Contracts, conjunctions and clarity

Entering into a tenancy agreement only to find out later that the landlord is selling the place with you in it can be very frustrating. We've written a whole series of posts on this. The Residential Tenancies Act 2010 introduced one particular method of dealing with landlord selling that has caused a bit of confusion since its introduction. That method is giving the tenant the ability to end the tenancy early because they hadn't been informed of the sale before entering into the agreement. We've written twice before on this issue, using our understanding at the time. Fortunately, as of 4th July this year, the Act was amended slightly to make it crystal clear what it had probably meant to say all along.

Unfortunately, it has been clear as mud to some, provoking today's pedantic rant.

Now see here, you lot!

The Act now reads:

(1)  A tenant may give a termination notice for a fixed term agreement on any of the following grounds:

...

(c)  that the landlord has notified the tenant of the landlord’s intention to sell the residential premises, unless the landlord disclosed the proposed sale of the premises before entering into the residential tenancy agreement as required by section 26,

Section 26 requires a landlord who has an intention sell the premises and has also prepared a contract for sale to disclose that fact to the tenant before entering into a tenancy agreement with them.

The confusion arises now on how to read (1)(c). Since the clarification an agent in NSW has told a tenant, that "this section now only applies if a Contract for Sale of Land was prepared prior to the lease being entered into."

Now, we're all for the evolution of the English language. We've accepted that google is a verb, that we all know some flexitarians, but we're not yet aware of anyone making an argument for redefining the word "unless".

Unless is a form of conjunction (a word that joins two phrases), which is "used to introduce a case in which a statement being made is not true or valid." What "unless" most definitely is not, is "only if", as asserted by that real estate agent.

In this case the statement that being made is:

A tenant may give a termination notice for a fixed term agreement on (any of) the following grounds: that the landlord has notified the tenant of the landlord’s intention to sell the residential premises,

The Act inserts the conjunction,

unless

and the qualifier:

the landlord disclosed the proposed sale of the premises before entering into the residential tenancy agreement as required by section 26.

For clarity, here is what the explanatory note that accompanied the amendment through parliament says about it:

A tenant will have a right to terminate the agreement early, unless the proposed sale was disclosed in accordance with that section [section 26].

The way to read this part is that a tenant is entitled to terminate in almost all the circumstances where the landlord notifies them of an intention to sell the premises. There is one exception, and that is where the landlord had, before the agreement started, disclosed that they had prepared a contract for sale of the home.

We hope this settles the question!

* This information is not to be construed as legal advice and should not be relied on in the making of any rash decisions about moving house. If in doubt, contact your local TAAS.

Your rights in action: Peace, comfort and privacy

In todays guest contribution, the Brown Couch welcomes contributor Anne Coates. Anne is a Distance Education Student with a story to tell! This article first appeared in the April edition of Tenant News - the TU's regular newsletter.

As a distance education student, my rented apartment is not only my home, but also my main place of study. So I particularly value the right to ‘reasonable peace, comfort and privacy’. One way this right is maintained is through the landlord or agent giving proper notice, prior to access – at least in theory! Recently I discovered in practice, things may be rather different.

Our landlord, it turns out, has decided to sell the property. In preparation, a tradesperson was arranged by the landlord to paint all the windows. Our notice of this work was a knock on the door by the painter, one Thursday morning just after 7am, requesting for all the windows to be opened, and left open ‘for the next few days’.

The failure to give adequate notice (not less than 2 days notice for maintenance), and the painter’s noisy scissor lift starting each morning from 7am, upset the 20 odd tenants in the apartment block. The tenants exchanged ideas for action. Some put up notices in response to the painter’s sign for ground floor tenants, while others sent emails to the Managing Agent. Eventually, the message made its way to the painter, so towards the end of the job the noise was not starting until 8am (the legislated time).

The following Tuesday a letter under our door advised that a Selling Agent (not the Managing Agent!) wanted to inspect the premises on Friday at 9.30am, another failure to provide adequate notice for access. Again, the protests of the tenants in the building resulted in the inspection not taking place. Our efforts in objecting to our rights being breached eventually resulted in the legislated 14 days written notice prior to showing the premises to prospective buyers. So, as one of my neighbours’ signs appropriately summed up, “Check your lease and be empowered!”

For more info, check out Factsheet 8, Access and Privacy at tenants.org.au

Still making sense of sales

Fair Trading NSW has just released its latest edition of The Letterbox - this time it's all about "privacy and access"...

Now, just like in the last issue, the latest Q & A session includes some comments that we're not so comfortable with.

Q: What rights do tenants have when the owner is selling the property and requires frequent access for inspections? Can tenants be asked to leave during inspections?

A: If a landlord wants to sell a rental property, the tenant must be given 14 days written notice before the first property inspection. If the landlord intended to sell the premises but did not inform a new tenant of this fact before the lease was signed, the tenant can terminate the lease with 14 days notice and doesn’t have to compensate the landlord.

Okay. We agree, but we think they've forgotten to include a closing sentence of considerable importance:

"If the landlord had no intention to sell the premises when the tenancy agreement was signed, and only later decided to sell, then once so informed the tenant can terminate the lease with 14 days notice and doesn't have to compensate the landlord."

By way of explanation, we refer to this previous post on The Brown Couch, where we extracted a relevant passage from the CTTT's decision in Kutzner v Kamp (NSWCTTT unreported). We reproduce this passage here again:

The issue for determination is whether in these circumstances the tenants were entitled to give notice of termination under section 100(1)(c) of the Residential Tenancies Act 2010. I am satisfied that it is not a requirement of this provision that the landlord must have an intention to sell the property at the time of entering into the residential tenancy agreement which was not disclosed. It is only necessary for the landlord to have notified the tenant of such an intention during the fixed term without notice prior to commencement of the tenancy. "Disclosure" in the sense used in s100(1)(c) does not mean disclosing what was known to the landlord but rather whether prior notice had in fact been given of the landlord's subsequent decision.

The question arising upon the Tenant being told of the intention to sell, is whether the Tenant had been told at the commencement of the tenancy that this would happen. It is not an answer to say that the landlord did not know then that this would occur.

It is our view that Kutzner v Kamp is based on a correct interpretation of the law.

As has been noted in comments on our earlier posts, and in conversations with tenants' advocates across New South Wales, Fair Trading NSW has sometimes given information to tenants that is not consistent with the decision in Kutzner v Kamp. To that end, it is disappointing, but not surprising, to see the information published today in The Letterbox.

On the other hand, the CTTT's annual report for 2010/2011 includes the following case study on page 35:

Click on the image to enlarge

You can find more information about what to do when the landlord wants to sell here, here and here.

As with all things, if you are not sure about a situation with your tenancy, contact your local Tenants' Advice and Advocacy Service for a chat. You can find their details here.

When landlords sell: part 3

So you've found out that your premises are on the market and you're ready to drive a hard bargain about a schedule of access for your landlord to show prospective purchasers through.

But there's a few more things that the landlord or agent may want spring on you and that you should be prepared for. What do you say when the landlord wants to put up a for sale sign? Conduct an open house inspection? Conduct an auction on-site?

(Malloy has a good look around at the open house.)

None of these things are expressly mentioned in the Residential Tenancies Act 2010. What is mentioned, specifically and repeatedly, is that the premises will be available for 'inspection by prospective purchasers' (mentioned in each of the subsections (1)-(4) of s 53). In s 55, which deals with access without consent, the wording is only slightly different: at s 55(2)(f), it's access to 'show the premises to prospective purchasers.' (This difference in wording is really just one of perspective: prospective purchasers inspect what landlords show).

So, to be clear: the purpose of the access allowed by the Act is to 'inspect' or 'show' the premises, and that's it. Coming onto the premises to erect a 'for sale' sign is not access for the purpose of inspecting or showing the premises – and it doesn't fit with any of the other allowed purposes for access at s 55. So no 'for sale' signs without your consent.

It's the same for coming onto the premises to conduct an auction: that purpose goes beyond the allowed purpose of inspecting/showing. Likewise where the proposed access is for entertaining or victualling the prospective purchasers. (A little while ago, the Tenants' Union heard of a case where a selling agent proposed to host a 'champagne and canapes' soiree for prospective purchasers at rented premises. No word on whether the tenant was expected to serve the drinks or help with the washing up. In any event: this is beyond the allowed purpose, so there's no right of access under the Act.) None of this is allowed without your consent.

What about 'open houses' – which are, after all, for the purpose of inspecting or showing the premises? An open house may pass the 'purpose' test, but there's an argument (we doff our caps to legendary tenant advocate Robert Mowbray for this one) that an open house is not allowed under the access provisions of the Act. This is because an open house would admit not only 'prospective puchasers', but also cat burglars, neighbourhood stickybeaks and anyone else who cares to wander in.

There's another argument you can make against open houses – and this one doesn't turn on the wording of the Act, and goes straight to your landlord's hip pocket nerve. Point them to s 61(2) of the Act:

(2) The Tribunal may, on application by a tenant, order the landlord or the landlord’s agent to pay compensation to the tenant for damage to or loss of the tenant’s goods caused by any person in the exercise of a power of the landlord or landlord’s agent to enter residential premises under this Act or the residential tenancy agreement.

In other words, if a so-called 'prospective puchaser' knocks off your iPod, or camera, or antique netsuki, the landlord (or the agent) may be ordered to compensate you for your loss. A sensible landlord or agent should try to minimise this risk by showing the premises to bona fide prospective purchasers only, without a risky open house.

*

We hope this short series of posts helps you survive the spring sales season. As we said at the beginning, many of the provisions in relation to sales and access are new to the 2010 Act – so landlords and agents may not be completely up to speed on them. If you encounter any problems (at least, any problems that threats of nudity can't fix), please contact your local Tenants Advice and Advocacy Service – and if you want to share your experience of the new provisions, let us at the Tenants' Union know too.

When landlords sell: part 2

So your landlord wants to sell and you've decided to stay put. Good for you – it's your home, after all.

But now, unfortunately, you will have to share it occasionally with your landlord, their agent, and prospective purchasers who want to have a look at the place. Let's consider your position, legally and practically.

As a starting point, the Residential Tenancies Act 2010 says that you and the landlord (or their agent) should negotiate and try to come up with a mutually acceptable schedule of access for the purpose of showing the property. Section 53 inserts the following terms into every tenancy agreement:

(2) A landlord or the agent of the landlord for the sale of the residential premises must make all reasonable efforts to agree with the tenant as to the days and times when the residential premises are to be periodically available for inspection by prospective purchasers.

(3) A tenant must not unreasonably refuse to agree to days and times when the residential premises are to be periodically available for inspection by prospective purchasers.

(4) A tenant is not required to agree to the residential premises being available for inspection by prospective purchasers more than twice a week.

If you and the landlord cannot come to an agreement about access, the Act also provides a fallback position. Section 55(2)(f) provides that in the absence of agreement, the landlord can have access to show the premises no more than twice a week, and they must give you 48 hours' notice each time. Note that if you have no agreed schedule of access and you are given a valid notice of this kind, the landlord or agent can access without your consent, and regardless of whether you will be there at the premises or not. You can also apply to the Tribunal for an order specifying or limiting the days and times when the landlord may access to show the premises.

In our view, access twice a week probably isn't too bad: from our experience, most tenants can tolerate this level of intrusion, and agents can work with it too.

It is a bit of a pity, however, that the Act provides for it as the fallback position, because it may let landlords and agents off the hook in relation to their obligation to negotiate about a schedule of access. Had the Act instead provided for a bare minimum amount of access (say, once a week, or once a fortnight) as the fallback – or indeed, no guaranteed access at all – that really would have gotten landlords and agents negotiating, and possibly bringing rent reductions to the table as well.

Nonetheless, you shouldn't give the game away in your negotiations. When they show premises to prospective purchasers, landlords and agents don't rely just on their legal right of access; they also rely – more than they realise – on the good will and co-operation of tenants. You should make them aware of this.

And if your landlord misses the point when you're negotiating, they may need to be shown how much they rely on your good will when they actually start showing prospective purchasers around. We'd never counsel you to do anything that's a breach of your tenancy agreement, but you might consider, for example, the following entirely legitimate actions:

(1) Taking a photo of every person who attends the premises (for security purposes, of course);




(2) Throwing a party for a dozen or two of your closest friends;




Or (3) Going nude.



Or, indeed, (4) All of the above.

*

Next: 'for sale' signs, auctions and the dreaded 'open house'.

When landlords sell: part 1

It's only just August, but the thoughts of many a speculator-landlord now turn towards spring – the traditional peak season for selling properties. Their tenants, however, might find themselves in for a long winter of discontent.

(Selling agents. Grr.)

In a short series of posts, the Brown Couch will look at what you can do if your landlord decides to sell – particularly with reference to new provisions of the Residential Tenancies Act 2010 that have changed the law in significant ways. [UPDATE: see also part 2 and part 3.]

First: what you're entitled to know about your landlord's plans for selling the place.

Disclosure prior to entering into a tenancy agreement.
Since the new Act commenced on 31 January this year, landlords and agents are required to disclose, before entering into a tenancy agreement with you, if they intend to sell the premises (s 26). 'Intend' in this context means that the landlord has gone as far as preparing a contract for the sale of the premises (so they don't have to disclose if they are only vaguely entertaining the possibility of selling).

So what happens if nothing was disclosed, you signed a tenancy agreement, and now you find out that the landlord is putting the place on the market?

If the landlord or agent has breached the requirement at s 26 – that is, they really had prepared a sale contract, and did not disclose the fact – they can be prosecuted and fined: maximum penalty $2200. But if there was no sale contract before the tenancy started, there's no breach – and as a tenant, you probably won't be in a position to tell if your landlord has done the wrong thing or not. Best to get in touch with NSW Fair Trading and let it make some investigations.

And keep in mind, too, that the disclosure requirement has been effective since 31 January 2011 only. The new Act is not a time machine (that is to say, it is not retrospective legislation), so a landlord's failure to disclose prior to 31 January is not now an offence.

In any event, s 26 does not stop a landlord from putting the premises on the market. Nor does having a fixed term agreement stop a landlord from selling. (You might have thought that a fixed term agreement means that your landlord agrees to be your landlord for the duration of the term – but no.) We'll come back to some special provisions relating to fixed terms in a moment.

Notice that the landlord is selling.
Apart from the pre-agreement disclosure requirement, your landlord is required to give you written notice of their intention to sell (s 53). They have to do this at least 14 days before showing the premises to any prospective purchasers.

In this 14-day period, you'll probably ponder your options: should I stay or go? We'll consider the implications of staying put in a subsequent post; here, we'll look at going.

I want to go (and am in a fixed term agreement).
You can go – you just need to give 14 days' notice on the ground that you've been notified that the landlord intends to sell the premises. This is a new ground of termination, at s 100(1)(c) of the new Act, and, with one exception, it is available in relation to all fixed term agreements (that is to say, it's available regardless of whether the agreement started before or after commencement of the new Act and, as discussed previously by NC, regardless of whether the landlord formed their intention to sell before or after entering into the tenancy agreement). The sole proviso: you cannot use it if you knew the premises were for sale when you entered into the tenancy agreement.

All of which, really, is fair enough: the landlord can still choose to sell, but you don't have to live with all the consequences of their choice. (Mind you, we think it would be fairer if you could get compensated for your moving costs, but as it is, you just get to end your tenancy without further liability to the landlord.)

I want to go (and am in a periodic agreement).
You can go – but you cannot give a 14-day termination notice per s 100(1)(c), because these apply only to fixed agreements. You'll have to give a 21-day termination notice, per s 97. (This is the standard no-grounds termination notice.)

*

Next: so you've decided to stay put – you'll need to deal with access by the landlord and agent (possibly agents, plural) and prospective purchasers (possibly very plural).

Landlord selling? Looks like you're free to go *

The new Residential Tenancies Act 2010 has now been in operation for five months. Regular visitors will recall that this Act marks the first comprehensive rewrite of renting laws in more than 20 years - fixing many flaws in the old 1987 Act, and bringing a few new measures in to reflect the changing of the times.

As with any new piece of legislation, what's written down by Parliament can mean different things to different people. It's only when disputes under a law are taken into the judicial system for arbitration that we can start to properly understand that law's meaning - because the courts generally get the last word on how to interpret a law. In the case of the Residential Tenancies Act, the first port of call for arbitration is the Consumer, Trader & Tenancy Tribunal (CTTT). Although decisions made by the CTTT do not set legal precedents (in fact it is not even bound by its own decisions), for the purposes of understanding how fiddly bits of our new renting laws work, we need look no further than decisions made in the CTTT.

Not all CTTT decisions make it into print, and there's often a lag as most juicy decisions take time to write up and publish. But luckily for us, we've got access to the collected works of the Tenants Advice and Advocacy Services, so we can spot 'em as they happen.

Recently, the CTTT decided a case that helps to clarify part of the new law*. At section 100(1)(c) the Act allows tenants to give notice to end a tenancy during a fixed-term (without having to compensate the landlord) - if the landlord tells the tenant that they're going to start selling the property. But there's a catch... the landlord must not have already told the tenant about the proposed sale before the tenancy began.

And, maybe, there's another catch. Another section of the Act - s26(2)(a) - requires a landlord to tell the tenant about a proposed sale before entering into a residential tenancy agreement (specifically, if a contract for sale has been prepared).

Until now, it has been unclear whether this would mean that tenants could not make use of the s100(1)(c) option, unless the landlord had failed to disclose an already existing intention to sell before entering into the agreement. In other words, if a landlord had no intention to sell at the beginning of the tenancy (and therefore had nothing to tell the tenant), could they later change their minds, and would this prevent the tenant from giving notice under section 100(1)(c)?

Tenants' advocates have formed a view on this - that the two sections of the Act can be read independently of one another - and this has now been successfully argued in the CTTT. In the case of Kutzner v Kamp (NSWCTTT unreported) the Tribunal stated:

The issue for determination is whether in these circumstances the tenants were entitled to give notice of termination under section 100(1)(c) of the Residential Tenancies Act 2010. I am satisfied that it is not a requirement of this provision that the landlord must have an intention to sell the property at the time of entering into the residential tenancy agreement which was not disclosed. It is only necessary for the landlord to have notified the tenant of such an intention during the fixed term without notice prior to commencement of the tenancy. "Disclosure" in the sense used in s100(1)(c) does not mean disclosing what was known to the landlord but rather whether prior notice had in fact been given of the landlord's subsequent decision.

The question arising upon the Tenant being told of the intention to sell, is whether the Tenant had been told at the commencement of the tenancy that this would happen. It is not an answer to say that the landlord did not know then that this would occur.

This is a good outcome for tenants, but we'll be keeping an eye on how landlords respond to it. Will we start to see blanket disclosure under section 26(2)(a)? Presumably, not all prospective tenants will be keen to enter into agreements on properties that are listed for sale, so even if landlords do start to try this on, we don't think it will take off. Most landlords wouldn't want to limit their pool of potential tenants in this way. Even so, if you're sitting down to sign a new lease and the agent says "oh, by the way, we need to tell you the landlord is going to sell, but it's nothing to worry about because they haven't listed it yet", it would be a good idea to press them for more information. If they can't give you any indication of when a listing for sale is likely to proceed, there's a good chance you'll be able to distinguish - when it matters - between what was known to the landlord then, and any subsequent decision to sell.
* This information is not to be construed as legal advice and should not be relied on in the making of any rash decisions about moving house. If in doubt, contact your local TAAS.