COVID-19 relief (in particular, as to possession orders) within the Residential Tenancies Act 1997 (Vic)

Markiewicz v Crnjac [2021] VSCA 290

The COVID-19 legislative regime

In April 2020, in response to the impact of the COVID-19 pandemic on workers in Victoria, Parliament introduced a new Part 16 into the Residential Tenancies Act 1997 (Vic) (Act).  Section 542 of the new provisions provided that where a tenant was otherwise in breach of a residential lease (for example, by not paying rent), they were taken not to be in breach if the breach was because of a “COVID-19 reason”.  The “COVID-19 reasons” principally included illness and an inability to work because of the exercise of powers by the Chief Health Officer.

Part 16 was originally legislated to operate between 29 March 2020 and 28 March 2021 (the Emergency Period).  It was technically repealed on 28 March 2021 but reg 14 of the COVID-19 Omnibus (Emergency Measures) Transitional Regulations 2021 (Vic) (Omnibus Regulations) provided that the protection conferred by s 542 in respect of breaches of leases occurring during the Emergency Period was to continue in relation to those breaches (but not subsequent breaches) until 25 October 2021 (the Transition Period).

Despite this, at the conclusion of the Emergency Period, Parliament introduced further amendments to the Act.  One of those amendments was s 91ZM, concerning the eviction of tenants, which provided that a notice to vacate could be issued by a landlord where there had been an “occasion of non-payment of rent” by a tenant.  That, in turn, was defined as rent that was “owing” by a tenant.  It was the interaction between s 542 (extended by reg 14) and s 91ZM that was in issue in this decision.

The facts and the Tribunal’s decision

The facts of the case were not in dispute.  The tenant had occupied premises in Avondale Heights since 2015 and had, until the shutdowns caused by COVID-19, complied with the terms of her lease.  During the Emergency Period, as a result of those shutdowns, she lost almost all of her income as a rideshare driver and was only able to pay about half of the rent owing (which was held to constitute a “COVID-19 reason” under the Act).

The landlord did not seek to evict the tenant or recover arrears during the Emergency Period.  However, on 30 March 2021 (two days after the end of the Emergency Period), the landlord issued a notice to vacate under s 91ZM because of the failure to pay rent during the Emergency Period.  The landlord subsequently applied to VCAT for a possession order as required by the legislation.

The Tribunal was constituted by Quigley J and Proctor DP.  Although the Tribunal held that s 542 of the Act (extended by reg 14 of the Omnibus Regulations) provided a defence to the landlords’ claim for compensation for the rent outstanding, it held that s 542 did not apply to the recently-introduced s 91ZM possession order regime.  That is, the Tribunal held that after the Emergency Period had concluded, the landlord was entitled by s 91ZM to a possession order in respect of rental that remained “owing”, being rental unpaid at the end of the period.  In doing so, the Tribunal concluded that s 91ZM was unaffected by s 542 and reg 14 and applied notwithstanding the deeming operation of those provisions.

The tenant sought leave to appeal the decision to the Court of Appeal.  

Findings of the Court of Appeal

The Court of Appeal (Emerton and Sifris JJA and Macaulay AJA) unanimously allowed the appeal.

The critical issue before the Court of Appeal was whether the tenant’s failure to pay rent for a COVID-19 reason during the Emergency Period, which although strictly a breach of the lease, was taken not to have been a breach during the Transition Period – and whether, as a result, the rental outstanding did not constitute rental “owing” for the purpose s 91ZM.  In answering that question, the Court engaged in a detailed exercise of statutory interpretation and considered the intention of Parliament in introducing these amendments to severely curtail rights of landlords during the Emergency Period and Transition Period.  The principles applied by the Court with respect to the exercise of statutory interpretation are well-known and were not the subject of any controversy in the case.

The Court held, in short, that the deeming provision had the effect that the tenant was deemed not to be in breach of the lease during the Emergency Period.  By reason of reg 14, that “fiction” continued during the extended Transition Period.  The consequence of that fiction was that no rental was “owing” during either of those Periods – that is, because there was no breach, there could be nothing owing.  In making that finding, the Court rejected the landlord’s argument that the arrears constituted a debt owing independently of a breach of the lease.

Because the non-payment of the rent during the Emergency Period was to be taken not to be a breach of the lease, enforcement measures for rental arrears (including, relevantly, the making of a possession order) could not be taken during the Emergency Period and the Transition Period.

Other findings

A separate question in the appeal concerned whether the protections afforded by the COVID-19 relief provisions would operate permanently or would cease to have effect after the conclusion of the Transition Period (being from 25 October 2021).  More pointedly, the Court had to decide whether the effect of the legislation was that rental that was deemed not to be owed during the Periods would never be owed or whether such rental would, once the operation of the legislation concluded, “revive” as a debt.

The Court held that the rental would accrue once again after 25 October 2021.  Their Honours considered that while the legislation contemplated a temporary loss, suspension or moratorium of the landlord’s rights, the COVID-19 measures were never intended to have permanent operation and were never intended to permanently extinguish property rights.  That is, once the Transition Period ended on 25 October 2021, the rental arrears would be “owing” and would be payable and subject to the procedure set out in s 91ZM (and related provisions).

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