Monday, July 28, 2014

The big stick

Legendary tenants advocate and TU Older Tenants Project Officer, Dr Robert Mowbray, looks at who's using the 'big stick' in tenancy – that is, the Tribunal.

Big stick: a policy of acting or negotiating from a position backed by a show of strength. Origin from ‘speak softly and carry a big stick’, portion of African proverb quoted by Theodore Roosevelt.

Who were the big users of the Consumer, Trader and Tenancy Tribunal (now amalgamated into the NSW Civil and Administrative Tribunal) in the twelve months to 30 June 2013?

Well, landlords of course …in sheer numbers. They lodged 23,888 applications in the Tenancy Division (75% of all applications) and 16,897 applications in the Social Housing Division (95% of all applications). 

But it's not as simple as that. Park residents lodged 1,739 applications in the Residential Parks Division and, indeed, this is 88% of all applications in that Division.

Looking a little deeper at the market share of each type of housing provision, a simple analysis shows that the biggest users of the Tribunal are community housing providers, with 14.5 applications for every 100 premises managed by community housing providers. They are followed by Aboriginal housing providers (13.0), Housing NSW (10.5) and park residents (7.7). And social housing tenants (including community housing tenants) are the least likely of all groups to use the Tribunal.

This can be visualised in the column chart below.

Why might this be the case? 

Let’s look first at community housing providers. There are a number of possible explanations as to why community housing providers are heavy users of the Tribunal – and in particular, why they are heavier users than Housing NSW.

Compared with public housing, community housing has fewer elderly tenants, who tend to have a stable fixed income, such as Age Pension, and also relatively stable expenditures. More of these tenants can pretty much ‘set and forget’ their rent payments which, of course, means fewer problems for Housing NSW.

Another explanation is the practices of community housing providers when dealing with rent arrears and disputes.

Housing NSW’s ‘Community Housing Access Policy’, February 2012, states:

4.4. Termination of Resident and Tenancy Agreements

Community housing providers must have fair and transparent processes in place to determine the termination of any resident agreement or a residential tenancy agreement under the Residential Tenancies Act 2010. This must include a process to advise residents and tenants about the circumstances in which a resident agreement or residential tenancy agreement may be terminated. Following a decision to terminate a residency agreement or a residential tenancy agreement, a community housing provider must issue, in writing, a notice to the resident or tenant explaining the termination and setting out a reasonable timeframe for the resident or tenant to vacate the premises. The termination of a residential tenancy agreement must be accordance with appropriate provisions under the Residential Tenancies Act 2010.

So, there is discretion for each community housing provider to decide in what circumstances they might initiate an application to the Tribunal. The policy of one Sydney-based community housing provider suggests that it uses the Tribunal as a ‘big stick’. This community housing provider applies to the Tribunal for a termination order, even though it is their expressed intention to obtain a performance order. And, they do this regularly, forking out the application fee each time.  This may or may not be common practice amongst other community housing providers.

In relation to managing rent arrears, this community housing provider’s ‘Policy and Procedures’, published on-line, states:

If a tenant is more than 14 days in rent arrears they will be served a letter for non-payment of rent, giving them 7 days to amend the arrears.
If the tenant does not respond and the arrears fall further behind, after 7 days, the Manager will issue a Notice to Terminate.
If the arrears are not cleared by the end of the Notice Period we will apply to the [NSW Consumer and Administrative Tribunal] for a Specific Performance Order where tenants have entered into a formal repayment agreement.
Where tenants have not signed a formal repayment agreement we will apply to the [NSW Consumer and Administrative Tribunal] for an order giving us vacant possession of the property and an order that the tenant pay all rent owing.
[However] at the Tribunal hearing we will not pursue an order for possession if the tenant consents to a Specific Performance Order to repay all arrears owing. If the tenant breaches this order we will apply to the Tribunal for vacant possession of the property.

The same community housing provider states:

Any Notice to Terminate issued for breach of the lease agreement will follow the same principles applied in the Eviction for Rent Arrears policy.

It is probable that community housing providers have a lower ratio of tenancies to tenancy managers compared to Housing NSW. Accordingly, they have more time to vigorously pursue disputes. This, in itself, is worth further investigation. However, in tandem with an explicit policy such as above, it will inevitably lead to a greater number of applications before the Tribunal. 

The figures for Aboriginal housing combine both properties owned by the Aboriginal Housing Office (but managed by Housing NSW) and Aboriginal community housing organisations. Their numbers are of the same order, with around 4,500 to 4,700 properties respectively. This would explain why their use of the Tribunal also is mid-way between that of Housing NSW and community housing providers.

Now let’s look at residents of residential parks. There are a number of possible explanations as to why residential park residents are heavy users of the Tribunal. 

Seventy-six percent of applications in the Residential Parks Division were about excessive rents and excessive rent increases. Because it is so costly for park residents to move, park owners have disproportionate market strength and therefore are in a position seek to extract a higher rent than may be justified. 

However, the park residents live in close proximity and enjoy solidarity in numbers. As a general rule, notices of rent increases are issued to all residents at the same time and this leads to their banding together to dispute excessive rent increases.   

Also, the more residents that dispute the rent increase then the greater the chance of success, because of the ‘comparable site fee’ argument and park owners saying things like 'we have 96 residents and only 20 of them are here – the other 76 are happy to pay the increase’.  The fact that a successful challenge often depends on numbers pushes the numbers up.

Also, unlike tenants of residential properties, residents of residential parks are not subject to no-grounds eviction and therefore are less vulnerable to retaliatory eviction for exercising their rights.

The low rate of applications from private tenants and social housing tenants requires a comment. A major reason for the smaller number of applications by private tenants would be their fear of retaliatory notice of termination. This interpretation is reinforced by results in the ‘Affordable Housing and the New South Wales Rental Market, 2014 Survey Report’, published by the Tenants’ Union of NSW on pages 11 and 12:

77% of respondents have put up with a problem or declined to assert their rights as a tenant because they were worried about adverse consequences.

It may be that social housing tenants hold the same fear. This shouldn't be the case, however, because social housing landlords are required to be more transparent. Nevertheless, in the case of social housing tenants, they may be discouraged because they are up against a big authority in their lives and a repeat player in the Tribunal. They may feel that they lack the information and skills to make their case. This is one reason why Tenants Advice and Advocacy Services are so important.  

Having said this, the higher rate of applications from private tenants than from social housing tenants is probably is probably at least partly explained by claims for return of rental bond at the end of tenancies. In the 12 months to 30 June 2013, there were 4,543 bond disputes in the Tenancy Division, compared to just 48 in the Social Housing Division. 

When considering the use of the Tribunal, we should keep in mind that Tribunal applications mean different things between different types of applicants. Applications cover a wide range of types of applications. A few examples will suffice:

       42% of applications in the Tenancy Division were lodged by private landlords seeking orders for termination for non-payment of rent.
       2% of applications in the Tenancy Division were lodged by tenants seeking orders for repairs.
       54% of applications in the Social Housing Division were lodged by social housing providers seeking orders for termination for non-payment of rent.
       1% of applications in the Social Housing Division were lodged by tenants seeking orders for repairs.
       9% of applications in the Residential Parks Division were lodged by park owners seeking orders for termination.
       76% of applications in the Residential Parks Division were lodged by park residents for orders relating to rent / excessive rent increases.

So, what's at stake is very different, depending on who is applying. When a group of park residents apply against a rent increase, what's at stake? The park operator might end up getting the same rent as as they currently get, or perhaps more (but not quite as much as they had wanted). When a landlord applies for termination, a tenants' home is at stake. Many orders sought by social housing providers for termination for non-payment of rent would have led to performance orders without the tenancy being terminated. This is the ‘big-stick’ interpretation cited above on how some community housing providers use the Tribunal.

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