Financial institutions often provide secured funding enabling borrowers to purchase residential properties for investment purposes. As tenants may come and go from a residential rental property, the identity of current tenants is not always recorded in the records of the financial institution.

The Victorian Civil and Administrative Tribunal (VCAT) takes a strict view on the requirement under the Residential Tenancy Act 1997 (Vic) (RTA) for Notices to Vacate issued by mortgagees to be addressed to the tenant.  VCAT has interpreted the legislative requirements under the RTA as meaning each tenant must be correctly named.

How are possession orders obtained against a tenant?

Provided the tenancy agreement post-dates the registered mortgage given by the mortgagor, the financial institution may utilise the provisions of section 268 of the RTA by issuing a Notice to Vacate and upon its expiry applying under section 325 of the RTA to VCAT for an order for possession against the tenant.

How can tenants be identified?

A common method employed to identify tenants is to conduct an occupancy check of the property. If the tenants refuse to identify themselves or access to the property cannot be obtained, for example it is in a secure apartment building, another option is to ask the mortgagor for details as to whom resides in the property.

If neither of the above methods identify the tenant the provisions of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act) enable an applicant in a proceeding to request that VCAT make a declaration concerning any matter in a proceeding. For a financial institution to avail itself of these provisions an application will need to be made to VCAT under the RTA for there to be an active proceeding within which to request a declaration under the VCAT Act.  For there to be an active proceeding under the RTA the financial institution will need to have issued a Notice to Vacate to 'the tenants'.

The declaration that would be sought in the proceeding under the VCAT Act would be an order compelling a person who would know the name of the tenant to provide this information. Such persons may be:

  • the mortgagor;
  • real estate agent; or
  • building management company in the case of strata titled buildings.

If this order is obtained, it overrides the Privacy Laws applicable to the agent who must comply with the order and disclose the name of the tenant. Once the name of the tenant is known, the financial institution may apply to amend its proceeding to be against the named tenant, issue a fresh Notice to Vacate to the named tenant and adjourn the proceeding for hearing until after the termination date within the Notice. However, going through this process will take time and incur additional legal expenses. This process should be treated as an option of last resort.

Takeout

Once a mortgagor is in default, it is prudent for the financial institution to keep up-to-date records as to who is occupying the property. If the name of the tenant is known, the financier's rights pursuant to the RTA are absolute and, subject to the process being strictly followed, it should be successful in obtaining a possession order against the named tenant.