More praise for the draft Bill - the view from over there --->

After much sleuthing and snooping around, we’ve finally stumbled across our very own copy of the Real Estate Institute’s “preliminary submission” on the draft Residential Tenancies Bill 2009. (Hint: It’s now on their website!)

Given what’s been bandied about in the press over the last couple of months, we could have guessed what’s in it. But, in case you missed the earlier dispatches, here’s what’s getting their goat:

- The Institute is concerned that the “break-fee” concept will so unsettle existing power dynamics that tenants will use them as a threat, to badger landlords into silly things they shouldn’t have to worry about – like fixing things, and not putting the rent up too often…

- The Institute is concerned that having to have a reason when refusing to allow tenants to sublet – and not having complete control over their tenants’ choice of flatmate anymore – will take all the fun out of being a landlord…

- The Institute is concerned that being unable to refuse, without a reason, the planting of a shrub, the painting of the back fence, or the hanging of a picture in the living room, will suddenly result in the construction of a new billiards room out the back, and a second toilet downstairs – all without council approval!

- The Institute is concerned that a minor adjustment to the law about challenging rent increases is nothing short of rent control.


We have to admit, these concerns seem rather baseless to us here at the Brown Couch, and we have our suspicions that the Institute is simply trying to push some political buttons. Aforesaid issues aside, they have actually covered very little ground considering the nature and number of reforms currently under consideration. Instead of offering valuable insight into whether or not the proposed changes might work, they’ve treated us to a rather gruff lecture on why new laws will make life miserable for us all – and it’s not without its share of vitriol and blame.

According to the Institute, “ the NSW property market (upon which the Government is heavily reliant for revenue) must be attractive for both NSW and external investors”. Fair enough… But research consistently shows that the rights of tenants and landlords are pretty far down the list when it comes to decisions to invest (or disinvest) in property. For that matter, there are plenty of other, more appropriate ways to make the NSW property market an attractive place to park your money. The Residential Tenancies Act is not the place to try and meet this objective.

Linked to this idea that investment is discouraged by regulation is the idea that landlords should not have to bear the risks of their investments. In 2007, and again in 2009, the Institute said, “Investors select an investment for return, and is (sic) not driven by a desire to provide housing.” It’s fair to assume, then, that landlords are in it for the capital gains… Tenants, on the other hand, are far less likely to be entering into rental agreements on their accountant’s advice – they’re just looking for somewhere to call home. Landlords do not become landlords in order to give tenants what they need. Landlords become landlords in order to make a profit. How unfortunate, then, that houses are so fiendishly expensive, and that their only real value is in their capacity to house…

The Institute would have us believe that proposed changes to the law will increase landlords’ risks. With increased risks come increased costs. With increased costs come increased rents… What the Institute fails to point out, though, is that each anticipated “new” risk already exists for landlords. Tenants live in houses, and living in houses causes wear and tear. Sometimes tenants don’t live in houses, but landlords still have to pay their mortgages. Sometimes tenants move away unexpectedly…

The simple fact is that investing in real estate is a risky, and costly, business. Between buying and selling, most landlords are going to be out of pocket, and will quickly go broke if they don't have the cash-flow to cover their expenses. Tenants assume their own risk, too - that of making a home out of a property they have no real control over. Landlords can convert their risk into huge wads of cash, if they manage it well. Tenants can't.

Devising new and innovative ways of reducing the cost of being a landlord is of course a worthwhile pursuit. But really... Insisting the Residential Tenancies Act be used to pass foreseeable but unwanted costs onto tenants is hardly the way to go.

Finally, the Institute seems to think that repeating the mantra "it's not fair" over and over again will somehow make it so. Apparently, "landlords and property managers are sick and tired of a tenancy system which is heavily biased in favour of tenants". But this critique of existing tenancy law doesn't stand up to scrutiny. Generally speaking, the most sought after Tribunal order for landlords is to recover possession of premises. This can be enforced by the Sheriff (using reasonable force, if necessary). For tenants, the most sought after Tribunal orders are for repairs and maintenance, or for observance of peace, comfort and privacy. Neither of these can be enforced, and remedies such as compensation can be hard to obtain if the landlord won't play by the rules.