How federal diversity jurisdiction affects interstate landlords

In January 2018, EAC advised members the Justice Legislation Amendment Act (No2) 2017 had commenced at the end of the previous year. This would mean notable changes to how interstate landlords approached tenancy issues in NSW.

This year, EAC partners, JemmesonFisher represented a landlord and property manager in what is believed to be one of the first matters to be heard in local court under the new federal diversity jurisdiction.

In this article, we revisit what you need to know, providing JemmesonFisher’s case study as a practical example that will help you better understand the obligations of each party and the updated processes.

In December of 2017, the Justice Legislation Amendment Act was updated to address an ongoing issue relating to NCAT’s lack of authority to determine tenancy-related matters if the landlord resided in a state other than NSW.

Put simply, the Act determined matters such as these would not be heard by NCAT, but would be heard in a local court setting, and processes would need to be amended accordingly, to adhere to the requirements of local court proceedings.

What is an interstate landlord?

The introduction of this amendment caused some confusion, not only for property managers, landlords and tenants, but also for the local court.

One of the initial points of confusion related to exactly what constitutes an interstate landlord.

According to Lisa Jemmeson of JemmesonFisher, an interstate landlord is one who resides in a state of Australia other than NSW.

Landlords who reside in territories like the ACT or Northern Territory are not captured by the legislation, nor are overseas or corporate landlords (non-individuals).

How will this amendment affect landlords and property managers?

When trying to settle a dispute with a tenant renting in NSW, a property manager representing a landlord in another state, will face a complex process, different to the NCAT proceeding with which they may be familiar.

According to Lisa, the more complex nature of the process is a good reason to consider using a legal practitioner who knows how to navigate the proceedings of local court.

“Local court proceedings are very different to those of NCAT hearings where the property manager can pass over documentation to the NCAT member for consideration. The court is not just responsible for hearing issues related to real estate, so an experienced legal practitioner may be more equipped to follow proceedings and provide guidance to the magistrate.”

The process dictated by the federal diversity legislation can also take several months, so Lisa advises all landlords carefully consider their insurance policy to ensure they will be covered.

“Not all landlord insurance policies are created equal, some will offer a landlord in this situation more protection and cover than others. Property managers can’t provide financial advice, but you can make observations that help ensure the landlord is covered right from the start.”

Costs can extend beyond those normally incurred during an NCAT hearing, with local court given the option to charge or waive its own fees. Again, insurance providers may cover these fees, but each policy is different so landlords should be well-versed in what their policy covers before they take action.

What does a real case look like?

This year, JemmesonFisher worked with a property manager on what they believe to be one of the first matters to be heard in the local court under the new federal diversity jurisdiction.

The firm represented an interstate landlord and their property manager after a termination notice was issued to a tenant who was in rental arrears, among other issues, and the tenant failed to adhere to the notice and vacate.

The property manager made an application to NCAT to have the issue resolved, but was informed in writing, NCAT could not determine the matter as the landlord resides in another state. NCAT instructed the matter falls under federal diversity jurisdiction.

With the tenant still in breach, JemmesonFisher made an application through the local court on behalf of the landlord, via a summons.

Lisa advises there is a draft summons on the NCAT website that can be used, however, as this is local court, not NCAT, it may be in the best interest of the landlord and property manager to have a legal practitioner who is familiar with the process, complete the summons.

In this case, JemmesonFisher completed and filed the summons and an affidavit, which is the way evidence is tendered in local court (as opposed to documents simply being handed over to the member at NCAT).

Initially, the matter was put before a registrar along with a list of other matters, ranging from criminal and civil matters to bail hearings. The registrar was familiar with the case because of the correspondence already submitted and referred it to be heard by a magistrate later the same day.

A hearing in front of a magistrate follows local court proceedings. The magistrate is not a specialist in real estate matters as would be the case with NCAT — they hear a variety of matters and may not be familiar with the specific legislation relevant to this landlord’s case.

JemmesonFisher stepped the magistrate through the legislation, providing an understanding of how an NCAT proceeding would usually occur and ensuring he was aware of all relevant information.

The firm completed a further affidavit to provide additional documents to the magistrate and guide him through the tenant’s breaches.

The landlord and property manager, represented by JemmesonFisher, were successful, with orders secured to terminate the tenancy on the day of the hearing, as may occur in an NCAT proceeding, and an order of suspended possession for a period of two weeks.

Lisa noted seven-to-eight weeks had passed by the time the matter was first addressed by NCAT, with the application submitted in January and first considered in April.

In this instance, the insurance of the landlord was integral to success as it covered the landlord’s lost rent for that period and any required court and representation fees.

If your agency is facing a similar issue with a local tenant and an interstate landlord, it is highly recommended you seek legal support so you can ensure your landlord is well-represented by a specialist who understands the local court system.

This article does not constitute legal advice, but if you do require legal assistance with a similar case, consider contacting our partners at JemmesonFisher.

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