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Hi,
We have had a number of enquiries about what compensation can be claimed for, and how to present such a claim, when a tenant is in breach of their fixed term residential tenancy agreement.
The Residential Tenancies Act 2010 is quite clear that the Tribunal may, on application by a landlord or tenant, make a number of orders including an order for the payment of an amount of money (section 187(1)(c)) and an order as to compensation (section 187(1)(d)) and further, in regards to compensation, states in section 187(2):
Without limiting the Tribunal’s power to make an order as to compensation, the Tribunal may order compensation to be paid for the following:
(a) loss of rent,
(b) any other breach of a residential tenancy agreement,
(c) loss or damage suffered by a person as a result of inaccurate, ambiguous or out-of-date information being listed about the person on a residential tenancy database.
Thus, the Tribunal has the power to make an order for any appropriate form of compensation (being an amount of money or otherwise), but is also specifically directed to take into account compensation for loss of rent as well as any other breach.
Click here to view section 187 of the Act
When should you be able to claim compensation using the 'Residential Tenancy Agreement with ADL Additional Terms'?
When making an Application to the Tribunal you should be able to make a claim for compensation as follows:
- Where you have not crossed out Additional Terms 41 and 42, you will be limited to claiming the break fee as calculated in accordance with Additional Term 41; OR
- Where you have crossed out Additional Terms 41 and 42, using the ADLForms 'Clause Cross-out' feature (Simply click on the terms to cross them out within the ADLForms program), ADL's Additional Term 53 will become effective and you should be able to claim for (among other things):
- Loss of rent; and
- compensation, including out of pocket and other reasonable expenses, as provided by sections 187(1)(c) and (d) and 187(2) of the Act.
With any claim, the amount of compensation claimed must be fair and reasonable and portrayed as such to the Tribunal.
Note: A claim under Additional Term 53 is not limited as it would be if Additional Terms 41 and 42 applied.
Are advertising costs considered to be a fair claim?
Advertising costs should be a fair claim considering that a landlord would have budgets in place (particularly in respect of advertising costs) based on the tenant's legally written commitment to rent the premises for a specific term.
Where a tenancy terminates early, the landlord will be forced to outlay for advertising costs they have not budgeted for. The earlier the termination, the greater the effect on the Landlord's returns. A simple formula for determining a fair amount for such a claim might be:
(Cost of Advertising) X (Months Remaining) / (Term of Tenancy)
You may have your own formula or method of calculation.
Why would the Tribunal refuse to order compensation?
Where the Tribunal is of the opinion a claim is unreasonable the applicant will be unsuccessful.
When making claims for compensation it will be extremely important to present your case well and clearly refer to sections 187(1)(c) and (d) and 187(2) of the Act.
Bear in mind, not only is the Tribunal governed by the Act and Regulations but will be influenced by the individual Tribunal Members' own views and experience and it is the individual that you will have to persuade as to the fairness of your claim.
One difficulty to overcome is the Tribunal's tendency to lean towards the 'Break Fee' provisions (Additional Terms 41 and 42), even where they are crossed out in the Tenancy Agreement. Therefore it is important to draft your claim with care.
Alan Liddle
(General Manager - ADL Software)
Click on the link below to:
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