A “Cautionary Legal Tale”: The housemates from hell!

26/11/2020

Property Law

A “Cautionary Legal Tale”: The housemates from hell!

When cash flow is short: One option to help pay the rent/bills/mortgage is to take in one or more flat or housemates. You may think that this is a simple matter (no legal advice required). This article is a “Cautionary Legal Tale” based on one of our real client's experiences. When flat or housemates refuse to pay rent + make living in your own home so untenable you have no choice but to leave … you have the housemates from hell! This is a scenario that could have you kicking yourself that you didn't engage a lawyer to start with!

Contents

What could go wrong? right …

What if your flat/housemates are not going to be tenants?

Penalties + Potential Compensation Claims for unlawful eviction

What is a Lodger?

Let's turn back the clock …

What could go wrong? right …

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 …

The easy part ➲ Find your Flat/Housemates

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.

What if your flat/housemates are not going to be tenants?

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.

It makes no difference what the agreement is called, or how the parties are referred to in the agreement.

Penalties + Potential Compensation Claims for unlawful eviction

➲ 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.

What is a Lodger?

“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 [1952] 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 [1985] 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 [2005] 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 [1959] HCA 45).”

Let's turn back the clock …

If a lawyer had been consulted and arrangements had been made and conducted differently such that all of the above factors which are considered by the Courts tended to indicate a lodgement, then the flat/housemates could 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 law suit + 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
Forcible entry
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.”

Credits:

This article was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Cover Image:

Photo by Dimi Katsavaris on Unsplash

Important Notice:

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.