NSW renting laws - change is recommended

Wedged between a state budget and a federal election, the NSW Minister for Innovation and Better Regulation's report on the Residential Tenancies Act 2010 could not have come at a worse time for those of us who love a good old chat about tenancy law reform.

We've all been busy discussing other things - like what will become of the social housing system as more and more government assistance is designed to keep people in the private rental market, or indeed how the market might respond if we change the way negative gearing and capital gains taxes work... Anyway, last Thursday the report was tabled in Parliament, and it's time we gave it another look.

We might have to wait until next week before any of the usual media services pick it up - or indeed before Fair Trading puts the report up on their website. You can find it in the Hansard records until then. In the meantime here's what's going on:

The good
There are a couple of very good recommendations in the report. For instance, it recommends a suite of changes that would improve renting laws for victims of domestic violence, and bring NSW into line with a number of other Australian jurisdictions. These include:

• allowing victims of domestic violence to end their tenancy immediately by giving notice to the landlord and any co-tenant, along with evidence of domestic violence (such as a provisional, interim or final AVO)
• allowing a tenant to change locks and security devices where necessary to protect themselves from domestic violence
• ensuring liability for damage is not attributed to a victim of domestic violence, resting instead with the perpetrator, where the damage is the result of domestic violence
• ensuring that victims of domestic violence cannot be unjustly listed on a residential tenancy database

Other recommended improvements to the law include preventing tenancy database operators from charging tenants to find out if they have been listed, shifting the "reasonable diligence" defence in repairs and maintenance matters from the question of breach to whether a remedy will be available, ensuring that tenants have some recourse if material facts are not properly disclosed by a landlord prior to entering into a tenancy agreement, coming up with a single method for calculating a lease-break fee, and making it clear what seperately metered premises means when landlords pass water and utility charges on to tenants.

The bad
There are some recommendations in the report that we're less fussed with, such as proposed changes to the way a tenancy that is established as part of an employment contract can be brought to an end, allowing landlords to photograph a tenant's home for use in a sales campaign, and persevering with the "frequently failed to pay" complication to the otherwise useful "pay and stay" rent arrears provisions.

Some much needed changes to the law are missing from the report's recommendations, too. In particular, there's no proposal to fix the way rent increases work, no prohibition on landlords inserting "no pets" clauses into tenancy agreements, no requirement for landlords to occasionally inspect their investment properties and report on prospective maintenance needs, and no mention of increased funding for Tenants' Advice and Advocacy Services.

Most importantly, the report has declined to recommend putting an end to landlords' use of "no grounds" notices of termination, focusing instead on oft-promised, never-delivered "longer fixed-term tenancies". We'll come back to that in a moment.

The curious
The report makes several recommendations that warrant further investigation, and we're doing our best to find out more. These include working out what to do about share-housing tenancy agreements and marginal renters not covered by the Boarding Houses Act, and making minor amendments to the Act that "have merit".

Also in this category are recommendations to use the interest on tenants' bond money to fund "consumer protection more generally" - will this be at the expense of tenants getting More Bang for Your Bond? ; and make Rental Bond Board data available through an "open data project" - but this shouldn't impede the continuation of our new Rent Tracker series.

Unfinished business
Seems it wouldn't be a complete review of the Residential Tenancies Act without putting security of tenure into the "too hard basket". This is very easily done by making recommendations like "the Act's provisions in relation to no grounds terminations should remain unchanged. The Government should consider other ways of improving security of tenure in the rental market, including through facilitating the use of longer fixed term leases".

The thing about this is that landlords don't want to offer long fixed term leases, and tenants don't want to accept them. Not in the current climate, with a rental market driven by gains-motivated investors who'd sooner have vacant possession for a quick sale than a long-term, steady tenancy. The report even notes this, characterising it as the "tax settings in Australia and the tendency to purchase a property to make a capital gain rather than to collect rental income contributing to landlords' reluctance to enter long term leases".

This is interesting in the context of the Federal parties' stated views on those very tax settings. If the NSW Government wants to encourage more long fixed-term tenancies in the private rental market - and this is a long-stated aim that we can trace back to the 2005 review of the Residential Tenancies Act 1987 - they need look no further than the way negative gearing and capital gains tax concessions encourage the wrong kind of investment. They should insist whoever next takes Federal office take the appropriate action and reform these tax concessions. After all, as the saying goes - if you want less of something, you tax it.

The process from here
We expect further consultation to occur on some of these recommendations before any legislation to amend the Residential Tenancies Act is put to Parliament. The report gives no indication of expected timeframes, but even if Government moves quickly it could be several months before we see further details of the proposed changes. Of course, this means Government has plenty of time to consider the report's recommendations, or indeed revisit those important changes that did not make the list.

We'll keep you posted.