As a result, a mortgagee must now serve a notice to vacate in accordance with the RTA.

The notice to vacate process takes a slightly different path depending on whether the tenancy pre-dates or post-dates the mortgage 

If the tenancy post-dates the mortgage, which will be the most common occurrence, the mortgagee is entitled to issue a notice to vacate on the tenant under section 268 of the RTA, giving the tenant 28 days to vacate the security property.

If, however, the tenancy pre-dates the mortgage, the mortgagee needs to determine whether the tenancy is a fixed-term tenancy agreement or periodic tenancy agreement.

If the tenancy is for a fixed term, the mortgagee is not entitled to issue a notice to vacate in its capacity as mortgagee. Instead, it needs to rely upon alternative powers that may, or may not, be granted by the terms of the mortgage itself.

Many mortgages include a term granting the mortgagee the power to enforce the mortgage by doing anything an owner of the security property could do. Assuming that this limited power of attorney is granted by the mortgage, it would generally allow the mortgagee to step into the owner’s shoes as landlord for the purpose of the RTA.

Acting as landlord for the security property, the mortgagee can give the tenants 60 days notice to vacate under section 259 of the RTA if the security property is immediately after the termination date to be sold or offered for sale with vacant possession.

If, however, the fixed-term tenancy has expired, and the tenant is still occupying the security property, section 230 of the RTA deems that the tenant is under a periodic tenancy agreement. A periodic tenancy agreement has a rental term of one month and starts afresh every month. In other words, the fixed term tenancy “ends” and therefore a new periodic tenancy agreement is created for the following month. As a fresh tenancy agreement is created every month, the current tenancy agreement will generally postdate the mortgage, enabling the mortgagee to issue a notice to vacate under section 268 of the RTA.

A notice to vacate must be in the form specified in the Residential Tenancies Regulations 1998 (otherwise it will be invalid) and must be served on the tenant by:

1. Delivering it personally to the tenant (usually using a process server); or

2. Leaving it at the tenant’s usual last known place of residence or business with a person apparently over the age of 16 years and apparently residing or employed at that place; or

3. By sending it to the tenant by ordinary post addressed to the person’s usual or last known place of residence or business.

If a tenant fails to comply with a notice to vacate, a mortgagee has two options available to it:

1. Apply to VCAT for an order for possession; or

2. Issue proceedings for possession in the Supreme Court.