VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
Residential Tenancies DIVISION
Residential Tenancies LIST	
vcat reference No. R2022/9197	
CATCHWORDS	
Meaning of rent and service charge – section 109A of the Residential Tenancies Act 1997 (Vic) – registered housing agency – whether additional property charge is a service charge or rent - notice to vacate for rent arrears given under section 142ZF – calculation of rent arrears – application struck out. 	

APPLICANT	Unison Housing 	
RESPONDENT	Paul Nelson 	
WHERE HELD	Teleconference 	
BEFORE	Member F Gelev	
HEARING TYPE	Hearing	
DATE OF HEARING	22 March 2023 and 30 August 2023	
DATE OF ORDER	30 August 2023	
date of reasons	20 September 2023	
CITATION	Unison Housing v Nelson (Residential Tenancies) [2023] VCAT 1097	

Order
VCAT finds:
1.	The rooming house operator gave the resident notice to vacate under section 142ZF of the Residential Tenancies Act 1997 (Vic).
2.	The Tribunal has reached the view that the amount of rent arrears in the notice to vacate was incorrect.  
3.	The notice to vacate is therefore not valid or effective.
4.	Written reasons will be provided. 
VCAT orders and declares:
1.	The application is struck out.

F Gelev
Member 			

APPEARANCES:		
For Applicant 	Ms J Li and C Mazzonetto	
For Respondent 	Mr C Fitzgerald (Counsel), instructed by Justice Connect 	

Reasons
Background
1	On 23 March 2022, the rooming house operator Unison Housing Ltd (the applicant) gave the resident Mr Nelson (the respondent) a notice to vacate under section 142ZF of the Residential Tenancies Act 1997 (Vic) (‘the Act’). The notice was purportedly given on the basis that the respondent was at least 7 days in rent arrears.
2	According to the notice, dated 16 March 2022, rent was paid up to 28 January 2022 with $0 on account and the respondent was 47 days in arrears, with total rent arrears owing of $1,778.37.
3	On 30 March 2022, the applicant filed an application for a possession order, pursuant to section 323(a) of the Act.
4	On 12 April 2022, the matter came before the Tribunal for the first time before a different member who ordered a payment plan.
5	The matter first came before the Tribunal as presently constituted on 22 March 2023. The Tribunal, after identifying that the issue in dispute related to the calculation of rent, adjourned the matter. The matter came back for a further hearing on 30 August 2023. 
The challenge to the notice to vacate
6	The resident has challenged the notice to vacate on the basis that the rent arrears have been miscalculated for two reasons: first, because a rent increase took effect on 14 November 2021, but the applicant has not provided a copy of the proposed rental increase to the respondent’s legal representatives and thus there is a possibility the notice was defective; secondly, not all the charges imposed on the respondent and counted towards the rent arrears are in fact rent, as defined in the Act.
7	While the Tribunal did not need to consider the first issue – the validity of the rent increase – the Tribunal agrees with the respondent that if a new notice to vacate is issued, the respondent would be entitled to a copy of the relevant documents to decide whether that notice was valid. 
The relevant provisions
8	Rent is defined in section 3 of the Act:
an amount paid to a rooming house operator by a resident to occupy a room and use facilities and services…but does not include any amount for which a resident is liable under section…109A.
9	Section 109A of the Act enables a registered housing agency and Homes Victoria to impose a service charge on a resident in a rooming house – which has been declared under section 19 of the Act to be a rooming house – for any water, central heating, laundry or utility services or facilities made available to the resident where it is not possible or reasonably practicable to measure the use by the resident of that service or facility. 
10	The applicant is a rooming house operator and a registered agency under section 84 of the Housing Act 1983. The premises are located in a building which has been declared under section 19 to be a rooming house. 
11	Further, the parties agree that the respondent’s room falls within this category, i.e., it is not possible or reasonably practicable to measure the use by the resident of that service or facility.
12	Prior to 29 March 2021, section 109A of the Act provided that only the Director of Housing – now known as Homes Victoria – could impose a service charge. Since 29 March 2021, the current version of section 109A has been in force: a registered housing agency can also impose a service charge on a rooming house resident. The expression ‘service charge’ in section 109A means charges for "any water, central heating, laundry or utility services or facilities made available to the resident". The amount of the charge cannot be more than the cost of providing the service or facility to the resident, and it can be increased or decreased in line with changes in cost.
13	Subsection 109A(3A), which came into force on 29 March 2021, stipulates that if Homes Victoria or a registered housing agency imposes or varies a service charge, it must give written notice to the resident. Once given a notice, a resident has the right to challenge the notice – seek that it be withdrawn or that the amount of the charge be varied – at the Tribunal. Section 109(3B) gives the Tribunal the power to withdraw the service charge, vary the amount of the service charge or otherwise vary the service charge as it sees fit.
14	The parties agree and the Tribunal accepts that the applicant is a registered housing agency which can impose a section 109A charge.
The validity of the notice to vacate
15	The applicant must prove the grounds in the notice to vacate, that is establish that the respondent owed at least 7 days’ rent at the time notice to vacate was given to him. Where the notice to vacate is invalid, the Tribunal does not have the power to make a possession order under section 330(1) of the Act.
16	At present, and for some time, included in the amount the respondent pays weekly is an amount the applicant calls an ‘additional property charge’ or ‘additional property cost’. It has varied over time but is about $45 in the respondent’s case, according to the “Income review calculation”, dated 8 November 2022. It is defined by the applicant to include water, electricity, laundry and cleaning of common areas.
17	The rent account or ledger does not separate out the additional property charge and therefore it is not possible from the ledger to find out when the additional property charge was first imposed. The applicant’s representative at the hearing on 30 August 2023 could not shed any light on this issue.
18	Water, electricity and laundry services fall within the definition of the service charge in relation to which a section 109A service charge may be imposed. Cleaning of common areas would appear to be outside the ambit of section 109A.
19	If the additional property charge is part of rent, then the respondent’s arrears in the notice to vacate were calculated correctly and he owed more than 7 days’ rent at the time the notice to vacate was given, the notice to vacate would be valid. If the additional property charge is in fact a section 109A service charge, then there are no rent arrears and the notice to vacate is invalid. 
20	According to the applicant, the respondent only pays ‘rent’. The additional property charge, according to the applicant, is not a service charge, but is in fact either part of the rent or part of the rental rebate.
21	The applicant’s legal argument as to why the additional property charge is not a service charge relied on the email reproduced immediately below. In oral argument, the applicant’s representative did not advance any new argument. The email in question is dated 24 August 2023 and in it the applicant reproduced advice from Community Housing Industry Association Victoria (‘CHIAVic’) and wished to rely on it (bold in the original):
Essentially, there is no definition of additional property costs in the Act. However registered agencies (CHOs such as Unison Housing) are able to apply a rebate as defined under s3 of the RTA.
Because income-based rent plus the additional property costs will not exceed market rent, it is considered to be included as part of the “rebate”.  
The Victorian Housing Registrar requires registered agencies’ additional property costs to be transparent and this is why they are often itemised – but this does not make them a “service charge”.  
Additional property costs are inherently different to a service charge because:
•	Additional property costs are included in the rebated rent amount.
•	Additional property costs cap out at Market Rent.
•	Additional property costs do not change until there is a review of the rebate.
•	Additional property costs are not shown separately on the rent ledger – income-based rent + APC = rent payable.
•	Service charges are not included in the rebated amount.
•	Service charges are shown separately on the rental agreement.
•	Service charges can change as costs go up or down irrespective of the rebated rent amount.
•	Service charges + income-based rent can exceed market rent.
•	Service charges are shown separately on the rent ledger to rebated rent.
22	The Tribunal accepts that the Victorian Government’s own advice seems to fail to take into account section 109A of the Act. Community Housing renters are advised the following on a webpage entitled “Understanding your community housing rent”.
Rent setting is a complex area with no single model applying across the community housing sector in Victoria.
The following principles apply to rent setting by registered agencies:
….
•	a rent figure may include other charges, such as for water and electricity applying to the property (for example, in rooming houses and units which are not separately metered).
23	The respondent argues that most of the items contained in the additional property charge cannot be charged as rent, but constitute a service charge as defined in section 109A. 
24	While the respondent’s counsel’s legal submissions of 29 August 2023 were based on the concession that the additional property charge was imposed in late 2022, that has not been established by the applicant. The additional property charge may have been imposed from a much earlier date. The Tribunal suggested to the applicant’s representative that the charge may have first been imposed in 2019 and she agreed this was possible. According to a letter available to the Tribunal from an unrelated matter, on 27 November 2019 the applicant wrote to a resident in the following terms:
	Rent Policy Changes
	Unison is making a change to our rent policy.
The changes will apply to our long term social and affordable tenancies with an aim to making the rent charging process more transparent, easier to understand and consistent across the long term housing portfolio.
25	The letter went on to discuss how rent would be calculated for ‘social tenancies’ and for ‘affordable tenancies’. The letter then continued thus:
	Additional Property costs
In many Unison properties there are additional property costs which are a condition of occupancy. These costs will vary depending on the service provided at the individual property. In buildings where these costs are applicable, the amount will be added to the rent to make the weekly amount payable. Additional property costs may include any of the following:
			Electricity – Gas – Water – Cleaning – Furniture – Laundry Facilities
26	Finally, the letter advised the resident that they will be asked to sign a new tenancy agreement “to reflect the changes in the way Unison will be calculating rent”. 
27	There is no evidence before the Tribunal that the parties have signed a rooming house agreement since November 2019. 
28	An undated but current document, provided by the applicant and entitled ‘Rent: A guide to your rent at Unison Housing’ relevantly states: 
	1.1 Unison Rent policy
	…
	1.1.1 Social Housing rent – Amount that you need to pay
Unison subsidises rents to ensure they are affordable. For each renter, the subsidy is the difference between the market rent and the income assessed rent based on household income.
	a. Market rent
The market rent for a property is the amount of rent that a renter in the private rental market would be expected to pay…
	b. Income Assessed rent
	Income assessed rent has three parts…
c. Additional property charge
In many Unison properties there are additional property charges which are a condition of living in the Unison property. These could include:
• Electricity
• Gas
• Water
• Cleaning
• Gardening
• Furniture
• Laundry facilities
29	While the heading at 1.1.1 includes the word rent (‘Social Housing rent – Amount that you need to pay’), a table in the same document refers to Total Weekly Amount Payable, rather than Total Rent Payable. The total amount payable consists of Income Assessed Rent and Additional property charges.
Analysis
30	The applicant’s representative at the hearing on 30 August 2023 was not able to advise the Tribunal when the additional property charge was first introduced, nor the exact reason why the applicant considered it necessary to introduce it. 
31	The Tribunal’s decision is based on limited evidence in relation to the terms of the rooming house agreement, whether it is oral or written, and most importantly in relation to the date when the additional property charge was introduced and the exact amount of the additional property charges since it was first imposed on the respondent. 
Is the additional property charge part of the rebate?
32	The applicant, relying on the advice by CHIAVic submits:
Because income-based rent plus the additional property costs will not exceed market rent, it is considered to be included as part of the “rebate”.
33	The argument that the additional property charge is part of the rebated rent is discussed further below. For the sake of completeness, the Tribunal has considered whether the additional property charge could be ‘part of the “rebate”’.
34	A 'rental rebate' is defined under section 3 as "a rebate of rent, or any other reduction in rent, granted to a renter or a resident of a rooming house by Homes Victoria or a registered agency". 
35	The Oxford English Dictionary defines rebate thus: 
A deduction from a sum of money to be paid; a discount; esp. (in later use) one given retrospectively; a partial refund of money paid.
36	The Tribunal finds it self-evident that an additional charge cannot be a rebate, which is a reduction or deduction or a refund of rent. The Tribunal accepts the respondent’s submission that an additional property charge is not a rebate. 
Is the additional property charge rent?
37	The Tribunal is cognisant of the fact that the applicant appears to have relied on advice from the Victorian Government that the additional property charge forms part of rent. The advice to renters appears not to take account of section 109A of the Act.
38	The advice from CHIAVic focuses on various amounts payable pursuant to legislation or policies other than the Residential Tenancies Act 1997 (Vic). The determination of the formulae used by the applicant to determine the amount of rent, any other charges, rebates and total amount payable do not go to the heart of the issue in dispute. 
39	The argument that the additional property charge is not separated out from rent on the ledger – and therefore it must be rent – is circular and without substance. The nature of a charge cannot be changed by it being added or not added to a ledger.
40	The fact that the total amount of rent payable, including the additional property charge, would never exceed the market rent, is not determinative of the issue in dispute. There is no reference to the concept of market rent in section 109A or elsewhere in the Act. 
41	The Tribunal is of the view that if the applicant is seeking to charge the respondent money for any of the services enumerated in section 109A – water, central heating, laundry or utility services or facilities – it cannot alter the nature of the charge and eschew its responsibility to send a section 109A notice, simply by naming the charge something other than a service charge.
42	The applicant’s own documents advise residents that while some of them would only pay rent, others will pay additional charges. This is precisely the situation envisaged by section 109A: a service charge can be imposed on a resident, but the resident must be given notice of the charge and offered a chance to challenge the charge, or the quantum imposed. 
43	In a document entitled “Rent Policy” available on the applicant’s website, the applicant explains (bold added):
Rent Rebate 
3.5 Rental rebate means a rebate of rent, or any other reduction in rent, granted to a renter or a resident of a rooming house by the Director of Housing or a registered agency. 
3.6 As a social housing provider, Unison provides a rental rebate to maintain affordability of rent charges. The rental rebate is the difference between the market rent and the rebate assessable amount.  
3.7 Proof of income for all household members must be provided before a rent rebate can be assessed.  
3.8 Proof of income must be provided to Unison by the deadline required, otherwise the rebate will either not be applied and/or removed. If income evidence is provided after the deadline and the rebate has been removed and/or not applied, there will be no reimbursement, unless otherwise approved by the manager.
44	If a rooming house operator seeks to impose on a resident of a rooming house a service charge, the resident can challenge the service charge at the Tribunal, if the resident believes the charge is unclear, excessive or should not be imposed at all. 
45	The applicant’s position in practical terms means there are two categories of residents, those who pay an additional property charge and those who pay a service charge for identical services. It would be paradoxical and unfair to allow a situation where residents from the first category, some of the most disadvantaged members of our society such as the respondent, whose sole income is a Centrelink benefit, cannot challenge how much they pay for services (because the additional property charge is not a service charge), while residents who are relatively better off can challenge the service charge under section 109A. 
46	It would undermine the purpose of section 109A, if Homes Victoria and registered housing agencies could deny this avenue of redress to all residents and circumvent section 109A by calling a service charge an additional property charge (or some other name).
47	Furthermore, if one were to adopt the reasoning contended for by the applicant and CHIAVic, this would lead to the absurd situation where the same resident could be charged the two purportedly different charges while living in the same room: A resident might pay rebated rent – together with what the applicant would refer to as an additional property charge for a period of time. However, the same person – if they fail to provide all the necessary information to enable the rooming house operator to calculate their income and to apply the rental rebate – could be charged market rent for a period of time, and most likely they would be liable to pay a service charge. 
48	The Tribunal finds that an additional property charge, in so far as it relates to matters enumerated in section 109A, but most likely not the fee for cleaning of common areas, is a service charge and not rent. 
49	Therefore, after 29 March 2021, the date when section 109A was amended to apply to organisations such as the applicant, the additional property charge ought not to have been included in the calculation of rent payable in the resident’s ledger and cannot be counted towards rent arrears. 
50	Based on the letter from November 2019 and in the absence of any evidence to the contrary from the applicant, the Tribunal finds that the additional property charge was introduced in November 2019, and it applied to the respondent whose rooming house agreement commenced on 22 February 2012. 
51	There are 352 days, or just over 50 weeks, between 29 March 2021 when the amended section 109A came into force and 16 March 2022 when the notice to vacate was issued. Over 50 weeks, if the weekly additional property charge was $45, the total amount that must be subtracted from rent arrears would be $2,250. The amount exceeds the claimed rent arrears in the notice to vacate of $1,778.37. Therefore, on the limited evidence before it, the Tribunal finds rent was not at least 7 days in arrears at the time the notice to vacate was given and therefore the applicant had no basis on which to issue the notice to vacate. The notice to vacate was invalid.
52	In writing these reasons, the Tribunal identified an additional issue not addressed by the parties: because under section 109A only the Director of Housing could impose a service charge up until 28 March 2021, if the additional property charge was first introduced prior to that date, in any future proceedings for rent arrears the Tribunal may need to decide whether the additional property charge was part of rent up until 28 March 2021 or it was an improperly/impermissibly imposed service charge. 
53	The applicant’s representative on 30 August 2023 suggested that the Tribunal might list the evidence that it would have had regard to in order to make a fully informed decision. They include the following evidence/documents: 
•	the parties’ lease(s)/ rooming house agreement(s), if any;
•	when the additional property charge was introduced and when the respondent was notified of it;
•	how the charge was imposed (automatically after a certain date or in a new written tenancy / agreement);
•	the rental ledger, especially from the commencement of the charge (and the additional property charge should be separated from rent in the ledger); and
•	a breakdown of the individual items that constitute the charge.
Conclusion
54	Because at the time the notice to vacate was given the resident did not owe more than 7 days’ rent, the notice to vacate was invalid.
55	The application is struck out.

F Gelev
Member