Can a Mortgagee Evict a Tenant?
Capital Securities Mortgages Pty Ltd v NAA (Residential Tenancies) [2026] VCAT 40
Decision Date: 21 January 2026
Key Issue: The Tribunal considered four main issues: whether a mortgagee can issue a notice to vacate under s 91ZZB of the RTA or is confined to s 91ZZK; whether the notice to vacate was valid, particularly given that the attached auction authority had expired before the nominated termination date; whether the mortgagee had established the grounds for the notice, namely a genuine intention to sell the property with vacant possession; and whether, in all the circumstances, it was reasonable and proportionate to make a possession order, having regard to the renter’s personal circumstances and the factors set out in s 330A of the Act.
Full Case: https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VCAT/2026/40.html?
Background
The respondent, NAA, had lived in a Thornbury property since 2016. The property was later purchased by Mr Liang in July 2023, at which time the applicant, Capital Securities Mortgages Pty Ltd, registered a mortgage over the property.
NAA entered into a nine-month fixed-term residential rental agreement with Mr Liang in December 2023, which expired in September 2024 and then continued as a periodic tenancy.
Following a default on the mortgage, the County Court of Victoria granted the mortgagee possession of the property in November 2024. However, in April 2025, the Court declared that the mortgagee’s right to possession was subject to the existing rental agreement and stayed the warrant of possession as against the renter.
In April 2025, the mortgagee directed the renter to pay rent to it rather than to the owner. On 14 May 2025, the mortgagee issued a notice to vacate under s 91ZZB of the Residential Tenancies Act 1997 (Vic) on the basis that the property would be sold with vacant possession. The termination date was 21 July 2025.
When the renter did not vacate, the mortgagee applied to VCAT for a possession order.
Issues
The Tribunal considered four main issues:
Whether a mortgagee can issue a notice to vacate under s 91ZZB of the Residential Tenancies Act, or whether mortgagees are limited to issuing notices under s 91ZZK.
Whether the notice to vacate was valid, particularly given that the attached auction authority expired before the termination date.
Whether the mortgagee proved the grounds for the notice, namely, a genuine intention to sell the property with vacant possession.
Whether it was reasonable and proportionate to make a possession order, having regard to the renter’s personal circumstances and the factors in s 330A of the Act.
Decision
VCAT held that the notice to vacate was valid and that the mortgagee was entitled to rely on s 91ZZB as a substituted residential rental provider.
The Tribunal found that s 91ZZK does not exhaustively regulate the circumstances in which a mortgagee can end a tenancy. Where a mortgagee has effectively taken over the rights and duties of the rental provider—such as by receiving rent and exercising possession rights—those rights may pass to the mortgagee by operation of law under s 5 of the Residential Tenancies Act.
In this case, the mortgagee had directed the renter to pay rent to it and thereby entered into possession through receipt of rents under s 78 of the Transfer of Land Act 1958 (Vic). As a result, the mortgagee stood in the shoes of the rental provider and was entitled to issue a notice to vacate for the sale of the premises.
The Tribunal also rejected the argument that the notice was invalid because the attached exclusive auction authority expired before the termination date. The documentary evidence requirement only requires that an authority to sell be attached to the notice; it does not require that the authority remain current for the entire notice period. The expiry of the authority went only to whether the intention to sell was genuine.
VCAT was satisfied that the mortgagee genuinely intended to sell the property with vacant possession in order to recover loan funds following the owner’s default.
Reasonable and Proportionate Test
The renter opposed the possession order on hardship grounds. He was a single father caring for three children with significant disabilities, including a daughter with severe autism and complex behavioural needs. Medical evidence indicated that relocation would likely cause serious disruption to the family and exacerbate the daughter’s behavioural and emotional difficulties.
Despite these circumstances, VCAT found that it was reasonable and proportionate to make a possession order.
The Tribunal accepted that the renter faced substantial challenges in relocating. However, it found:
The mortgagee needed vacant possession to maximise the sale price of the property.
selling the property subject to the tenancy was not a realistic alternative because of access issues during a sales campaign, the low rent, and the likely reduction in the pool of buyers;
the renter had not fully explored available private rental options; and
Community services and housing supports were available to assist the family.
Balancing these considerations, the Tribunal concluded that although relocation would be difficult, it remained possible with appropriate support.
Decision
VCAT made the following orders:
The renter must vacate the premises by 20 February 2026.
The applicant may request a warrant of possession if the renter does not vacate by that date.
The identities of the renter and his eldest daughter were anonymised, and access to the file was restricted.
Key Legal Principles
This decision clarifies that mortgagees are not limited to issuing notices to vacate under s 91ZZK. Where a mortgagee effectively assumes the position of the rental provider—such as by collecting rent or taking possession—the rights and obligations of the rental provider may pass to it under s 5 of the Residential Tenancies Act. In those circumstances, the mortgagee may rely on termination grounds available to rental providers, including sale of the premises with vacant possession under s 91ZZB.
The case also illustrates the application of the “reasonable and proportionate” test in circumstances involving significant renter hardship.
