In brief - Tenants had not entered into formal written residential tenancy agreement

In a case heard recently in the Queensland Civil and Administrative Tribunal (QCAT), Thomson v South East Property Group Pty Ltd t/as Ray White Coorparoo [2014] QCAT 18, a Brisbane property manager has been ordered to refund bond and advance rent monies received from prospective tenants of a residential townhouse because no document was ever received that committed the tenants to enter into the tenancy.

Tenants pay two weeks' rent and four weeks' bond to secure premises

The prospective tenants, Mr Timothy Thomson and Ms Nicole Smith, signed a tenancy application form with the property manager on 1 September 2013 and formally submitted it the next day. Two days later, the property manager advised the tenants that their tenancy application had been accepted and asked the tenants to pay a deposit of two weeks' rent and four weeks' bond to secure the premises. The amount was duly paid by the tenants to the property manager.

Prior to the tenants signing a residential tenancy agreement, the tenants advised the property manager that they had become aware that identical townhouses in the complex were being leased for lower rental amounts than what the tenants had agreed to pay. The property manager offered a slight reduction to the agreed rent.

Tenants decide not to proceed with tenancy agreement and request refund

The tenants subsequently advised the property manager that they were no longer able to proceed with the tenancy agreement and requested a refund of the monies paid. The property manager responded that it would be treating the tenants' refusal to proceed with the tenancy agreement as a "break lease situation" and that the property manager intended to forfeit part or all of the money paid by the tenants on account of lost rent.

Tenants argue that property manager not entitled to accept any money from them

The tenants argued that:

Property manager argues that verbal tenancy agreement entitles it to receive bond and advance rent

The property manager argued that:

  • The tenants had verbally agreed to pay the reduced rent; and
  • Monies paid by the tenants were pursuant to a verbal tenancy agreement, entitling it to receive those monies on account of bond and advance rent.

QCAT determines that tenants did not enter into residential tenancy agreement

QCAT held that no document was ever received that committed the tenants to enter into the tenancy or to pay an amount in relation to it, nor did the tenants ever enter into a formal written residential tenancy agreement. QCAT also held that the amount paid by the tenants was merely a holding deposit, pending the entering into of a general tenancy agreement. The property manager was ordered to refund to the tenants the entire money paid by them to the property manager.

The case highlights the importance of property managers exercising caution when accepting funds from prospective tenants and purporting to forfeit those funds in the absence of a written residential tenancy agreement.