In our recent meanderings through published decisions of the Queensland Civil and Administrative Tribunal we came upon one decision which raised some interesting questions about the term ‘mitigation of loss’ for landlords.
The decision was Redondo Property Investments Pty Ltd v Bennett and Anor  QCAT 282 (19 May 2011).
The essential issue in the case was that the landlord was seeking rental arrears and other compensation in the sum of $25,271.98.
The decision is of importance given the reference made to a landlord’s duty to mitigate loss.
Section 362 of the Residential Tenancies and Rooming Accommodation Act 2008 provides:
362 Duty to mitigate loss or expense: –
- This section applies to the lessor if the lessor incurs loss or expense because of-
- the tenant’s failure to hand over vacant possession of the premises after a termination order is made by a tribunal; or
- the tenant’s abandonment of the premises; or
- another act or omission of the tenant.
- This section applies to the tenant if the tenant-
- incurs loss or expense because of an order made by a tribunal or registrar declaring that the tenant abandoned the premises on a stated day; and
- contends that the premises were not abandoned or were only abandoned on a day after the day stated.
- The lessor or tenant-
- must take all reasonable steps to mitigate the loss or expense; and
- is not entitled to receive compensation for any loss or expense that could have been avoided by taking the steps.
PLEASE NOTE THAT SIMILAR PROVISIONS APPLY IN EACH STATE AND TERRORITY – A LANDLORD ALWAYS HAS A DUTY TO MITIGATE LOSS.
The Member stated in her reasons the following:
“The Applicant did not mitigate the loss to the tenants and allowing them to remain in occupation of the property without paying their rent caused the rental arrears to escalate to such a large amount that the tenants had little chance of repaying those funds.”
Does a landlord have a duty to mitigate loss in accordance with the legislation prior to the termination of the tenancy agreement?
The fact is that the landlord had not issued any breach notices to the tenant during the 12-month period and had not sought to terminate the tenancy.
Ultimately this decision did not make a definitive decision on the duty to mitigate as that question became unnecessary as the application was filed out of time.
However, the decision does raise the real question – does a landlord have a duty to mitigate loss in accordance with the legislation prior to the termination of the tenancy agreement?
The answer must be ‘Yes’.
If a landlord does not follow the prescribed procedures set out in the legislation, then the door is open to a claim by the tenant that the landlord has failed to mitigate the loss.
So next time you have a landlord say ‘give them another go’ remind that landlord that they may ultimately suffer the consequences financially.