Is the presence of a renter a barrier to execution of a court warrant?

Since around April 2011, the Sheriff’s Office of Victoria has taken the view that they would not execute a court warrant of possession against a person in occupation of land if they were under a residential rental agreement within the meaning of the Residential Tenancies Act 1997 (Vic) (RTA) and the mortgagee must instead comply with the provisions of the RTA. This position has recently changed after AsJ Derham’s judgment in Capital Securities XVI Pty Ltd v Kozina & Anor [2023] VSC 178 (Kozina).

Mortgagee’s requirements under the RTA

Section 91ZZK of the RTA provides an avenue for a mortgagee to issue a notice to vacate on a renter. The requirements for a mortgagee to issue a notice to vacate are:

1. the mortgage was entered into before the residential rental agreement;
2. the mortgagee is entitled to possession of, or to exercise a power of sale of the rented premises;
3. the mortgagee must not have expressly or impliedly consented to the mortgagor entering into a residential rental agreement in relation to the rented premises, regardless of when the residential rental agreement was entered into; and
4. the notice to vacate must specify a termination date that is not less than 60 days after the date on which the notice to vacate is given.

Further obligations on mortgagees enforcing against renters under the RTA can be found in our earlier article.

Lease provisions under the Transfer of Land Act

The Transfer of Land Act 1958 (Vic) (TLA) provides a means of transacting in land and protecting a person’s interest in land. Section 87C of the TLA provides that the creation of a lease, in respect of land subject to a mortgage, is not valid or binding against a mortgagee unless the mortgagee has consented to the creation of the lease in writing.

Summary of the facts of Kozina

• On 8 September 2017, the plaintiff lender obtained a judgment for possession of the mortgaged property and pursuant to an agreement between the plaintiff and the defendants, the plaintiff agreed not to enforce the judgment until 30 August 2022.

• On 26 October 2022, the plaintiff obtained a warrant of possession which was sent to the Sheriff’s Office for execution, due to be executed on 17 February 2023.

• On 27 January 2023, an application was made to restrain the plaintiff and the Sheriff from enforcing the warrant, which was refused.

• On 16 February 2023, solicitors for the defendants wrote to the solicitors for the plaintiff stating that the defendants were not fit to vacate and provided a letter from a medical practitioner. As a result, the Sheriff rescheduled execution of the warrant to 17 March 2023.

• On or about 15 March 2023, the defendants engaged a real estate agent to sell the mortgaged property and on or about 1 March 2023 the defendants entered into a periodic rental agreement with their daughters. At that time the solicitors for the defendants wrote to the solicitors for the plaintiff stating:

“Whilst the rental agreement was created for the purpose of improving the saleability of the property you will no doubt be aware that a by-product of the tenancy agreement is that the eviction by the Sheriffs(sic) Office can no longer proceed. We look forward to your confirmation that the eviction scheduled for 17 March 2023 is stayed and to your clients (sic) input, if any, to ensure a successful sale by auction”.

• On 17 March 2023, the Sheriff’s Office advised that as a result of the tenancy agreement, the Sheriff would not proceed to execute the warrant without a court order.

Analysis

• The RTA notice regime applies to circumstances where the mortgagee has not given consent to a residential rental agreement.

• Whilst a residential rental agreement may be valid as between the residential rental provider and the renter, it does not mean the residential rental agreement is valid as between the renter and the mortgagee – that is the effect of the operation of s 87C of the TLA.

• The correct construction of s 91ZZK of the RTA is permissive and not a mandatory requirement as a result of which a mortgagee ‘may’ (not must) give the renter a notice to vacate the premises.

• As the language of s 91ZZK of the RTA is permissive, this enables the mortgagee to submit to the jurisdiction of the Victorian Civil and Administrative Tribunal (VCAT) should it wish to do so.

Change in the Sheriff’s practice

As a result of the AsJ Derham’s judgment in Kozina the Sheriff’s Office of Victoria will now execute a court warrant of possession against all persons in occupation of land, regardless if they are a renter and have entered into a residential rental agreement within the meaning of the RTA.

It is the Sheriff’s policy that sheriff’s officers deliver a notice to vacate to the occupant followed by a final notice to vacate before enforcing the warrant. Subject to any extenuating circumstances, the notice to vacate is delivered approximately 3-4 weeks before the set date, and the final notice to vacate is usually delivered before or on the day of the set date.

Until recently, the Sheriff’s notice to vacate would inform renters that a court warrant does not give sheriff’s officers the power to end a residential rental agreement made under the RTA and if a mortgagee is seeking vacant possession, it will need to comply with the provisions of the RTA.

Now, if sheriff’s officers become aware that there are potential renters at the property, they will notify the mortgagee and provide renter’s details. If a mortgagee has not consented to a residential rental agreement, it is then a matter for the mortgagee should it wish to submit to the jurisdiction of VCAT.

Key takeaway

The presence of renters at the property may not stop the Sheriff from executing the warrant. If a mortgagee is not bound by a residential rental agreement, a mortgagee is not required to issue a notice to vacate under the RTA.

If you are a mortgagee who is wanting to enforce its mortgage against a renter who is in occupation of a mortgaged property, please contact us and we can provide advice on whether you ought to comply with the mortgagee’s obligations under the RTA.

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Authored by:

Sonia Apikian, Partner
Sarah Rogers, Senior Associate