any of the following:
(a) a regulated assisted boarding house,
(b) premises that are used as a hotel, motel or bed and breakfast accommodation,
(c) premises that are used as a backpackers hostel,
(d) a serviced apartment (being a building or part of a building that is used to provide self-contained tourist or visitor accommodation that is regularly cleaned by or on behalf of the proprietor or manager),
(e) premises that are used to provide accommodation for workers or employees in connection with their work or employment,
(f) a government school or registered non-government school within the meaning of the Education Act 1990 or any other premises that are used by an educational body to provide accommodation for its students,
(g) a private health facility licensed under the Private Health Facilities Act 2007 ,
(h) a nursing home within the meaning of the Public Health Act 2010 ,
(i) a mental health facility within the meaning of the Mental Health Act 2007 ,
(j) a public hospital within the meaning of the Health Services Act 1997 ,
(k) a residential care facility under the Aged Care Act 1997 of the Commonwealth operated by an approved provider under that Act,
(l) a retirement village under the Retirement Villages Act 1999 ,
(m) premises that are the subject of a site agreement to which the Residential (Land Lease) Communities Act 2013 applies,
(n) premises that are the subject of an occupation agreement to which the Holiday Parks (Long-term Casual Occupation) Act 2002 applies,
(o) social housing premises within the meaning of Part 7 of the Residential Tenancies Act 2010 ,
(p) premises used for refuge or crisis accommodation, or accommodation for persons with additional needs, that is provided by a public authority, council or any other body or organisation and that is wholly or partly funded by the Commonwealth or the State (or an agency of the Commonwealth or the State),
(p1) without limiting paragraph (p), premises used for accommodation that is provided by a registered provider of specialist disability accommodation for the purposes of the National Disability Insurance Scheme Act 2013 of the Commonwealth,
(q) premises (or premises of a kind) prescribed by the regulations.
When a Boarding Premises falls within the scope of the Boarding Houses Act 2012 (NSW) it appears from the legislation that the parties may still expressly opt out of the provisions of the Boarding Houses Act 2012 (NSW) and the mandatory application of the Occupancy Principles by entering into a Residential Tenancies Agreement.
If the parties do so, then the provisions of the Residential Tenancies Act may then apply.
Section 30 of the Boarding Houses Act 2012 (NSW) clearly distinguishes the two arrangements:
30 Occupancy principles
(1) The "occupancy principles" in relation to registrable boarding houses are the principles set out in Schedule 1.
(2) The occupancy principles apply for the purposes of this Division only in relation to residents of registrable boarding houses under occupancy agreements.
Note : The definition of "occupancy agreement" in section 27 (1) excludes any rental agreement between a proprietor and resident of a registrable boarding house (or any persons acting on their behalf).
Accordingly, the occupancy principles do not apply in relation to a person who is entitled to reside in a registrable boarding house under a rental agreement.
A rental agreement is defined in section 27 of the Boarding Houses Act 2012 (NSW):
"rental agreement" means:
(a) a residential tenancy agreement within the meaning of the Residential Tenancies Act 2010 , or
(b) a lease to which the Landlord and Tenant (Amendment) Act 1948 applies.
When a Boarding Premises falls within the scope of the Boarding Houses Act 2012 (NSW) a copy of the Occupancy Principles MUST be provided to boarders.
These principles are applied in any situation where a Residential Tenancy Agreement has not been entered by the parties.
Where an Occupancy Agreement or any other agreement is entered (other than a Rental Agreement - refer above) then any provisions of that agreement that are inconsistent with the Occupancy Principles specified in Schedule 1 of the Boarding Houses Act 2012 (NSW) are void and unenforceable.
Where terms of the agreement are not in conflict, the terms are enforceable under the normal principles of Contract at common law.
When the Occupancy Principles apply this means that any bond maximum is 2 weeks rent and the bond does not need to be lodged with the Rental Bonds Online service operated by NSW Fair Trading (as would normally be the case for any Residential Tenancy Agreement).
Instead, according to Occupancy Principle # 8, the bond is deemed to be a Security Deposit which can held directly by the Landlord.
Boarding Houses and the Law: A legal guide for people in NSW - Guide published by Redfern Legal Centre
Relevant Case Law: Aquino v SPL Living Pty Ltd  NSWCATCD 120
This recent 2022 case considered whether the agreement entered was an Occupancy Agreement or a Residential Tenancy Agreement and consequently which legislation applied to the matter.
This article was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.
Photo by Dimi Katsavaris on Unsplash
This article is intended for general interest and information only. It is not legal advice and nor should it be relied upon or used as such. Always consult a lawyer for specialist advice specific to your needs and circumstances.
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