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Which case won?

Landlords seek early termination of lease due to hardship during Covid-19 pandemic – Which case won?
14 Jul | Which Case Won

Landlords seek early termination of lease due to hardship during Covid-19 pandemic – Which case won?

by Anneka Frayne, Tamworth

The Facts

Parties enter into residential lease agreement

A husband, his wife and two children lived with the husband’s elderly mother in a house that she owned.

This enabled the husband and wife to rent out their home, becoming landlords under a residential tenancy agreement with the tenants.

Under that agreement, the tenants leased the premises for a period of 52 weeks, commencing on 12 August 2019 and ending on 9 August 2020.

Landlords seek order for early termination of lease due to Covid-19

On 30 March 2020, the landlords served the tenants with a notice of termination.

The notice required the tenants to give vacant possession of the premises on 9 August 2020, being the end of the 52-week lease period.

However, with the Covid-19 pandemic, the landlords became worried about putting the husband’s elderly mother at risk of infection by living with her.

On 16 April 2020 they applied to the NSW Civil and Administrative Tribunal, requesting an order for earlier termination of the lease.

The landlords claimed that in the special circumstances that existed, they would suffer undue hardship if the residential tenancy agreement was not terminated.

The tenants opposed the early termination of the lease, saying that they would suffer if it was terminated early.

It was up to the tribunal to decide whether to grant the order.

Both parties appeared at the tribunal via telephone due to the Covid-19 pandemic.

casea
The case for the landlords
  • The law requires that special circumstances exist to terminate this lease early. If the Covid-19 pandemic is not a special circumstance, then I don’t know what is.
  • We live with my mother, who is 77 years old and has chronic health problems, including diabetes, kidney disease, heart disease and high blood pressure. By living with her, we are putting her at significant risk of contracting Covid-19 and dying.
  • This is especially so since I work in close proximity with people in the construction industry, putting me at high risk of contracting the virus and passing it on to my mother.
  • My wife and children also live with us and have frequent contact with my mother, further increasing her risk of contracting Covid-19.
  • This situation is also causing us undue hardship. It makes it impossible for my elderly mother to self-isolate in accordance with Australian government health recommendations for people like her.
  • Living with my mother during this pandemic is also putting considerable emotional and financial pressure on the family. The tenants say that we should just rent somewhere else, but this is not an option. We cannot afford to pay the mortgage on our home as well as paying rent on another property.
  • The tribunal should grant our application for an early termination order so that we can keep my mother alive by moving out of her house, back into our own premises.
caseb
The case for the tenants
  • We would suffer considerable financial hardship if we were required to vacate the premises. Our moving costs would be approximately $5,000, at a time when we have already experienced financial hardship. We recently had to pay thousands of dollars for our daughter to return home from Peru when she was stranded there due to Covid-19.
  • The real reason the landlords want to terminate early is in retaliation against us for being temporarily in arrears on our rent while our daughter was stranded, and for insisting that necessary repairs be made to the premises.
  • In any event, there is no need for the landlords to move out of their mother’s home. The government has only said that elderly people should stay at home, not that they should totally isolate themselves. Nor did the government order people living in the home of an elderly person to relocate.
  • The landlords’ argument that they can’t move into alternative accommodation because they can’t afford both mortgage and rent makes no sense. If the landlords evict us, they will no longer receive rent from us and so will be no better off. Besides that, the landlords have not even tried to find alternative accommodation.
  • If we are forced to move out early, it will cause severe disruption to our family of five and render us homeless.
  • The tribunal should dismiss the landlords’ application for an early termination order.

So, which case won?

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Expert commentary on the court's decision

Anneka FrayneDirector
"Even during Covid-19, the common principles of contract law still apply, and the circumstances of each case will be taken into consideration. If you are a landlord seeking to rely on section 93 of the Residential Tenancies Act, it’s critical to ensure that you have all the relevant evidence available in your case so that the tribunal can properly assess the circumstances."
Civil and Administrative Tribunal dismisses landlords’ application for early termination of lease

In the case of Tawadros v Grubisic [2020] NSWCATCD 1, the NSW Civil and Administrative Tribunal ruled in favour of the tenants, Vanja Grubisic and Joe Cardinale, dismissing the application for an early termination order by the landlords, Abraham Tawadros and Safaa Roufael.

Landlords seek early termination order under section 93 of Residential Tenancies Act

Mr Tawadros and Ms Roufael sought to terminate the residential tenancy agreement early under section 93 of the NSW Residential Tenancies Act 2010.

Section 93 states that “the Tribunal may, on application by a landlord, make a termination order if it is satisfied that the landlord would, in the special circumstances of the case, suffer undue hardship if the residential tenancy agreement were not terminated”.

In considering section 93, the tribunal emphasised that as applicants, the landlords bore the onus of proof. It was up to them to provide sufficient evidence to satisfy the tribunal that the order could be made.

The tribunal also pointed out that even if the landlords provided sufficient evidence, the tribunal had discretion whether to make the order.

Tribunal considers landlords’ application in stages

The tribunal also made clear that it would consider the landlords’ application under section 93 in stages.

First, the tribunal had to determine if there were “special circumstances”.

Secondly, if “special circumstances” were established, the tribunal had to determine if there was “undue hardship”.

Finally, if both special circumstances and undue hardship existed, the tribunal had to decide whether it was appropriate to exercise its discretion to terminate the tenancy.

Tribunal finds Covid-19 is a special circumstance under section 93

Looking for guidance from decided case law, the tribunal defined “special circumstances” as circumstances that are out of the ordinary.

The tribunal noted that it must consider all relevant circumstances in determining the issue of whether there are “special circumstances” in the present case.

The tribunal concluded that on the evidence, the landlords had established that there were “special circumstances” in this case. The tribunal found that the “situation created by the coronavirus can be described as unusual or uncommon and are ‘circumstances that are out of the ordinary’. The living arrangements between the landlords and [Mr Tawadros’ mother] have been impacted by the coronavirus and their fears for the wellbeing of [Mr Tawadros’ mother] are reasonable”.

Tribunal finds no undue hardship under section 93 and dismisses landlords’ application

As well as demonstrating there are special circumstances, the landlords had to prove that they would suffer undue hardship if the residential tenancy agreement were not terminated.

The tribunal turned to caselaw to define “undue hardship”. It adopted the court’s finding in State of New South Wales v Austeel Pty Ltd [2004] NSWSC 81 at [22] that “undue hardship” simply means excessive or greater hardship than the circumstances warrant. In that case, the court also noted that even if a claimant is themselves at fault, it is still an undue hardship if the consequences are out of proportion to their fault.

The tribunal was not satisfied that Mr Tawadros and Ms Roufael’s evidence established sufficient hardship to justify termination of the tenancy. The landlords had not provided evidence of hardship which was excessive or disproportionate to the circumstances of the case.

Although the tribunal accepted that Mr Tawadros’ mother was in a high risk category and may not recover if infected with Covid-19, there was no evidence that any member of Mr Tawadros’ family had Covid-19 or was at increased risk of contracting the virus.

Nor did government advice dictate that elderly people should totally isolate themselves from the rest of the community. Advice to the elderly to take proper precautions and to remain at home, did not mean that any person residing with an elderly person should move out of the residence.

In addition, Mr Tawadros and Ms Roufael could possibly have rented alternative accommodation and provided no evidence that they made a genuine attempt to do this.

The tribunal also agreed with the tenants, Ms Grubisic and Mr Cardinale, that the landlords’ assertion that they couldn’t afford both their mortgage and rent wasn’t persuasive.

Finally, the tribunal emphasised that earlier termination of the tenancy was a serious matter and would render Ms Grubisic, Mr Cardinale and their family homeless.

The tribunal dismissed Mr Tawadros and Ms Roufael’s application, concluding that they had not provided sufficient evidence that, in the special circumstances of this case, they would suffer undue hardship if the residential tenancy agreement were not terminated.

Landlords must provide sufficient evidence to persuade tribunal

This case provides insight into the rights of tenants and the obligations of landlords in unusual circumstances such as those created by Covid-19.

It is not the case that Covid-19 automatically renders the obligations of a landlord void due to special circumstances.

The landlord’s circumstances must be weighed against the rights of the tenants to remain in the property and the hardship the tenants will endure if the lease is terminated.

Although it might have been difficult mentally for the landlord to deal with the risk of living with his elderly mother during the virus, it would have caused financial hardship and homelessness for the tenants if an order for early termination was made.

Also, under section 93, the landlord bears the onus of proving that special circumstances and undue hardship exist. In this case, Mr Tawadros and Ms Roufael failed to meet this evidentiary burden, with a paucity of evidence on their attempts to find alternative accommodation, the costs of alternative accommodation and a doctor’s opinion on why Mr Tawadros’ elderly mother should self-isolate.

Even during Covid-19, the common principles of contract law still apply, and the circumstances of each case will be taken into consideration. If you are a landlord seeking to rely on section 93 of the Residential Tenancies Act, it’s critical to ensure that you have all the relevant evidence available in your case, so that the tribunal can properly assess the circumstances.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.
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