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Benchmark - Real Estate Cases & Commentary
Tenancy matters
    •  Break lease
        -  Recovery of costs by tenant
        -  Duty of landlord to mitigate loss incurred by breach of lease
        -  Duty of landlord to mitigate loss if claiming compensation
        -  Failure of landlord to mitigate loss

Recovery of costs by tenant 

A tenant broke his lease. The landlord found a new tenant, but at a rent that was reduced by $20 per week.

The tenant sought an order from the Tribunal that he had been entitled to break a lease. He also sought compensation for the cost of truck hire for removal, the refund of the bond, the cost of application to the Tribunal, and reimbursement for repairs he had done to the premises.

The landlord contended that the tenant had not been entitled to break the lease, and claimed for outstanding rent to the date a new tenant moved in, $20 per week from the date the new tenant moved in until the date the original tenant’s lease should have finished, water usage, a reletting fee, a lease preparation fee.

The tenant claimed he had been entitled to break the lease because the property had been advertised as a three bedroom house, whereas, in fact, it was a two bedroom house.

The tenant inspected the property, signed a lease, and moved in four days later. Upon moving in, the tenant realised that the property only had two bedrooms. Nine days later, he advised the landlord’s managing agent that he intended to vacate the property.

The Tribunal stated that, when the property is available for inspection, the description of the number of rooms is less important than it would otherwise be. The Tribunal therefore considered that the tenant was not entitled to break the lease.

Similarly, the tenant was not entitled to recover the cost of truck hire for removals.

Further, the cost of applications to the Tribunal must be borne by the applicant.

The Tribunal did allow the tenant to recover the cost the repairs that he had done, which was $53.05.

The Tribunal also allowed the landlord to recover all of the amounts he claimed from the tenant, which amounted to $2,157.95.

The tribunal ordered that the landlord was entitled to the bond, to be offset against the amount owing to him.

This left an amount that the tenant owned the landlord of $504.90, which the Tribunal ordered the tenant to pay.

Graham v Sivabalakan [2010] NSWCTTT 603

Duty of landlord to mitigate loss incurred by breach of lease 

Landlords have an obligation to mitigate loss after a tenant’s breach of the lease. A claim for loss of rent may not be allowed unless the landlord can provide evidence that they have attempted to find new tenants by taking steps such as re-listing the property and arranging for inspection of the premises as soon as possible.

The landlord and tenants entered into a Residential Tenancy Agreement for a term of 12 months. The tenants vacated the premises after five months. The tenants applied to the CTTT seeking a refund of the bond and compensation from the landlord for economic and non-economic loss. They claimed that the cooking and hot water facilities in the premises had not worked throughout the term of the tenancy. The incoming inspection report indicated that the oven was broken and ongoing complaints were made to the managing agents about the cooking facilities. After three months there was an unsuccessful attempt to repair the oven. It was eventually fixed shortly before the tenants moved out. During the tenancy, the tenants also made numerous complaints about a leak in the hot water system, which deteriorated to the point where they had no hot water.

The landlord admitted that the stove in the premises did not work but claimed that the damage to the oven was caused by the tenants’ faulty installation of a washing machine. The landlord denied that the tenants would have been put to any inconvenience by the leak in the water heater.

The landlord sought compensation from the tenants for the losses incurred as a result of their breach of the lease.

The CTTT rejected the landlord’s claim for loss of rent as it was not satisfied that the landlord had taken reasonable steps to mitigate the loss. The landlord could not provide any evidence of advertisements for the property, or show when she commenced advertising for new tenants. The tenants had not, after giving notice of their intention to vacate, been contacted by the agent to arrange an inspection of the premises by potential tenants.

The CTTT ordered the tenant to pay the landlord’s re-letting costs.

In relation to the tenant’s claim, the CTTT accepted that the cooking facilities and hot water system were not working properly. The CTTT held that the landlord had breached the tenancy by failing to maintain the premises in a reasonable state of repair. The landlord was ordered to pay the tenants $750.00 which included an allowance for stress and inconvenience. The landlord was also ordered to repay the balance of the bond to the tenants, less the amounts owing to the landlord.

Cormack v Azzena [2010] NSWCTTT 191

Landlord must try to mitigate loss if claiming compensation from a former tenant 

The landlord obtained orders authorising it to sell goods that had been abandoned by the tenants and which remained on the premises. The goods consisted of beds, wardrobes, lounges, dining table and chairs, refrigerator, stereo and television.

On 11 September 2009, the landlord had the goods valued – the valuation was that the bulk of the goods were worthless, but that 27 items were worth a total of $725.00. On 25 September 2009 the landlord had all of the goods packed and put into storage for one month, at a cost of $2,008.50. The goods were sold at auction for $587.00. After deducting commission and cartage fees, the net proceeds were $18.56.

The landlord claimed compensation from the tenant, including an amount of $330.00 for the cost of the valuation, and the $2,008.50 for packing and storing the goods. The Tribunal found that it was reasonable to arrange for an independent valuation, and allowed the cost of obtaining the valuation.

The Tribunal declined to allow the cost of storage. It held that the landlord had an obligation to mitigate its loss, but that that the landlord had failed to do so when it proceeded to incur storage costs that were greater than the known value of the goods.

NSW Land & Housing Corporation v Semmens [2009] NSWCTTT 665 

Failure of landlord to mitigate own loss 

The tenants entered into a lease for 52 weeks in January 2010. In July 2010, the tenant advised the landlord’s managing agent that they intended to vacate the premises in August.

The landlord sought an order that the tenants pay the advertising fees that had been incurred, as well as fees for breaking the lease.

The tenants provided evidence that the advertisements placed by the landlord’s agent had been misleading, and had made the property seem less attractive than it was. The advertisements had stated that the property had on street parking, whereas it had a lockup garage and storage.

The Tribunal held that this advertisement would have deterred potential new tenants from even viewing the property The landlord had therefore failed in her duty to mitigate her losses. The tenants should not bear the consequences of the landlord’s agent’s error.

The Tribunal therefore did not allow the landlord’s claim for advertising costs, but did allow the landlord’s other claims.

Jones v Levey & Wilson [2010] NSWCTTT 617