Major Reforms in Minor Detail: Five Strikes System for Rental Arrears

In our regular column, Major Reform in Minor Detail, we take individual issues from the recent tenancy law reforms and discuss what they means for the community housing sector.  One change that has caused a lot of confusion is the new “five strikes” system for Notices to Vacate for rental arrears introduced by s91ZM of the RTA.

As was previously the case, if a renter received a Notice to Vacate for rental arrears and subsequently pays all unpaid rent before the termination date, a possession order will not be issued by VCAT. This was the existing practice of VCAT but the legislation now states that VCAT no longer has the discretion to issue a possession order where the arrears have been repaid.

Where the change comes in, is if a fifth or subsequent Notice to Vacate is given within a 12-month period, the rental provider may apply to VCAT for a possession order at the end of the 14-day notice period, and VCAT may issue a possession order even if the renter pays off their arrears.

So while this change has caused lots of questions and confusion, it is hard to see how it will be of much relevance to the community housing sector.  This is because social landlords use eviction as a measure of last resort so would not seek to evict renters who are willing to address their arrears, even if they have frequently been in arrears in the past.

It also remains to be seen whether this system is of much relevance for private landlords as, to issue a possession order based on a “fifth strike” for a renter who has repaid their arrears, VCAT would need to consider it “reasonable and proportionate” to make such an order with reference to the legislated test outlined in s330A of the RTA. This will include an assessment of whether the breach has been remedied. Therefore, VCAT may find that the “five strikes” criteria for possession outlined in s91ZM are met but dismiss the application anyway as it is unlikely to be reasonable and proportionate to end the tenancy based on arrears where those arrears have been repaid.

We will examine the reasonable and proportionate test in more detail in the next Major Reforms in Minor Detail.  In the meantime, members with any questions on this are welcome to contact us