Simon Johanson October 25, 2011
RENTERS face being evicted without notice when owners default on home loans if the National Australia Bank wins a Supreme Court battle against Victoria's Sheriff.
Tenant groups have labelled the bank's court action as ''ruthless'' and ''cold hearted'', particularly after high-profile advertising promoting its customer-friendly face.
In a case that could have far-reaching implications for Victoria's renters, NAB has taken the Sheriff to court after it failed to evict the tenants of two Ivanhoe East properties.
The mortgagor of the properties defaulted on repayments to NAB after letting them out without the bank's knowledge, prompting it to seek repossession orders.
NAB wants the Supreme Court to force the Sheriff to evict the tenants without it needing to comply with the Residential Tenancies Act, which requires renters be given 28 days' notice.
A tenant of one of the properties, Darren Burke, said the uncertainty and stress had forced him to consider moving home.
''I've got an 84-year-old mother living with me and the last thing I need is the stress for her. She thinks we're going to be kicked out every five minutes,'' he said.
''If the owner goes belly up and can't pay their mortgage, that means the bank can come in and say to every person: 'Right, here's your eviction notice, get out!' ''
In court documents, NAB argues the Sheriff should enforce a warrant of possession on the homes without requiring the bank to go to VCAT and give the tenants notice.
But the Sheriff has refused to act on the warrant because the Tenancies Act obliges owners to give the tenants notice ''to the exclusion of any other law''.
''At the very least, there is a right [of tenants] to receive notice to vacate,'' says the Sheriff.
Tenants Union of Victoria spokesman Toby Archer said if NAB won the case, financial institutions would not have to give notice to tenants when their landlord defaulted.
''There will be tenants who face the nightmare scenario of continuing to pay their rent while their landlord's defaulted on the mortgage and the first they'll know of it is when the Sheriff comes to evict them.
''It is just incredible that an institution the size of NAB could act in such a ruthless and cold-hearted fashion.''
CLSA Australia banking analyst Brian Johnson said the longer banks left a property unsold, the more interest and costs they accrued.
Mr Johnson said there had been an increase in the number of postcodes experiencing mortgage stress and, as a result, banks were trying to balance their housing books.
Investors, many of whom are negatively geared with high debt-to-value ratios, own about 88 per cent of Melbourne's rental housing stock.
Setting a legal precedent that allowed banks to evict people without notice would leave tenants severely exposed if mortgage defaults were to rise suddenly, Mr Archer said.
Australian Bureau of Statistics figures show 30 per cent of Australian households were renters, the remaining 70 per cent were purchasing their homes or owned them outright. The case has been adjourned until Thursday.