Monday, October 25, 2010

More on tenancy databases

Previously, we were talking about the tenancy database operator TICA Pty Ltd and its new facility for tipping off agents whenever a current tenant applies for a tenancy elsewhere. It's timely, then, to take a look at how tenancy databases ordinarily operate – quite apart from the new tip-off service.

Tenancy databases have been around for about 20 years (by contrast, we first noticed the tip-off service a few months ago). There are a few of them around – TICA, TRA, Barclays and NTD are the main ones – all of them private companies. They are separate from credit reference databases (NTD is owned by the credit reference company Veda Advantage, but the databases are separate), but they make a similar claim: that they are in the business of 'risk management'. They do this by taking listings from agents of the names and other identifying info of supposedly 'risky' tenants, and making these listings available to agents to search against when a person applies for a tenancy. If you're listed, you may have trouble getting a tenancy.

('Computer says no'. Tenancy database-style thinking.)

We've never thought very highly of the risk management claim. Agents can and do ask applicants for references; and where there is a gap in an applicant's references, an agent is entitled to ask for an explanation. Whether it is satisfactory or not means the agent applying a bit of nous. By contrast, 'computer says no' is not a very smart way of assessing applications.

This is especially because there are real questions about the quality of the information stored on tenancy databases. For most of their 20 years of operation, tenancy databases were not regulated, and in that time they collected a lot of rubbishy, even abusive listings: for example, listings of tenants who had been late with rent but caught up, or who settled debts out of the bond, or who had dared to apply to the Tribunal for orders against the landlord. And listings could hang around for years – long after they were at all representative of the 'risk' posed by a person.

These problems have been somewhat tidied up by a patchwork of regulation, including the 2004 NSW Rule of Conduct under the Property, Stock and Business Agents Act, which provides that NSW agents can list only for certain reasons and in certain circumstances, and sets timeframes for listings depending on the reasons they were made. Nonetheless, TICA still claims to have 'millions' of listings, a fact that TICA boasts as if it is a strength. On the contrary, with this many listings you have to wonder how many are at all relevant for present risk assessment purposes. Also, from the copies of listings we've seen, it appears that TICA no longer includes the reason for a listing in the listing – a move that we assume is designed to exploit a loophole in the timeframe provisions (ie no reason, no applicable timeframe), but which would appear to diminish the usefulness of the listing for risk assessment purposes. Furthermore, TICA is happy to take otherwise non-compliant listings from landlords who, not being real estate agents, are not covered by the Rule of Conduct (another loophole exploited).

Anyway, that's the traditional risk-management role played by tenancy databases – notwithstanding our misgivings about how well they actually play it. The Virtual Manager tip-off service is quite different, and the surveillance it insinuates into tenants' decisions about whether to look for other places to rent derives no justification from proper risk management principles.

The new service, however, is not the first time TICA in particular has departed from the traditional role. For some years now TICA has operated, in addition to its 'Tenancy History Database', an 'Enquiry Database'. Here's how it works:
  • you apply for a tenancy with an agent who is a member of TICA;
  • the agent enters your name and the other info you gave in your application into the search fields of the Tenancy History Database, to see if there's a listing about you;
  • zap – you're now listed on the Enquiry Database.
That's right - you're listed. It doesn't matter if there's no listing about you on the Tenancy History Database – it doesn't matter if you've never rented before. It doesn't matter if you're not offered the tenancy, or if you knock it back. You're listed.

The Enquiry Database is, like the Tenancy History Database, searchable by TICA members, so they can see how many applications you have made, to whom, where and when. None of which is of the slightest use in a sensible assessment of the riskiness or otherwise of an applicant for a tenancy. Some time ago, the Tenants' Union complained to Fair Trading NSW that listings on the Enquiry Database were also listings in breach of the Rule of Conduct: Fair Trading's view then was that even though the listing is made when an agent enters information into the search fields, this is incidental to the search and it is actually TICA that is doing the listing – and not being an agent, TICA is not covered by the Rule of Conduct (that loophole again).

In a way, the Virtual Manager is the mutant offspring of the Enquiry Database: whereas the Enquiry Database waits passively for an agent to search its listings, the Virtual Manager actively tugs on an agent's sleeve and tells them what it knows whenever one of the agent's current tenants applies elsewhere. And to be clear, the Virtual Manager does so because the agent has set it to, by 'flagging' tenants for email alerts – and this act of 'flagging' is not incidental to anything else.

Bring on the Residential Tenancies Act 2010. In contrast to the present patchwork, its regime of tenancy database regulation will apply to agents, landlords and tenancy database operators, set clear circumstances, reasons, and timeframes for listings and – correcting the most serious deficiency on the current regime – allow disputes about listings to be heard and determined by the Tribunal.

Wednesday, October 20, 2010

Tenancy database operator offers new way to invade your privacy

Tenancy databases (aka tenant blacklists, bad tenant databases) are in the news today, with the revelation that the big tenancy database operator, TICA Pty Ltd, has hit upon a brand new way to invade the privacy of tenants.

This is TICA's new 'Virtual Manager' service – a bit of software that TICA is selling to real estate agents.

(Tenants Winston and Julia consider finding a new place to rent.)

Here's how it works:
  • An agent enters their current tenants' names and other personal info into the Virtual Manager, and 'flags' them.
  • Whenever one of these tenants applies for a tenancy with another TICA agent (and the agent does a search of TICA's database), an automatic email alert is sent to the current agent. The email alert contains the location and contact details of the agent who took the application.

In other words, the Virtual Manager tips off the agent when a current tenant applies elsewhere. This is a gross invasion of a person's privacy. When a tenant decides to move out, the agent is entitled to receive a termination notice. They are not entitled to receive prior email alerts and tip-offs.

The potential consequences of the Virtual Manager tip-off service are worrying. Having received the email alert, the current agent might then contact the other agent and cruel the tenant's application, or take some other form of revenge (no repairs, bothersome inspections, etc, etc). A particularly creepy agent (or indeed, anyone who should get their hands on the service) might also use it to receive email alerts about the possible movements of ex-girlfriends, spouses, etc. But even where it is not abused like that, this service, in its ordinary operation, tells agents about things that are none of their business.

TICA boss Philip Nounnis says TICA cannot police the way agents use the Virtual Manager – nor can the Government, because the Virtual Manager is an 'internal database' for each agent who buys it, and internal databases are excluded from the current regime of tenancy database regulation and, for that matter, from the soon-to-commence Residential Tenancies Act 2010.

With due respect to Mr Nounnis, the Tenants' Union disagrees. It's not 'internal.' Each application of the Virtual Manager is intergrated with TICA's other databases. (After all, where do the email alerts come from? How does the system know to send an email alert about any particular person?)

Our view is that any NSW agent who enters a tenant in the Virtual Manager and flags them for email alerts is listing them on a tenancy database in breach of the Rule of Conduct under the Property, Stock and Business Agents Act and, when the new Residential Tenancies Act 2010 commences, in breach of that Act too. The NSW State Government should act now to make it clear to agents that using TICA's Virtual Manager in this way is unlawful.

Thursday, October 14, 2010

Light globes, pets and Regulation

As we know, Fair Trading NSW awaits comments on the draft Residential Tenancies Regulation 2010.

One of the things this Regulation will do is provide a standard form of residential tenancy agreement, so that landlords (who are responsible for preparing written agreements) don't fall prey to unscrupulous solicitors, who might charge a fee for their "agreement preparation" services...

They wont have to, because an already prepared agreement will be coming to a website near you (sheer genius!) Or so we hope.

We think this is a good idea, because we'd hate for landlords to find an excuse to put the rent up. But, because we like to be cautious, we've gone over the proposed standard form agreement with a fine tooth comb, to see if it includes anything untoward, or just plain silly.

We haven't been disappointed...

"The tenant agrees, when this agreement ends, to make sure that all the light globes on the premises are working" (cl 17.5). "The landlord agrees that all light globes on the residential premises are working on the commencement of the tenancy" (cl 18.2).

One can only assume that the agreement will come with instructions on how to repair a broken light globe. If not, perhaps the smart thing to do will be to pack up all your light globes and take them with you when you move. Chances are, you'll be needing them.

Aside from that, there's not much to report on the silly side.

... But the proposed standard form agreement could go a little way towards mitigating the damage a tricky provision of the Residential Tenancies Act 2010 might do. Section 19 of the Act prohibits some additional terms from being included in residential tenancy agreements, and it specifically mentions professional carpet cleaning. This puts into legislation a consistently held view that carpets only need to be cleaned if they were clean to start with, but they're not clean at the end of the tenancy...

There was a last minute amendment to section 19, which unfortunately didn't receive any discussion when the Act was debated in Parliament. If your landlord lets you keep an animal, they can insist that you clean the carpets when you leave. This could apply regardless of whether your animal is a goldfish, or a raging bull.

To make matters worse, it also doesn't matter where your animal sleeps, or how dirty the carpets were to begin with. It is a bizarre piece of law, representing the unholy union of two quirks - pandering as it does to the fascination some landlords have with tenants keeping pets, and an obsession many real estate agents have with steam cleaned carpets...

The standard form residential tenancy agreement represents our best opportunity to reign this provision in. To achieve this, the proposed "pets clauses" (cl 42 & 43) in the draft Regulation will need a fair bit of work. If Fair Trading NSW can find a way to limit the use of "carpet cleaning" clauses, by incorporating sensible terms in the standard form residential tenancy agreement, then they should be well and truly congratulated. We shall have to wait and see.

Monday, October 11, 2010

Pop quiz: part 2

Now, the mathematics section, courtesy of Brown Couch reader and tenancy legend, Robert Mowbray.

Q. With the new Residential Tenancies Act 2010 (NSW) to commence soon, the old Residential Tenancies Act 1987 (NSW) will be repealed. In its 21 years of operation, how many private market tenancies have been created under the 1987 Act?

Good question, Dr Mowbray!

Like all good tenant advocates, Dr Mowbray never asks a question without already knowing the answer, and he has shared the answer with the Brown Couch. We won't share it with you yet, however; first, we'd like to hear your guesses.

And in a first for the Brown Couch, there's a prize for the closest guess: a DVD of the tenurially significant 1990 landlord-tenant horror-thriller, Pacific Heights.

('They wanted a tenant in the worst way. And that's what they got.')

Send your guess to us in the comments, or by email, by 31 October. One guess per person, please.

And so we're clear, the number we're taking as the answer is the number of rental bonds lodged over the period from the first quarter of 1990 (remember, the 1987 Act did not commence until late in 1989) to the June quarter of 2010 (or as close as we can get to the present date).

(A true pedant might object that bonds lodged does not equal tenancies commenced, because a few landlords wrongly don't lodge bonds, and a very few don't ask for them. If your guess is backed by a better method of approximation than our's, let us know.)

Get guessing!

Wednesday, October 6, 2010

Pop quiz!

Q. You answer the door to a woman who identifies herself as your landlord's estranged wife and co-owner of the premises. Until now, you had no idea such a person even existed. The woman demands entry to the premises.

Do you:
(a) stoutly refuse her entry – she's trespassing; or
(b) pull out the sofa bed – you've got a new housemate.

If you answered (a), good on you for sticking up for yourself, but legally you're wrong. The law says the correct answer, bizarrely, is (b).

(And if your landlord's estranged wife and co-owner looks like settling in for an extended stay, consider investing in a Tent Sofa – yes, they do exist.)

In a case like this, the law says each of the co-owners starts off with a right to possession of the premises (but not to the exclusion of the other), and when one of the co-owners enters into a residential tenancy agreement, that co-owner's right is passed to the tenant – and the other co-owner's right remains with that co-owner. Under the terms of the residential tenancy agreement, the tenant's right is exclusive of the co-owner who granted it, but it is not exclusive of the third party co-owner (it wasn't exclusive in the first place – that is, when it was in the hands of the first co-owner – and it cannot be now).

The third party co-owner's right is not exclusive of the tenant either; but they don't owe the tenant any obligations as far as the tenant's quiet enjoyment of the premises are concerned. Not being a party to the residential tenancy agreement, the third party co-owner cannot terminate it either (nor, for that matter, are they entitled to any of the rent paid by the tenant – that goes just to the co-owner who granted their own right to occupy to the tenant).

This pop quiz scenario has actually occurred once that we know of: the strange, sad case of Catanzariti v Whitehouse, where a landlord's estranged wife and co-owner really did move in with a tenant. (As the Federal Court records, 'initially against [the tenant's] will.' However, the tenant, 'being uncertain of his legal position, agreed to allow her to return to the house and occupy one of its rooms. She made certain re-arrangements to the disposition of the furniture and other chattels in the premises to enable her to do this.) The case ended up in court when these 're-arrangements' went as far as the tenants' sheets and crockery being thrown into the backyard, where the dog got at them. And the Court held: the estranged wife had a right to occupy the premises, and she owed no obligation to the tenant in relation to his quiet enjoyment. (The tenant was awarded some compensation for the damage to his linen and crockery as a matter of tort law – not anything to do with his tenancy).

This sort of thing, it must be said, would be a very rare occurrence, but the precipitating circumstances – that is, a co-owner getting left off an agreement – are probably a lot more common, so the potential for a Catanzariti v Whitehouse-style showdown may be quite widespread. To reduce this potential, the Tenants' Union is asking, in its submission on the draft Residential Tenancies Regulation 2010, recently circulated by Fair Trading NSW, for a requirement that landlords disclose all third party interests in rental premises. We expect that this would not actually result in very many third party co-owners being disclosed – rather, the effect would be that landlords would take greater care to ensure that all the co-owners are included in the tenancy agreement.

The TU will be commenting on more besides that – and to make your own comment, click on that link.

Tuesday, October 5, 2010

Happy International Tenants Day

Actually, it was yesterday – first Monday in October, same as Labour Day in New South Wales.

International Tenants Day was first declared in 1986 by the International Union of Tenants, which itself has roots in the 1920s.

(The International Union of Tenants)

I hope you had a day of quiet enjoyment, comrades, before turning again to the international struggle for a better deal for tenants.