Bond Insurance - a gamble not worth making.

We've recently found out about BondSure, a new company offering bond insurance, as well as bond loans and contents insurance. We do not think bond insurance is worth it for most tenants, unless you are exceptionally accident prone.

This guy. This guy needs insurance.

Let's consider the kind of insurance being offered. Your rental bond is already a form of insurance - the tenant pays a lump sum up front to ensure that if there is compensation due to the landlord at the end of the tenancy, the money is already there.

For most people insurance is about peace of mind – a protection against large, unexpected costs. This is exactly what your rental bond is!

It's not too different from paying insurance on a car, except that it is refunded at the end of the tenancy if you do not need to rely on it. And during the tenancy, it's held by the Rental Bond Board and there's the opportunity for your bond to be used for good.

So would you consider paying insurance on your insurance? It may sound a little odd, but that's the logic being offered by BondSure. Perhaps this reflects a view among landlords and agents that the bond is the tenants money in name only, and really it’s just waiting to go to its rightful home with the landlord. Is it a coincidence that BondSure is managed by former real estate agents?

So, how does this insurance on your insurance work?

Let's look at the insurance on a $2000 bond. The fees are $31.58 per month on a 12 month agreement, for a total of $378.96 for the year. You pay your fees, and if you need to make a claim, you pay your excess of $300 (Excess is 15% of bond or $200, whichever is higher). Coverage extends only to the bond amount, so the maximum claim you can make is your bond amount of $2000.

Now, because you have already paid the $378.96 in premiums, and $300 in excess, your insured $2000 bond effectively only gives you a benefit of $1321.04. The insurance does not cover anything above the bond, and it only covers "accidental damage". It does not cover many of the things that bonds often pay for, like rent arrears, utilities bills, or even most cleaning bills.

We know from the Rental Bond Board that the actual numbers of people losing their bonds are very low. Once you take out the stuff that BondSure's bond insurance doesn't cover, these numbers will be even lower.

Click for full size!

In the 2014-15 financial year, there were 266,856 bonds refunded. 53% of tenants received their bond back in full. If those tenants had held bond insurance, they'd have made a $378.96 bet and lost. This is where BondSure makes its money.

Another 38% received part of their bond back. Because of the excess of $300, the claim by the landlord has to be above $678.96 before it even makes sense to claim anything. If your landlord comes to you with a bill for damage of $150 dollars, you wouldn't spend $300 dollars to fight it, would you? So a large chunk of those tenants won't make the claim on the insurance, they'll just pay the landlord directly. So they'll have made a $378.96 bet and lost, on top of whatever "small" amount the landlord has claimed. This group end up paying both BondSure as well as their landlord, without actually obtaining any benefit.

If the claim on the bond is higher than $678.96, and only for accidental damage, then it becomes worth it for the tenant to have held their BondSure policy. They will start getting a payout that puts them ahead of where they would have been if they'd just saved their money. But that's assuming they've only been paying their premium for one year.

For those playing along, that leaves just 9% of tenants who lost their bond entirely in 2014-15. We know that many claims for the whole bond occur following breaches, such as rent arrears and the like, so only some would get the benefit of bond insurance. Those tenants often also owe more than the bond to the landlord, so they will still have costs above the payout.

If you are lucky(?) enough to be one of the small percent who had accidental damage that cost you exactly what your bond would cover (and nothing more!) then you get the full benefit of the insurance, and get your bond back. Happy days!

In considering all of this we haven’t included the cost of attending the Tribunal, which a bond insurance system discourages tenants from using. If your landlord's claim is high enough the "rational" thing to do would be to accept it and take the BondSure payout, even if you know the claim is false or an overreach. Without bond insurance it is usually worth it for a tenant to dispute a bond claim because the Tribunal forces agents and landlords to provide evidence for their claim.

As with all insurance, this is basically a gamble. Only around 1 in 4 tenants will get some benefit from a BondSure bond insurance policy. Most won't, and this is why when you gamble the house always wins. The house here is BondSure, who get paid either way, and if they do pay out make a relatively small loss. Using the proportions above, if everyone had a $2000 bond covered by BondSure they would make an average of $131 per client. Tenants, on the other hand, would spend an average of $319 by taking out insurance on their insurance.

Save your money, don't use bond insurance. If you really want to cover yourself for the unexpected loss of a rental bond, you'd be better off sticking $30 a month in an old jam jar.

Inaccessible justice

As of July 1st, some applications to the New South Wales Civil and Administrative Tribunal became more than twice as expensive. However, if you aren't elderly, disabled or unemployed you might not know this because this only applies to people in receipt of a pension.

The fee change was published and made law on the 1st of July, the same day it was to take effect. To our knowledge, this change came without consultation with the members (including the Tenants' Union) of various consultative committees set up to support the Tribunal. This is a very disappointing omission, as we might have been able to discuss the potential impact on access to justice, and the fairness of the decision in light of the funding arrangements of the Tribunal.

Prior to July, pensioners could seek a reduction in fees, down to $5 for the basic application. $5 had been the level for concession card holders for many years, and reflected a commitment to ensuring that vulnerable people could still access the justice system when they were mistreated.

Now the calculation is that concession fees will be 25% of whatever application the person is making. It will now cost a pensioner $12 to make a regular application. This may not sound like much if you are a wage earner, but it will begin to bite concession card holders hard enough that they may not apply to the Tribunal at all.

It also means the concession fee will continue to increase when other fees do. Consider how quickly pensions are rising compared to wages below, and consider the fairness of this proposition.

Changes in income types over the last 20 years

Tenants are the people most likely to apply as concession holders, and we already fund nearly a third of the entire expenditure of the Tribunal. More than $14 million a year is provided to the Tribunal from the interest earned on tenants bonds.

Most of the funding NCAT receives from tenants' money is actually already spent subsidising landlord applications, so vulnerable tenants being asked to pay more than twice as much for their application really does seem a bit much.

And since tenant applications at NCAT are already dwarfed by landlord applications, there is no good reason to tip that balance further towards landlords by discouraging tenant applications.

Finally, something to consider about how we encourage access to justice for some of our most vulnerable members of society. In both Victoria and the ACT, their Tribunals also recently updated their fee structures. The cost to concession card holders to make a tenancy application? $0.

Tenants steal the show at Parliament!

This week was an important one for our More Bang for Your Bond campaign.

For over six months, we have been campaigning for an increase in funding for the 19 Tenants' Advice and Advocacy Services operating across NSW. These services are funded with tenants' money, via the interest accumulated by bond monies held by the Rental Bond Board. Much of this interest is retained by the Government in surplus. But tenants' services have had no increase in real terms for over 12 years, despite a 25% increase in the number of tenants in the state over that time. And so the services are now stretched thin, forced to turn back those needing help on a regular basis. So with the backing of over 1500 supporters, we took the campaign to NSW Parliament - formally presenting a petition to bring funding up to speed with the needs of the rental market in 2015.

The presentation ceremony featured speeches from our Executive Officer Julie Foreman, as well as Dr. Geoff Lee MP (Member for Parramatta and Parliamentary Secretary), Jenny Leong MP (Member for Newtown), and David Mehan MP (Member for The Entrance). But by consensus it was our tenant speaker, Milly Morison, who stole the show. Milly's words perfectly capture the experiences of countless tenants across the state, and the vital role played by the service that assist them.

We are grateful to Milly, and proud to republish her speech in full here. 

Milly's speech:

Thank you all for coming today. I would like to take a moment to thank the Tenant’s Union of NSW and the network of Tenants Advice and Advocacy Services throughout NSW, for all the help that they have given me during my time as a renter.

I would like to give you a bit of background as to why I am so grateful for their help. A couple of years ago I was renting a house directly through the owner. We were on a periodic agreement when the owner fell ill and required the house back. He wanted to give us two weeks’ notice to vacate, so of course, we panicked. Finding a house in the Sydney rental market is challenging under the best of conditions. I called my aunt who told me about the Tenants Union, so I gave them a call. The friendly gentleman on the phone gave me some advice and told me there was more detail on their website. There I found a wealth of information and Factsheets, which I have been using as my essential manual ever since. The information contained told me the minimum required notice was 30 days. Armed with this information I was able to negotiate with the owner so we weren’t going to end up homeless, which was a real possibility as I had just quit my job and my housemate was a casual waitress.

In our next house we needed additional housemates to cover the rent. The new tenants did not want to be on the lease, and I wanted the extra rooms set up as short term leases. The tenants.org.au website helped me set-up sub-lease agreements and provided a sub-lease template. It helped me to navigate the nitty gritty details and maintain a positive relationship with the real estate agent. With the help of the Tenants Union everyone was looked after and no one got the raw end of the deal.

When I moved out of that house I transferred the tenancy to the two remaining housemates and again, the information provided by the Tenants Union was invaluable. They wanted to have their dog on the lease and at first the owner refused, but we were able to write a letter using information provided in the Companion Animals Taskforce submission that changed the owner’s mind. They were allowed to have the dog and I was able to move out.

Most recently I was living in a house and I had a falling out with my co-tenant. I gave her my four weeks’ notice but things got ugly very quickly and she refused to return my bond. The Rental Bond Board holds the bond for the whole house and don’t return portions of the bond to individual tenants. If one tenant leaves it needs to be negotiated between the two parties. So it felt that she suddenly had control of all my money. My local Tenants Advice and Advocacy Service walked me through, step by step, how to communicate with the real estate agent, how to behave in such a way that I was in the right, when I should give my keys back, what to do about a condition report and documenting the house upon exit. TAAS gave me all of the tools that I needed to get my bond back and because of their handholding I was able to successfully retrieve my money without having to take it to the tribunal.

Throughout my experience as a renter, a tenant, a share house mate, I have needed the assistance of the Tenants Union and the TAAS and I have regularly called upon their support in all of those sticky situations. I have used the Factsheets for all those niggles and I watch with interest their advocacy for tenants’ rights.

Mine is not an uncommon story. My rental history is a cardboard cut-out experience shared by many other renters around NSW. I have trouble imagining how people manage these issues without the support of the Tenant Union and Tenants Advice and Advocacy Services and I cannot state strongly enough how vital they have been as my aids through the rental world.

Fair Trading's review of the Residential Tenancies Act also asks for comments on how interest on tenants' bond money should be spent. Let them know directly here!

Back to the Future for Renters

Today, the 21st of October, 2015 is Back to the Future Day. Movie-goers are celebrating the day that Marty McFly arrived in the future in the second film of the series. Marty came originally from 1985, and it made us wonder what had changed.
So what did renting look like in 1985? See below- the short story, there are many more renters than there used to be, and we're paying a lot more rent! Wages haven't gone up as much as rents have, and groceries have barely gone up at all (in fact in real terms, the kinds of items we've included here have come down in price).

Also in 1985 then NSW Housing Minister Frank Walker announced the first tenants advice services to be funded by the interest earned on tenants bonds. This was a big step up in capacity from the previous network of entirely voluntary services. At the time, we were the first state to utilise bond interest money in such a truly innovative, sensible way.
Now in 2015 we're asking for those services to continue to be funded at fair and sustainable levels in the More Bang for Your Bond campaign- in just a few weeks time we'll be presenting our petition and postcards at parliament house. Details to come, but there's still plenty of time to show your support!

Great Scott!

Top tenant 'mistakes' include knowing the law

Anybody foolish enough to spend time on the internet (you know who you are!) will know we are firmly ensconced in the age of the listicle. Newsworthiness, inanity, and even the number of things listed are irrelevant considerations - 29 Essential Albums Every 90's Kid Owned is what gets the clicks. Indeed, the medium has already reached a higher plane, arriving at the ironic, self-referential listicle.

So with the number of long-term tenants sharply on the rise, it is perhaps no surprise that tenancy law has now entered this brave new world of journalism. Earlier this week, Fairfax Media brought us The 10 mistakes landlords and tenants make.

Next time on The Brown Couch: 27 hilarious but true reasons why Taylor Swift's cat who grew up in the 90's will restore your faith in humanity

The tenant errors nominated do include genuine missteps that often leave renters high and dry - such as failing to provide notice before vacating, or not keeping records of communications with the other side. 

But two 'mistakes' did stand out as somewhat curious:

"Not reporting necessary repairs to the property manager"

"Feeling uncomfortable about asking for changes to the lease upfront"

Self-defeating fools! Of course, tenants are entitled to have repairs for which they are not responsible addressed by the landlord - and tenants are in fact obliged to report damage to premises as soon as practicable after becoming aware of it! And, like most any other contract, the parties to a residential tenancy agreement are free to renegotiate terms. Why oh why - Tell me why! - do tenants work against their own interests in this way? It categorically does not make sense. 

Except, wait...

Could it actually have something to do with the fact that landlords are presently empowered to issue tenants with a notice of termination for literally no reason? And that they can pull the pin at any point - either for the end of a fixed term or with 90 days' notice in a periodic tenancy? Could it be that the Tribunal is required to enforce a valid notice so issued? And that mechanisms for tenants to dispute 'no grounds' notices as retaliatory are notoriously difficult to use?

Of course it does. The threat of arbitrary termination in this manner hangs over the head of every tenant. Renters know their housing is inherently insecure, as our 2014 survey showed. And this naturally influences their approach to landlord-tenant relations. The consequence is that tenants are too often reluctant to enforce basic and fundamental legal rights for fear of putting their landlord offside. It is only too easy for a landlord to be rid of an irritating tenant that insists upon all that he or she is entitled to. And better still, very low vacancy rates mean a replacement will be found almost immediately. 

Perhaps tenants aren't so foolish after all.

It is for these reasons that The Tenants' Union argues for the abolition of no-grounds termination provisions from the Residential Tenancies Act. Instead, we say landlords should have access to an expanded list of legitimate termination grounds, such as needing the property to reside in personally. 

It also goes to show that the media isn't the best source of guidance on where you stand as a renter. For that, you should contact your local tenants' advice service - and of course sign this petition to ensure these vital but underfunded services continue to have the capacity to take your call. 


Read more about the Tenants' Union's opposition to no grounds terminations in our report on five years of the Residential Tenancies Act, available here.

Ignored NFP bill deserves our attention

Despite its sexy ‘bear pit’ moniker, few would argue that much of what happens in NSW Parliament is decidedly unfashionable, and ignored by the majority. Didn’t catch debate on the Impounding Amendment (Unattended Boat Trailers) Bill 2015 earlier this week? Thought not.

The legislature’s private members bills, we suggest, exist squarely within this vacuum. But one that made its way into Hansard in recent weeks has certainly piqued our attention.

Tales from The Lost World of private members bills…

On June 26 2015, Shadow Attorney-General Paul Lynch introduced the Non-Profit Bodies (Freedom to Advocate) Bill. As its straight shooting title suggests, the bill would ensure state funding agreements with not for profit bodies cannot include clauses restricting the recipient from advocating on law and policy issues. It bears a very strong resemblance to a Federal Government Act from 2013, covering Commonwealth-Not For Profit funding agreements. We endorsed that measure as “very good for the quality of our democracy”, for reasons also captured in Lynch’s second reading speech on the NSW Bill:

“A strong, innovative, independent not-for-profit sector is essential to getting government policy right and building a fairer community.”

More particularly, as the resourcing body for Tenants’ Advice and Advocacy Services in New South Wales, the Tenants’ Union exists in symbiosis with those front line organisations. Those are very much the kind of services whose work the bill intends to protect. And their capacity to engage in systemic advocacy can undoubtedly complement and enhance our own. Indeed, many TAAS services have played an active role in the discourse surrounding the Residential Tenancies and Housing Legislation Amendment(Public Housing - Antisocial Behaviour) Bill 2015 - providing submissions, explaining the impact of the proposed reform to Members of Parliament, and liaising with colleagues elsewhere in the community sector. The ongoing More Bang for Your Bond campaign – a joint initiative of the TU and tenants’ services – is another fine example of the work we do together.

Regrettably, the Bill met an untimely fate in the Legislative Assembly. In outlining the Government’s opposition to the Bill, Attorney General Gabrielle Upton described it as predicated on a “false and misleading” premise. The Attorney General further opined:

“We are notional trustees for [funding] dollars, and that responsibility means that they must go to the areas of greatest need where they can make the greatest difference to the lives of the people in our community…Those principles specifically seek to ensure limited funds for public legal assistance are directed towards legal representation, casework, and advice for disadvantaged and vulnerable people.” 

But this is, in our network’s experience, a false dichotomy. Our systemic advocacy work is always informed by the experiences of renters as revealed through advice, casework, and representation. Moreover, we see campaigning for improved laws and policies affecting renters, and engaging in client work to ensure best outcomes under the current regime, as pursuits of the same end – in the Attorney General’s words, ‘making the greatest difference to the lives of the people in our community.’ This is only possible through both systemic and client advocacy. Not to mention the quality of the investment. As the ALP’s Jo Haylen noted in the same debate, not-for-profits 

“provide critical services to our most vulnerable across every sector in the community…According to the Australian Bureau of statistics they contribute $43 billion to Australia’s gross domestic product and engage more than 4.6 million volunteers each year.”

Nonetheless, it follows that a legislated freedom to advocate is likely not to come to be for our sector in this 56th Parliament - the Bill banished to footnote status in its history.

But we continue to support its content as vital to ensuring maximum effectiveness for the tenancy network, and indeed the state's non-profit sector as a whole. 

Stepping up to end homelessness - Tenants Advice and Advocacy Services

Welcome to Homelessness Prevention Week 2015. This year, Homelessness Australia asks "How will you step up to end homelessness in Australia?"

Stepping up to end homelessness sounds pretty daunting, but there are many ways to contribute to this cause. In fact, Homelessness Australia has already suggested a few:

• raise community awareness and understanding of homelessness
• increase community connection for those who are homeless, or at risk of homelessness
• recognise the individuals and groups who help those experiencing, or at risk of, homelessness
• increase community understanding and connections for those working in the homelessness sector

We like to think we're doing a little of these things each time we cross paths on the Brown Couch - whether we're talking about how our state and federal tax settings contribute to an unaffordable private rental market, banging on about the need to change renting laws for the better, or drawing attention to the good things our friends and colleagues in the community sector do.

Today we'd like to focus on the statewide network of Tenants' Advice and Advocacy Services. We've know we talk about them a lot, but they're important, and it's worth revisiting some of those discussions. In June 2013 we wrote about their quest to save once million tenancies, where we talked about the volume of the work they do, its sometimes adversarial nature (good if you're a tenant who needs help!), and the fact that a large part of their work is driven by landlords trying to end tenancies.

The most common [Tribunal] applications were in fact made by landlords - overwhelmingly, for the termination of a tenancy. In the Tenancy Division, there were 19,373 of these. In the Social Housing Division, there were 9,536. That's a total of 28,909 - almost as many contacts as TAASs had over the year!

And in another discussion we put some numbers on how Tenants' Advice and Advocacy Services prevent homelessness.

To investigate the TAASs' role in preventing homelessness, a six-month project was undertaken by 15 TAAP direct services. The data they recorded highlights the positive impact of support provided to clients whose tenancies were vulnerable.

During the course of the project, 516 tenancies at risk of termination were identified. As a result of the advice and advocacy provided by skilled TAAS workers, homelessness was averted in 424 cases (82.2 per cent).

It's great work, and it should be celebrated.

But it's also getting harder for the Tenants' Advice and Advocacy Services to do this work, because they have not seen a real increase in funding since 2002. Since then, the number of households living in rented accommodation has gone up by 25% in New South Wales. And because these services are funded by the interest on tenants' bonds, there is more than enough money available to invest more in these services.

So... one way you can step up to end homelessness is by stepping up to support Tenants' Advice and Advocacy Services. And you can do that by joining the campaign to get More Bang for Your Bond.

Visit the campaign on Facebook and Twitter, check out the website, and sign the online petition. Grab some of the More Bang for Your Bond postcards* and help build support!

*Let us know where you are and we'll send you as many as you'd like.