Monday, December 12, 2016

Running repairs? The cost of longer term tenancies: part 3

We have written a number of blog posts now on longer fixed term tenancies, and the problems we anticipate if tenants were asked to take on repairs during a tenancy. One example worth considering when talking about longer term tenancies and the possibility of shifting responsibility for repairs is 'protected tenancies'.
Not that many people are familiar with protected tenancies (though we've written about them a number of times on the blog - most recently here and here). Protected tenants are those covered under the provisions of the Landlord and Tenant (Amendment) Act 1948, but there are very limited circumstances under which someone can be recognised as having a protected tenancy. Generally protected tenancies are found in older suburbs where many residents rented until gentrification gobbled up their suburb, or in country towns where no-one worried about paperwork in the good old days. And in practice, protected tenants are older tenants.

There are two key advantages of being a protected tenant. The first is rent control - rents are usually limited to 'fair rents', and will be considerably less than the market rent. The second benefit is stronger protections against terminations. Protected tenants can only be evicted on certain proscribed grounds (and they can't be kicked out for no reason, i.e. a 'no grounds' eviction). This gives them much greater security of tenure than other tenants. They certainly offer benefits far more compelling than anything being put on the table in current discussions around longer fixed term tenancies.
A succession of landlords all flatly refused to do repairs on this protected premises. Water had been pouring through the ceiling just inside the front door for months.
However the significant drawback of protected tenancies is repairs. The Landlord and Tenant (Amendment) Act 1948 is silent on the need for landlords to do repairs or maintenance. What this means is that many protected tenants are older tenants who, on the one hand have been able to age-in-place, but on the other hand live in homes crumbling around them, because their landlord refuses to do any repairs – sometimes in an attempt to force them out.

Recently we spoke with John, a protected tenant who has been living in his home in Randwick since 1978. We asked him about his experience in a protected tenancy and the ongoing issues he has faced around repairs ...

John moved into his unit in Randwick 39 years ago. It was an old Victorian place with rococo ceilings, a spacious feel - it had one large bedroom and a small room at the back - and a nice view over the racecourse.

But it was falling to pieces: “when I moved in the place was dreadful, everything was faulty”. There was no paint on the walls, the floorboards were loose and squeaked as you moved across them, and the lino had holes in it. The kitchen was a wreck. For $40 a week though, John thought he could live with it.

When he moved in John painted the apartment after confirming that the landlord at the time would reimburse him. The landlord never reimbursed him. Thanks to his handiwork over the years the unit is in good condition, but he has had to do a lot of work. He installed a new kitchen and a new heater, has put in carpets, and paid for significant additional repairs to the bathroom: “I’ve invested a bit into this place. The work I’ve done has made it into a nice place, a home for me”.

One of the few ways a protected tenant can get repairs done is to complain to their local council about the disrepair a building is in. Randwick Council under the Environmental Planning and Assessment Act 1979 has ordered John’s landlord to undertake repairs at least a couple of times. Once when the balconies for the unit block were crumbling and had to have work done to ensure the safety of occupants and passers-by. On another occasion they were required to bring in an electrician to attend to electrical faults that were posing significant safety risks for the entire building. John reports that in this instance his then landlord did call in an electrician, but failed to pay them. As a result the electrician refused to finish the work. In general his original landlord refused to do any work on the unit, including structural repairs.

The landlord's failure to undertake repairs has been a significant and ongoing problem for John:
I don’t see why I should be responsible for structural defects and electrical problems as a protected tenant. I don’t mind doing the things I can do, but the structural issues ... [should be done by the landlord].
Recently the original landlord who John had entered into his tenancy with sold the building (John reports they bought it originally for 7000 pounds, and when it sold 18 months ago it went for $4.2 million). The new owner tried unsuccessfully to evict John. John attributes his success in fighting the eviction in large part to the excellent support he received from a local tenant advocate from the Eastern Area Tenants Advice Service. The new landlord has subsequently undertaken significant renovations and repairs to all of the other units in the building, but - like John's original landlord - has left John's unit untouched.

When asked if he thought tenants should give up their established rights around repairs to secure a longer fixed term lease in the current private rental market, John was clear:
No, it’s not worth it. Not even if you’re going to rent one of the newer places. I know lots of people in Randwick in these new apartments who have lots of problems. Repairs come up often. The rent that tenants are expected to pay now, the landlord should bloody well look after the place.

1 comment:

  1. "The rent that tenants are expected to pay now, the landlord should bloody well look after the place."
    I think that sentence sums it up. If a landlord is unable, or unwilling, to spend money on repairs then they need to choose a different investment portfolio. Repairs are part of being a landlord, and help to maintain the property for optimum price.
    I have struggled in the past to understand why a landlord would want to be paying the real estate to find a new tenant each year. One would have thought they would be happy not to keep changing tenants with lost rent and more agent fees.
    Maybe it is the agents who are choosing to do this.
    Whilst our tax laws allow a landlord to claim Negative Gearing and the Capital Gains Tax Benefits there is little incentive to keep a property for long term, my understanding of the Tax laws is the landlord need to either live in a property every 6 years or sell it. This is certainly not allowing for many long term tenants.
    Changing the Tax laws, along with the removal of no grounds terminations and you may see a natural progression to long term tenancies without the need to insist tenants do the repairs as well as pay unaffordable rent.

    ReplyDelete

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