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Benchmark - Real Estate Cases & Commentary
Tenancy matters
    •  Reservation fee
        -  Landlord's entitlement to retain



Landlord's entitlement to retain 

Prospective tenants entered into an offer to rent agreement with the landlord, under which they reserved the right to enter into a lease. They paid the rental bond and four weeks rent. The prospective tenants had raised with the landlord the fact that their cat would also live on the premises.

The landlord subsequently submitted a lease to the prospective tenants that included two special conditions concerning the prospective tenants’ cat and the timber floors in the property. The special condition regarding the cat required that the cat remain outside at all times.

The prospective tenants refused to sign the lease and asked for their money back. The landlord refunded all of the money except an amount of $1,800, which the landlord claimed to be able to keep under a penalty clause in the agreement to rent.

The prospective tenants stated that they had specifically sought the approval of their cat being on the premises, and that this was an essential term of the lease contemplated by the agreement to rent.

The Tribunal agreed that the prospective tenants would not have entered into the offer to rent agreement if they had known of the special conditions. Therefore, the parties were not of the same mind and the penalty clause in the agreement to rent was not enforceable.

Therefore, the Tribunal ordered that the $1,800 be returned to the prospective tenants.

Rickman and Ryan v Johnson [2010] NSWCTTT 551