Court orders are not needed to evict renters

In the recent Supreme Court decision of Justice Harris in Commonwealth Bank of Australia v Shrestha [2024] VSC 229 (Shrestha) the Court was asked to determine whether a court order showing a mortgagee’s entitlement to possession of a mortgaged property is required prior to making a possession order against a renter under s 325 of the Residential Tenancies Act 1997 (Vic) (RTA). The Court held that a court order is not required and that a mortgagee is entitled to a possession order in the Victorian Civil and Administrative Tribunal (Tribunal) against a renter if it has issued a valid notice to vacate and can demonstrate its entitlement to possession of the mortgaged property through other means.

Background

Where a renter fails to vacate a mortgaged property after service of a notice to vacate, a mortgagee is entitled to apply to the Tribunal for a possession order of the mortgaged property against the renters.

Section 325 of the RTA provides:

1.A mortgagee of rented premises may apply to the Tribunal for a possession order for rented premises if;

1. 1. the mortgagee has given the renter a notice to vacate the premises; and
   2. the renter has not delivered up vacant possession of the premises.

…

5. An application under this section must be accompanied by a copy of any court order which shows the mortgagee’s entitlement to possession and to exercise a power of sale.

Until Shrestha the Tribunal’s position was that a mortgagee must accompany its application for a possession order with a court order establishing its right to possession or sale, failing which the mortgagee’s application would be fatal and could not succeed.

The decision

The Commonwealth Bank of Australia (CBA) applied to the Tribunal for an order of possession under s 325(1) of the RTA. The Tribunal dismissed CBA’s application on the basis that the application was not accompanied by a court order.

CBA appealed the Tribunal’s order to the Supreme Court of Victoria on the ground that VCAT erred in finding that s 325 of the RTA requires a mortgagee to obtain a court order.

After applying the relevant principles of statutory interpretation and considering the broader context and legislative history of the RTA as well as the practicalities of a mortgagee obtaining a court order, Justice Harris held that:

“s 325(5), properly construed, requires an application by a mortgagee for a possession order under s 325(1) to be accompanied by a court order showing the mortgagee’s entitlement to possession only if such a court order has been obtained by the mortgagee.”[1]

Key takeaways

• A mortgagee is not required to first initiate court proceedings against a mortgagor to obtain an order demonstrating its entitlement to possession of a mortgaged property. To do so, could be a costly and time consuming process and one with limited utility where the mortgagor does not contest the mortgagee’s right to possession.
• A mortgagee is entitled to a possession order against a renter if it has issued a valid notice to vacate and can show the Tribunal its entitlement to possession of the mortgaged property through other means.

Contact us

Where a mortgagor is contesting a mortgagee’s right to possession, or a mortgagee is unsure of the position, it may still be prudent to first obtain a court order. Please contact us and we can provide advice on your specific situation.

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Authored by:

Sonia Apikian, Partner
Anna Koumides, Special Counsel
Sarah Rogers, Senior Associate

[1] Shrestha at 80.