Agents get real (part 2)

In our previous post, we commenced a review of the Real Estate Institute's new 'Real Tenancy Policy' (as distinct from their unreal policy of last year). We were genuinely impressed with the REI's upfront recognition of housing as a human right and as a matter of physical, psychological and social need. We were less impressed with their argument about 'impediments for investors'; indeed, the evidence shows that over the past two decades punters have been piling into the market, and borrowing up big to do so.

Now we look at point 2 (again, the REI's in blue, we're in black).

*

[2] A needlessly complex and prescriptive regulatory regime

REINSW recognises the need for a legislative and regulatory framework which appropriately protects the interests of landlords and tenants of residential property. The far-reaching changes to the Residential Tenancies Act 1987 set out in the Residential Tenancies Act 2010 (uncommenced as at October 2010) have been the subject of detailed comment by REINSW.

'Far-reaching?' We wouldn't have said that, but let's see if the REI identify any 'far-reaching changes' in their new policy.

From our point of view, the Residential Tenancies Act 2010 mostly improves on the existing law, in a fairly technical, problem-solving sort of way. It does not radically recast the balance of power between landlords and tenants. You can find our own detailed comments here and (in very much more detail) here.

It is of concern that it is considered necessary to regulate the rights and obligations of residential landlords and tenants in a statute which comprises 227 sections (with many more provisions in as yet unfinalised regulations). The Residential Tenancies Acts in both South Australia and the ACT consist of approximately 120 sections. Western Australia manages the task in under 100 sections. While some jurisdictions (for example, Victoria and Queensland) have lengthier statutes than even New South Wales, those statistics strongly suggest that the sector in New South Wales is comparatively over-regulated.

As a measure of over-regulation, the number of sections in a piece of legislation is, with respect, not very good. The Landlord and Tenant (Amendment) Act 1948 (NSW) has 113 sections, almost exactly half the number of the new Act's. Is the 1948 Act simpler and less onerous by half?

Comparing the lengths of the Acts of each State or Territory shows nothing except that their respective Offices of Parliamentary Counsel do their drafting differently. Looking just at New South Wales, it is true that the 2010 Act has stacked on a few sections. Part of the reason for this is that it now includes bond provisions previously in the Landlord and Tenant Amendment (Rental Bonds) Act 1977. Another, bigger part of the reason is that the new Act is designed so that the casual reader can find all they need in one place, rather than skipping about throughout the Act. This means there is a bit of repetition (especially in relation to what sort of remedies are available through the Tribunal), but it is in the cause of making the Act more user-friendly.

In case it is thought that somehow New South Wales real estate has some unique feature which necessitates extensive regulation, it is notable that no other category of real estate in this state bears the same compliance burden as bedevils residential tenancies. For retail leases, the governing statute comprises some 156 sections (and no Regulation); for farming leases, the relevant legislation comprises 45 sections (with a Regulation containing 8 clauses). For other commercial property, no specific legislation has been enacted.

OK, we were being polite before, but it has to be said: this is a ludicrous measure of 'compliance burden'. Comparing consumer protection legislation with commercial legislation doesn't make much sense either.

A would-be landlord confronted with a choice between owning a property where recovery of water consumption depended, on the one hand, on agreement between landlord and tenant, and on the other hand on numerous factors including not exceeding a prescribed rate of water flow from taps (with one leaking tap at the commencement of a lease disentitling recovery) may think twice about becoming a residential landlord.

The water provisions are actually a lot easier for landlords than the REI makes out. It's all in the Reg (presuming the draft Reg is implemented): if the tenant is to pay for water, make sure there's no leaking taps and that the taps run at a maximum of nine litres per minute. Pretty simple. Sorry, but if you cannot operate a tap and a stopwatch at the same time, or find someone else who can do this for you, you really should think twice before becoming a residential landlord.

To take a further example of over-regulation, it is doubtful whether requiring a separate information statement to be given to a prospective tenant prior to the tenant entering into the agreement adds anything to the transaction. The residential tenancy agreement is in a standard, prescribed form; that document should be sufficiently clear on its face to render an additional information statement redundant. If it is not sufficiently clear, it should be re-drafted to make it so.

The 'information statement' they're referring to is the Renting Guide. It's been around for years: it used to be a little yellow booklet; a few years ago it slimmed down and is now a slip of paper with some handy phone numbers and basic info on it. It's handy for tenants, utterly harmless for landlords and agents. Is the REI seriously saying that would-be property investors are baulking when they find out that landlords have to give out the Renting Guide?

It is vital that the changes to residential tenancies legislation be monitored and reviewed to ensure that the new legislation does not impede the effective operation of the sector. If that review were only to occur after five years as contemplated in the new Act the results for the rental market would be potentially disastrous. Any review must occur sooner, and must include meaningful consultation with all stakeholders.

Wait a second - is that it? The water provisions and the Renting Guide? If this is all the REI can offer in support of their argument for an early review of the new Act (lest 'disaster' result), Fair Trading might feel well-pleased with its legislation.

Fortunately, we can offer a few more reasons to keep the law under review: the completely unsatisfactory state of the law for marginal renters, such as boarders and lodgers, who are excluded from residential tenancies legislation and have common law contracts only; the need to improve standards in rental housing, especially in relation to electrical safety switches and child-safe windows; the need to give tenants greater peace of mind and security through abolition of 'no grounds' termination notices....

In the meantime, we look forward to agents doing their own bit to reduce over-regulation by dumping all the additional terms from their tenancy agreements.

Next: point 3.