Residential Tenancies Bill 2010 introduced into Parliament

Last night the Fair Trading Minister, Virginia Judge, introduced into the New South Wales Parliament 'a Bill for an Act with respect to the rights and obligations of landlords and tenants, rents, rental bonds and other matters relating to residential tenancy agreements; and for other purposes'.... better known as the Residential Tenancies Bill 2010.

You can download and read the Bill here, and read the Minister's speech here (scroll down about two-thirds to get to the start of the speech).

(Sausage making (a little like law making))

And here's the Tenants' Union's comment:

The Bill reflects, with some changes, the draft Bill circulated by the Government in late 2009.

The Bill, like the draft Bill, would mostly improve New South Wales’ residential tenancies laws. The improvements it would make are sensible and modest, and are mostly directed at fixing problems and omissions in current laws.

This comment focuses on how the Bill addresses four areas of major concern identified by the TU in the draft Bill, and a fifth area of concern that arises from a new provision in the Bill that was not previously in the draft Bill.

1. Access in the event of sale

The Bill’s provisions in relation to access to premises by prospective purchasers in the event of sale are a significant improvement on those in the draft Bill.

The Bill provides that in the absence of an agreement between a landlord and tenant as to access, the tenant must receive not less than 48 hours notice of access (up from 24 hours in the draft Bill), and that access is limited to not more than twice in a week (the draft Bill provided no limit).

Also, a draconian penalty provision for tenants who refuse access, proposed in the draft Bill, is not in the Bill, which would instead deal with refusal of access as a breach of the tenancy agreement.

The TU supports these changes.

2. Former tenants’ goods left behind after termination

While the Bill’s provisions have been reworded to place greater emphasis on the intention that goods left behind should be disposed of by sale, they are substantially the same as those in the draft Bill. They would allow landlords to dispose of valuable goods belonging to former tenants after only 14 days, and without specific regard to their value. The TU remains of the view that the period should be 21 days, and that goods of value greater than $100 should be disposed of by sale for fair value.

If it is the intention of the Bill that a tenant be entitled to recover the value of goods even if they are not sold for fair value (clause 134(1)(d)), this intention should be made expressly clear. Inserting the words “if a reasonable sale price is not achieved” at the end of the subclause would do this.

A further problem in this regard is the wording of subclause, 134(2). This provides that a person who disposes of goods left behind in accordance with the Division will incur no liability. Adding “aside from a liability provided by this Division” would ensure that the intention will be given effect.

The Bill, like the draft Bill, also fails to provide any penalties for landlords who breach their obligations in relation to former tenants’ goods. Clauses 127 and 132 should be backed by penalties of 20 penalty units, and clause 131 by a penalty of 50 penalty units.

3. Tenancy databases

The Bill closes loopholes in the draft Bill’s provisions relating to tenancy databases. In particular, the Bill would prohibit tenancy database operators from listing persons except at the request of landlords and agents (the draft Bill would have allowed listings ostensibly by database operators themselves) and require the removal of out of date information (the draft Bill would have merely required landlords and agents to advise database operators as to out of date information, and operators would not have been required to do anything in response).

The TU supports these changes.

There is a problem, however, in the absence from the Bill of penalties for breach of the obligations at clauses 212 and 214. Each of these provisions should be backed by penalties of 20 penalty units.

4. Termination without grounds and the discretion of the Consumer, Trader and Tenancy Tribunal

The Bill, like the draft Bill, would remove the discretion of the Tribunal under the current law as to whether to order termination in proceedings by landlords of termination without grounds. The TU remains opposed to this change: it would turn termination notices without grounds into trump cards and encourage their use, where instead the law should discourage or prohibit their use.

Unlike the draft Bill, the Bill does not make any reference to the Tribunal’s discretion in relation to the date for possession of premises to be returned to the landlord after it makes termination orders without grounds. This is a serious defect: it should be clear in the legislation that the Tribunal has such a discretion, and that it is to be exercised considering the circumstances of the case.

5. Termination on the ground of rent arrears

The Bill’s provisions relating to termination on the ground of rent arrears reflect those of the draft Bill, which the TU generally supports, but the Bill makes one significant addition to those provisions. This addition – cl 89(5) – is misconceived and introduces uncertainty into an otherwise sensible regime.

Clause 89(5) provides that ‘the Tribunal may, on application by a landlord, make a termination order despite subsection (2) or (3) if it is satisfied that the tenant has frequently failed to pay rent owing for the residential premises on or before the day set out in the residential tenancy agreement.’ This presents the following problems:

• Clause 89(5) refers to an application by a landlord; it is unclear whether this is a special application of which the tenant should be specifically notified, or whether the provisions of cl 89(5) are available for use whenever a landlord makes an application for termination on the ground of rent arrears. If the latter, it opens the possibility that a tenant may make a payment of arrears based on the assurance given by cl 88(2), then subsequently find that the landlord has gone ahead with the termination application.
• Clause 89(5) refers to the Tribunal making an order ‘despite subsection… (3)’. Subsection (3) refers to events subsequent to the making of a termination order, so ‘despite’ does not make sense. The effect of the connection between these two provisions subsections is uncertain.
• The adverb ‘frequently’ is open to widely varying interpretation and may be the basis of disappointed expectations. We anticipate that some landlords will expect that any plurality of instances of late payment will constitute ‘frequent’ late payment and hence that the principles otherwise enshrined in cl 89 will not apply to their proceedings.

The uncertainty of the new clause is such that it may be ineffective, or it may undermine the rest of the regime.

The TU understands that the intention of the addition of cl 89(5) is to prevent dishonest tenants from deliberately and repeatedly paying rent in arrears at the last hour before their eviction. We submit that this intention will be given effect by the Tribunal when it considers the circumstances prescribed at cl 87(5) – particularly (b) ‘any previous breaches’ – in deciding to terminate a tenancy and setting the date for return of possession. We further note that landlords who experience hardship because of deliberate and repeated arrears could apply for termination under the hardship provisions at cl 93.

Alternatively, the Bill could be amended to provide, in addition to the factors at cl 87(5), that the Tribunal must consider whether the tenant’s failure to pay rent until just prior to enforcement of termination and possession orders is deliberate and repeated.