Getting in to hot water: energy charges for common hot water systems

This post authored by Grant Arbuthnot, Principal Solicitor at the Tenants' Union.There has recently been some developments in the NSW Civil and Administrative Tribunal for renters with common hot water systems. The Tribunal has found, and the TU agrees, that tenants are not liable for paying the energy bill required to heat hot water systems which are shared by multiple homes.

What is a common hot water system?

Some blocks of flats have common hot water systems.  This is where one water heating plant provides hot water to all the flats – individual flats do not have their own hot water systems. This was probably to keep the costs of building the flats lower.

How do they work?

Most common hot water systems are gas fired.  A large central hot water heater is connected to each flat.   Some have a circulation pump to reduce waste by cold water coming from the tap first.  The good systems are well insulated and well maintained. 

In a flat with its own hot water system, the tenant pays the gas or electricity bill used to heat the water. However, this is through an account with their own separate meter.

How were bills being calculated in common hot water systems?

Gas and water entering the plant are metered to allow calculation of the energy per water volume ratio (also known as a common or conversion factor) for the system, over a billing period.  This ratio is then applied to the water volume measured by each flat’s hot water flow meter.  This produces a figure for gas energy for each flat that can be multiplied by the tariff charged by the energy provider on the gas used.

What can go wrong?

We find that with both common and individual hot water systems, some are not well insulated or maintained.  The bad ones leak heat and water and they deliver much cold water, at the tap, before it gets hot.  Gas combustion may also be inefficient by neglect.

In both types of hot water system, because the tenant pays the bill, there is no incentive for the landlord to ensure the efficiency of the system unless the inefficiency can be seen as a repair issue. When tenants complain about common hot water systems, inefficiency is always mentioned. That is, it is very expensive to heat the water and users receive much higher bills than they would expect.

See the end of the article for an explanation of how we might calculate efficiency, and what we should expect in terms of the cost to heat water. It is not unreasonable for tenants to expect an efficiency of 70-80%. Two bills we have obtained from tenants were almost half as efficient and there are common hot water systems that are even more inefficient again.

Good news!

However, there is good news for tenants with common hot water systems. The Residential Tenancies Act 2010 says, at section 38, that the tenant shall pay for gas supplied to the tenant at the premises, if the premises are separately metered.  Further, the Act says, at section 40, that the landlord shall pay for gas supplied to the tenant at the premises if the premises are not separately metered.

With a common hot water system the gas is not supplied to the tenant at the premises or separately metered.  Therefore, the landlord shall pay the gas bills.

This has been backed up by two recent tenancy cases (though neither have been published):

In one, the landlord agreed that the landlord should pay the gas bills before it went to a decision.

In the other, NCAT decided that the landlord should be paying the bills going forward and ordered repayment of some of the tenants’ previous gas payments.

So, if your apartment has a common hot water system, where more than one unit is sharing the hot water tank, then you are not obliged to pay for the gas or other energy used to heat the water. If you think you might have a system like this, get advice from your local Tenants’ Advice and Advocacy Service.

Calculating efficiency

The bills people receive for common hot water systems are confusing because the units of volume are not litres and there are figures called Units, Multiplier, Conversion factor, Heating value, Pressure factor and Base usage.  Bills do state daily use of energy and compare it to prior bills.  This is helpful, but it does not tell you how efficient the plant is.  An efficiency figure would tell us what proportion of the heat of the gas used is actually getting into the water.

It is possible to estimate the efficiency of your common hot water system, by making two assumptions:

• it takes 4.186 kJ to heat a litre of water one degree Celsius &
• the water is being heated 50⁰ (from 15 to 65⁰C)

Note that the second assumption may vary between systems and weather conditions.

Based on these assumptions, 209.3 kJ per litre (4.186 x 50) would be 100% efficient.  This can also be expressed as 0.2093 MJ/l.

The two bills we obtained from tenants have effective energy per water volume ratios of 0.494311 and 0.49123.  The bills use MJ as the energy unit.  Assuming the order of magnitude for MJ/l as 0.49… the efficiencies for the bills are:

-        44.33% (0.4433 = 0.2093 /0.494311) &

-        42.61% (0.4261 = 0.2093 /0.49123) respectively.

EWON (Energy & Water Ombudsman NSW) investigated the gas bills of one of the tenants and reported that the common factor [or conversion factor] for an efficient common hot water system ranges from . . . 0.3 to 0.7 . . .

Doing the same calculation (divide into 0.2093) for that range we get:

Factor	% efficiency
0.3	69.77
0.4	52.33
0.5	41.86
0.6	34.88
0.7	29.90

What could we compare these figures with?

An American National Standards and Technology study from the 1990s demonstrates that the greatest difference to thermal efficiency of electric domestic hot water systems is made by insulation.  The uninsulated units averaged 40.6% (which is similar to the cases we described above) and the insulated units averaged 88.2%.  American advertising claims 80% thermal efficiency for a conventional domestic natural gas hot water system.  Elgas (Australia) correlates 4 to 7 star ratings with 73 to 94% for LPG domestic hot water systems.

Note that all the above figures are for the water heating plant only.  They take no account of loss of heat or water between the plant and the flats.  Calculating efficiency figures at the tap would need temperature measurements at the tap.  That would provide information on the efficiency of the whole system, plant to tap.

UPDATE

The second NCAT decision referred to above was briefly subject to appeal - but the appeal by the landlord has not continued.

New strata rules and you

Starting 30 November 2016, there will be some significant changes to the laws affecting tenants living in strata blocks. That's actually a lot of us - more than half of all people living in strata in NSW are tenants.
You can read more about the changes here, but what are the big changes that will be of particular interest to tenants? As is often the case with legislative reform, it's a mixed bag. Here are the ups and downs of four big changes which will affect tenants.

Pets

Considering the futility of life without strong tenancy rights

The model by laws will now be much more pet friendly. The default position will be that pets are allowed so long as the pet owner is responsible for the animal.
This is only the default for new by-laws. Existing strata schemes will need to vote to adopt the change, and even new strata schemes can choose not to use it - and maintain an anti-pet stance.
Of course no matter what the strata scheme decides, currently your landlord still has the ability to put a no-pets clause in a residential tenancy agreement. There is still a long way to go before tenants might make grown-up decisions about pets for themselves.

Washing

Hang me out to dry, you wrung me out, too too too many times

Good news - hanging your washing up on your balcony will no longer be a breach of the by laws, so long as it's not hanging over the balcony railings. Again, this only applies to strata schemes which adopt the new by laws.

Over occupancy

We won't take up too much room!

One of the interesting changes is the ability for strata schemes to limit the number of people who can live in the premises to no more than two adults per bedroom.
By extension, tenants will have clearer protections against strata schemes arbitrarily deciding to cancel key cards with the introduction of this by law removing one of the dodgy reasons some strata schemes have used to lock tenants out of their homes.
It's important to remember that vulnerable tenants who are being forced into overcrowded accommodation may not actually have much of a choice in these matters. That's not to say strata should allow overcrowding, but it is important that it is the exploitative landlord who is penalised by their breach rather than their vulnerable sub tenants. It is not clear in the new law that this will always be the case.

Tenant representation

Whiskers thought he was fitting in well
at his first strata committee meeting

There are two aspects of the new legislation that let tenants have something of a say in their strata community. Any tenant will be entitled to attend any meeting of the owners corporation (except during discussions of financial matters), though they won't be allowed to speak or vote.
In strata schemes where more than 50% of the lots have tenants, the tenants will be able to elect a tenant to represent who can speak, but not vote, on their behalf. How effective this will be at ensuring the majority of the strata community is heard remains to be seen.

Can I hang electoral material in my rented property?

It's election time in Australia, and political signs on front lawns and windows are cropping up across the country. We've been contacted by a number of tenants in recent days asking about their rights to have a sign up in their property - some have been approached by landlords asking them to take the advertising down again.

Our legal eagles got interested in the question so here's the skinny on your rights to hang political signage.

The TU does not endorse political parties or candidates. The TU does endorse Pedro.

The High Court

First things first, Australians do have a right to political expression. In 1992 in Nationwide News Pty Ltd v Wills and Australian Capital Television Pty Ltd v Commonwealth (ACTV) 177 CLR 1 the High Court made a decision confirming that right despite there not being a specific constitutional protection as in other countries like the USA. Read more here.

Council Requirements

Councils have rules around signage on properties and on the street. While it might be unlikely a little sign in your front yard or window needs approval, it could be worth checking with your local council about the size and type of signage you propose to hang, particularly if it's on the bigger end.

Strata by-laws

Most strata blocks have by-laws that restrict you from changing the external appearance of the lot without first gaining consent of the owner's corporation. Arguably election material may fall afoul of this by-law - if your strata brings it up with you, check out our factsheet on living in strata and get advice!

Tenancy Rights

When you rent premises, you become entitled to the ‘reasonable peace, comfort and privacy’ in your use of the premises. The landlord/agent must not interfere with, or cause or permit anyone to interfere with, your peace, comfort and privacy.

In relation to electoral signage, we consider it a breach of a tenant's reasonable peace, comfort and privacy for a landlord to demand the removal of political signage so long as the signs are legal, and not causing damage to the property.

However, all these rights can't stop New South Wales landlords from giving you a "No Grounds" termination notice, and it's unlikely that the retaliatory provisions will help. This alone may prevent many tenants from participating fully in the election process. One more reason to support stronger tenancy rights, for democracy!

If you are getting hassled by your landlord about political signage, get advice from your local Tenants' Advice and Advocacy Service.

Three easy fixes for better strata living

The new strata laws are in parliament, and the debate most likely starts today. The laws comprise of two separate bills, the Strata Schemes Development Bill, and the Strata Schemes Management Bill. There has been a lot of discussion of the issues around the Strata Schemes Development Bill, but today we'd like to look again at the Strata Schemes Management Bill which governs the day-to-day ways in which strata living is managed.

At the moment the bill misses an opportunity to reflect their 21st century context, for more than half of the people who live in strata in NSW. We've previously shared our detailed thoughts on the bill, but there are three easy ways to make sure strata living is fair and balanced for all residents, including tenants.

1. Tenant representation

Tenants who live in schemes where 50% or more lots have tenants living in them will be able to elect a tenant representative to sit on strata committee meetings and participate in committee meeting discussions, but will have no vote, no capacity to move motions, and can be excluded for a number of decision-making processes.
All tenants of all schemes will be informed that a strata committee meeting is taking place and will be able to attend, but not participate in any way.

We think all schemes should allow tenant representatives- arguably, it is the schemes where there are fewer tenants that most need to be reminded of their existence and concerns. Tenant representatives could also be empowered to move motions and vote on non-financial matters, such as new by-laws. There are no schemes where a tenant representative could vote their motion through against the will of the majority of owners, so this change would go a long way to making the community a better place to live, with no harm to owner-occupiers or investors.

The easy fix: Remove s33(1) to allow all schemes to have a tenant representative (if the tenants choose)
The bonus: We also recommend an amendment to allow a tenant representative to move a motion on any matter for which they are not excluded.

2. Unfair by-laws

For tenants, by-laws are perhaps the most significant aspect of a strata management scheme. In the absence of provisions allowing direct participation in a scheme – such as those discussed above – a tenant’s interaction with a strata scheme will usually be in relation to its by-laws. If the by-laws are unlawful, harsh, unconscionable or oppressive, they can be challenged at Tribunal and possibly overturned... but not if you're a tenant being subjected to those by-laws.

Tenants are excluded from challenging by-laws, and the Tribunal not permitted to overturn them, even if the tenant could demonstrate they were unlawful. This could then be used by a strata committee to issue fines and again, the Tribunal may not be able to refuse, simply because they are being applied against a tenant and not an owner. This is clearly an unfair situation.

The easy fix: Allow tenants to challenge unfair by-laws under sections 148-150.
The bonus: Allowing tenant representatives to move motions and vote on non-financial matters will mean better by-laws.

3. Overcrowding

We accept the need to address overcrowding in strata schemes for a range of reasons, but think it's important to remember that overcrowding is very often a symptom of broader dysfunction across the housing system – most notably the lack of affordable housing in the private rental market and ever-increasing restrictions on eligibility for social housing assistance.
The main method of pursuing overcrowding will be through the issuing of fines by the strata committee- $5500 for the first offence after a warning. However, this fine could potentially be directed at any person who is residing in the place, even if they are the exploited sub-tenant. We think that whether it is the owner of the property or the head-tenant, the person profiting from the overcrowding should be held responsible for it, not the people living in cramped and sometimes dangerous situations.

The easy fix: Amend s 147 so that penalties can be applied to 'a person with an identifiable interest in the lot' (whether they are an owner or a tenant), and not simply 'a person.'
The bonus: Introduce a section preventing strata blocks 'locking out' residents by cancelling swipe cards without good reason.

For more on Tenants Union policy platforms including law reform and previous submissions, visit our website!

Flat out on the Brown Couch - Part 2

Last week we brought you Part 1 of ‘Flat out,’ our breathless overview of the NSW Government’s proposed strata reforms. That was all about box office – the increasingly contested redevelopment proposals, and plans for tenant representation in strata governance. Like a kind of ersatz Jurassic Park: ‘50 Million Years in the Waiting’.

But not all that is golden glitters, and there is plenty more besides to interest tenants - in the Strata Schemes Management Bill particularly.

Look out for Flat Out 2 on PC wherever good tenancy games are sold

I’m a fixer; I fixed it

For one, the management bill should go some way to addressing a common impasse between tenants and landlords. Too often, tenants are frustrated in their efforts to obtain basic repairs to common property – including any structural wall - with the landlord refusing to take action because the owners corporation won’t sanction the works. This intransigence often persists even in the face of Tribunal orders requiring the landlord to do the work. Of course, such circumstances are far from ideal; Tenants are denied a basic right under the Residential Tenancies Act 2010, and landlords are forced to choose between breach of their residential tenancy agreement and defiance of building governance.

Under the new regime, owners will be able to undertake ‘minor cosmetic works’ to common property connected to their lot without reference to the owners corporation. Such works include replacing carpets or curtains, painting, and filling minor cracks. And an owner will only need a standard resolution – that is, a bare majority of votes – for ‘minor renovations’ such as replacing wiring, kitchen works, and addressing faulty light fittings.

Whilst these provisions are clearly no panacea, and do not touch on major works such as structural repairs, we suspect they will come in handy for a good number of tenants with hamstrung landlords looking to do the right thing.

Everybody in the house

The Management Bill also takes aim at another common ill of the strata tenancy – overcrowding. Any Sydney resident will have heard stories of students and others crammed into every conceivable nook and cranny of inner city apartments, far beyond any sensible capacity. Famously, Domain brought us the story of the man renting a Newtown balcony for $215 per week: breezy. The serious health and safety risks of such arrangements are self-evident.

Mike D, Ad Rock, and MCA enjoy a night in at their city apartment

The proposed new laws will allow strata committees to enact by-laws limiting the number of occupants per bedroom to two or more. An owners corporation will be able to pursue contraventions of these laws through the Tribunal, to the tune of up to $5,500 for an initial breach, and up to $11,000 for further breaches within 12 months.

It is appropriate that committees are empowered to make and enforce rules forbidding the unsafe renting arrangements created by overcrowding. But we are concerned that, as it stands, an owners corporation can chase enforcement against “any person” in breach of the by-laws. This leaves it open for the many sub-tenants that end up in overcrowded apartments as victims of unscrupulous head tenants, the dearth of affordable rentals, or the difficulty of obtaining social housing, to be held liable for significant penalties.

This is, we say, obviously unjust. These provisions should be enforceable against responsible head tenants and lot owners, certainly, but not sub-tenants.  And we would gently note that not even perfect strata legislation, handed down from a divine legislator, could comprehensively address the serious issues that drive renters into overcrowded apartments in the first place. Clearly a broader response is needed.

On the subject of enforcement, the Bill also includes general provisions allowing owners to challenge by-laws in the Tribunal. NCAT may invalidate by-laws it finds to be harsh, unconscionable, or oppressive.

Unfortunately, these otherwise welcome measures are a closed shop. Tenants cannot make the relevant Tribunal application, so anybody affected by an unjust by-law will need their landlord to pursue it on their behalf. And presumably ask nicely for the favour, Sir. It’s not hard to see a great number refusing to go down the time-consuming Tribunal road in a fight against their own strata company.

We think this option should instead be open to any occupant affected by harsh, unconscionable, and oppressive by-laws. More so because lot owners who refuse to take this action may also be in breach of their tenancy law obligation not to permit interference with tenants’ comfort. So opening up these provisions to all affected would provide the added bonus of preventing disputes between owners and renters.

Return to redevelopment

Finally, we return briefly to the battleground that is the Strata Schemes Development Bill. The new rules have overlooked an important consideration – what happens to tenancy agreements when the owners corporation affirms a decision to redevelop. As it stands, seldom used ‘fall back’ provisions in the Residential Tenancies Act, concerning a party gaining superior title to a property over the landlord, will apply. These would allow a developer-purchaser to terminate all tenancy agreements without notice, and seek Tribunal orders for vacant possession immediately.

This must be addressed, as it will place tenants who have broken no law and breached no contractual obligation at the serious risk of short-term eviction. The easiest way around this problem is a simple amendment to the Residential Tenancies Act - extending provisions that protect tenants for 30 days when a mortgagee comes into possession to tenants affected by strata redevelopment.

That’s it for our Brown Couch series on the strata reforms package. But feel free to put any further comments or questions in the box below. Alternatively, we encourage you to check out the Tenants’ Union’s full, formal submission here.

Flat out on the Brown Couch - part 1

You may have noted, dear reader, that the Brown Couch has remained empty, at least relatively speaking, in recent times – its grooves gently smoothing and that coffee stain resolutely untreated. There’s a bit of dog hair too.

Rest assured that we love the old sofa as much as ever. We have just been busy finalising submissions relating to three important Bills in the sights of NSW Parliament - the ResidentialTenancies and Housing Legislation (Public Housing – Antisocial Behaviour) Bill, Strata Schemes Management Bill, and Strata Schemes Development Bill.

Our poor neglected couch. Who can lend us that book of kooky stain removal tips?

The bulk of media contributions – quality and otherwise – to discussion of these reforms have concerned the social housing Bill. This is a very worthy topic, though of course the old rorters crackdown line remains as attractive as ever.

But we thought we might take you through how the proposed reforms to strata law will affect renters, too.

Make no mistake, this is a big deal; tenants occupy half of all strata lots in NSW, and this is the first sweeping look at the relevant legislation in half a century. It probably comes as no surprise, then, that we have no one stance on the reform package. There’s certainly much to like – even if it’s mostly a case of heading in the right direction (remember that?) as opposed to a final, lasting achievement of tenant equality. Elsewhere, we’re ambivalent. And other new provisions, particularly those concerning the processes around sale to developers, are cause for real concern and urgent attention.

So today’s entry will be the first of a two-part series, focusing on the most striking of the planned new laws from a tenant’s perspective.

The knockdown job

The redevelopment Bill contains probably the most dramatic change of the package. This reform is also the strong favourite to impact upon renters and other vulnerable people most if passed in its current form.

Under current law, approval for redevelopment of a strata scheme requires the votes of 100% of owners. Even the poorest member  - not just your figurative USAs and Chinas – holds a veto power on any decision to demolish their home.

Can we level it? Yes we can!

To encourage 'renewal', the new law will require only 75% of votes to achieve the same. The implications for long-term residents in hub or hipster neighbourhoods are obvious. Any redevelopment conceived in even the slightest rationality will result in much more valuable lots. For many residents who bought into a scheme decades prior – and did so under the assumption they had attained security - this will mean an inability to buy back into the area in which they have formed a lifetime of connections. Where they will go is anyone’s guess, though we suggest further housing insecurity will often come with the displacement.

For tenants and other renters, the 'renewal' process should mean even less affordable housing in desirable areas. And tenants will not be compensated for the financial and other costs of having to move when the decision is taken to end a scheme including their lot.

It follows, of course, that we strongly support the retention of current provisions requiring 100% of votes for redevelopment of strata schemes.

Peeping through committee cracks

On the strata management side of the package, the headline grabber is the introduction of ‘tenant representatives’. In buildings where tenants occupy more than half the lots, renters will be able to elect a representative to the strata committee.

Unfortunately, this position will not be one of substantive power, as the tenant representative will not be able to vote, hold office, put a motion to the committee, or even be counted towards a quorum. They can also be excluded from the discussion of any financial matter.

Still, a committee’s tenant representative could well provide valuable insight into the impact of governance decisions on tenants and other renters, as well as an ‘on the ground’ perspective a great many owners lack. We say there is no reason why committees where more than half of lots are owner-occupied should be denied this insight - particularly given it would not disturb the balance of committee powers established in the Bill. We also think a tenant representative should have the capacity to move a motion on any matter for which they are present, as a more direct and meaningful expression of tenant sentiment on issues before the committee.

On a similar note, tenants may also have a right observe owners corporation general meetings under a reformed strata law. This will increase transparency, and provide tenants with first-hand notice of any discussions affecting them. We’d like to see the drafting of these provisions tightened to give effect to their apparent intent.

These are, perhaps, the big-ticket items, but there’s much more in the reform package that warrants a closer look. Stay tuned for part 2 next week.

Read the Tenants’ Union’s full submission on proposed reforms to strata law here.

For more on the Strata Schemes Redevelopment Bill specifically, we also recommend the Shelter NSW submission.