New renting laws coming soon

The Residential Tenancies Act 2010 passed through both Houses of NSW Parliament in June 2010, without any amendment to the proposed bill. This new law doesn't apply yet, and we're told by Fair Trading NSW that it won’t come into play until sometime later this year. There's plenty of time to get settled in and have a good look at what's going to change, and this will occupy some of our time on the Brown Couch over the coming months. But for now, here's a quick look at the world of renting in NSW, as we soon will know it...

(Sausages: a little bit like a law. Apparently)

New developments

Tenancy Databases - taming the wild frontier...

Under the current law tenants have little recourse to challenge incorrect or unfair "bad tenant database" listings, but the new law will allow the Tribunal to order their removal. Landlords and real estate agents may be liable to compensate tenants for unlawful listings, and database operators may be fined for not following the rules. The government should be congratulated on this important improvement for tenants in NSW.

Share-housing - the end of uncertainty...?

A person who lives in a shared house, and is not named as a tenant, will need a written sub-tenancy agreement in order to come under the new Act's coverage (unless the head-tenant lives elsewhere). Under the current law, oral agreements between named tenants and their housemates are sometimes recognised as residential tenancy agreements, and sometimes not, depending on the facts in each case and how the Tribunal is constituted. The blanket removal of share house residents from the Act’s protection is alarming. Anyone living in shared accommodation should seek immediate advice to make sure they are prepared for this change.

Share-housing - the end of uncertainty...

The often fluid nature of shared housing arrangements will finally be recognised, with share-house occupants able to add and remove names from a residential tenancy agreement with relative ease. Under the current law, a co-tenant who moves out can never really be sure they wont be held responsible (as in liable) for damage or rent arrears caused by remaining tenants. The new law will also make it easier for tenants to sublet or transfer part of their tenancy. Tenants will still require permission, but landlords wont be able to 'unreasonably' refuse anymore, unless the tenant wants to move out and sub-let the entire tenancy.

Domestic violence - kick abuse to the curb...

When two or more tenants are named on the agreement - something that's not unheard of in domestic relationships - leaving violence can result in substantial debt, because you can't leave your residential tenancy agreement. Changes to co-tenancy laws will benefit those wishing to flee violence, by enabling them to end their liability to the landlord when they leave... Excluding a violent tenant can also be difficult. Under the new law a violent tenant may be excluded from a home, and their tenancy agreement will be automatically terminated, when an AVO is made against them. Remaining occupants may elect to continue or end the tenancy depending on their circumstances, even if they are not named on the original tenancy agreement, and regardless of whether the tenancy is still in its fixed term.

Termination for rent arrears - you pay, you stay, but mind you don't do it again...

Currently, there is nothing in the law to save a tenancy when rent arrears are paid at the last minute - it's entirely at the landlord's discretion. A tenant in arrears, and facing eviction, might choose to put whatever money they have available to other purposes (like moving house). Landlords might take a cynical approach to offers of payment, and decline to negotiate. The new law will see tenancies continue as long as arrears are paid, or payment plans strictly followed, even if the Tribunal has already ordered termination. The catch? If the tenant has "frequently failed to pay” rent, the Tribunal can order termination anyway. To be honest it all looks a little clumsy, and we'll be watching with interest to see how the Tribunal handles this one.

Terminating fixed term agreements – getting a better deal…

Tenants will be able to terminate fixed term agreements, without the need to compensate the landlord, if they are offered a social housing tenancy or a place in an aged care facility. They will also be able to end a fixed term agreement if the landlord puts the place up for sale – now that’s going to make things interesting.

Tinkering with the old bits

Aside from these initiatives, the Residential Tenancies Act 2010 will do little more than meddle with what we already know and love. Much of this is for the better, but it’s not all good news.

Termination without grounds

No grounds notices of termination will still be the bane of tenants’ lives. The required period of notice will be extended from 60 days to 90 days (that’s good) but the Tribunal will lose its discretion to consider the circumstances of the case before terminating a tenancy without grounds (that’s bad). The notion of a “retaliatory eviction” will be strengthened and tenants will be able to make a proactive application to the Tribunal to have a termination notice deemed retaliatory (that’s good) but the Tribunal will lose its discretion to consider the circumstances of the case before terminating a tenancy without grounds (that’s bad). Regardless of all the good things the new law will do for tenants, a landlord’s unfettered right to end a tenancy with no justification has been absolutely affirmed and strengthened by this law. This is disappointing.

Goods left behind

There will be some definite improvements to the law concerning goods left behind at the end of a tenancy, but landlords may be happier about these than their former tenants. Under the current law, landlords’ requirements are so onerous that they are rarely complied with – and they can often get away with it because obtaining compensation for lost goods is next to impossible in the Tribunal. The new law attempts to fix both of these problems by relaxing landlords’ obligations, and allowing tenants to claim compensation when the landlord does the wrong thing. The problem is that the rules have been relaxed so much that doing the wrong thing could be virtually impossible. We’ll be keeping a close eye on this one, too.

Landlord access

There will be several changes to the law insofar as it allows a landlord (or their representative) to come onto the property without the tenant’s permission. The most significant of these changes will be in relation to showing prospective buyers through when the property is for sale. The law will encourage parties to agree to no more than two “periodic inspections” each week – if no agreement is reached then the landlord may access the property without the tenant’s consent, limited to twice a week and requiring 48 hours notice. This is an improvement on the current law, which allows landlords to access the property on a reasonable number of occasions, provided reasonable notice is given.

Water charges

Landlords won’t be able to charge tenants for water usage unless the property is equipped with “water efficiency measures”. It will be left to the regulations to define what this means, but the Minister for Fair Trading has indicated (when introducing the bill to Parliament) that a low-flow shower head and a quick once-over by a plumber to fix any leaking pipes will probably suffice. The real fun to be had here will be in monitoring what, if anything, landlords do to ensure their properties are “water efficient” before passing their water bills on to tenants.

Paying the rent

Landlords and real estate agents will no longer be able to insist on “fee-for-service” rent payment methods, but will have to offer tenants at least one method of payment for which they will incur no unexpected costs. This should stamp out the dubious practice of reducing rent payment methods to a single option, being a direct debiting agent who not only charges the tenant for each transaction, but often requires complete and unsupervised access to their bank account as well.

Alterations

Tenants will be able to make “minor” alterations to rented premises, but only if their landlord gives them permission. Unlike the current law, landlords will not always be able to “unreasonably” refuse – but there will be a long list of things for which unreasonable refusal may still be given. This will include painting and making structural changes, or making changes that will be impossible to undo. Tenants will have to pay for any damage they cause by making alterations to rented premises.

Giving notice

Tenants will no longer have to give their own notice of termination if they want to move out before a termination date given by the landlord. This will save tenants the burden of having to pay double rent for longer than is absolutely necessary, and will allow a great deal more flexibility in timing relocations than the current law provides for.

Rent increases

The Tribunal will no longer distinguish between primary and secondary considerations when looking at excessive rent increases - comparable market rents will be just one of several factors for the Tribunal to look into. The flip side is that affordability is to be expressly ruled out as a consideration.

Break fees

The break fee did not survive the final cut – at least not to the extent that it was initially proposed. In the new law, the break fee will be an optional term, to be agreed to at the beginning of a tenancy. If you opt in, it applies. If not, the current system of breach, loss and mitigation applies. The break fee, or alternatively any compensation calculated according to the landlords actual loss, will only be payable by a tenant who abandons a fixed term tenancy. There will be no option for tenants to give notice during a fixed term, and then pay the break fee as compensation, as was initially proposed.

Residential Tenancies Bill 2010 introduced into Parliament

Last night the Fair Trading Minister, Virginia Judge, introduced into the New South Wales Parliament 'a Bill for an Act with respect to the rights and obligations of landlords and tenants, rents, rental bonds and other matters relating to residential tenancy agreements; and for other purposes'.... better known as the Residential Tenancies Bill 2010.

You can download and read the Bill here, and read the Minister's speech here (scroll down about two-thirds to get to the start of the speech).

(Sausage making (a little like law making))

And here's the Tenants' Union's comment:

The Bill reflects, with some changes, the draft Bill circulated by the Government in late 2009.

The Bill, like the draft Bill, would mostly improve New South Wales’ residential tenancies laws. The improvements it would make are sensible and modest, and are mostly directed at fixing problems and omissions in current laws.

This comment focuses on how the Bill addresses four areas of major concern identified by the TU in the draft Bill, and a fifth area of concern that arises from a new provision in the Bill that was not previously in the draft Bill.

1. Access in the event of sale

The Bill’s provisions in relation to access to premises by prospective purchasers in the event of sale are a significant improvement on those in the draft Bill.

The Bill provides that in the absence of an agreement between a landlord and tenant as to access, the tenant must receive not less than 48 hours notice of access (up from 24 hours in the draft Bill), and that access is limited to not more than twice in a week (the draft Bill provided no limit).

Also, a draconian penalty provision for tenants who refuse access, proposed in the draft Bill, is not in the Bill, which would instead deal with refusal of access as a breach of the tenancy agreement.

The TU supports these changes.

2. Former tenants’ goods left behind after termination

While the Bill’s provisions have been reworded to place greater emphasis on the intention that goods left behind should be disposed of by sale, they are substantially the same as those in the draft Bill. They would allow landlords to dispose of valuable goods belonging to former tenants after only 14 days, and without specific regard to their value. The TU remains of the view that the period should be 21 days, and that goods of value greater than $100 should be disposed of by sale for fair value.

If it is the intention of the Bill that a tenant be entitled to recover the value of goods even if they are not sold for fair value (clause 134(1)(d)), this intention should be made expressly clear. Inserting the words “if a reasonable sale price is not achieved” at the end of the subclause would do this.

A further problem in this regard is the wording of subclause, 134(2). This provides that a person who disposes of goods left behind in accordance with the Division will incur no liability. Adding “aside from a liability provided by this Division” would ensure that the intention will be given effect.

The Bill, like the draft Bill, also fails to provide any penalties for landlords who breach their obligations in relation to former tenants’ goods. Clauses 127 and 132 should be backed by penalties of 20 penalty units, and clause 131 by a penalty of 50 penalty units.

3. Tenancy databases

The Bill closes loopholes in the draft Bill’s provisions relating to tenancy databases. In particular, the Bill would prohibit tenancy database operators from listing persons except at the request of landlords and agents (the draft Bill would have allowed listings ostensibly by database operators themselves) and require the removal of out of date information (the draft Bill would have merely required landlords and agents to advise database operators as to out of date information, and operators would not have been required to do anything in response).

The TU supports these changes.

There is a problem, however, in the absence from the Bill of penalties for breach of the obligations at clauses 212 and 214. Each of these provisions should be backed by penalties of 20 penalty units.

4. Termination without grounds and the discretion of the Consumer, Trader and Tenancy Tribunal

The Bill, like the draft Bill, would remove the discretion of the Tribunal under the current law as to whether to order termination in proceedings by landlords of termination without grounds. The TU remains opposed to this change: it would turn termination notices without grounds into trump cards and encourage their use, where instead the law should discourage or prohibit their use.

Unlike the draft Bill, the Bill does not make any reference to the Tribunal’s discretion in relation to the date for possession of premises to be returned to the landlord after it makes termination orders without grounds. This is a serious defect: it should be clear in the legislation that the Tribunal has such a discretion, and that it is to be exercised considering the circumstances of the case.

5. Termination on the ground of rent arrears

The Bill’s provisions relating to termination on the ground of rent arrears reflect those of the draft Bill, which the TU generally supports, but the Bill makes one significant addition to those provisions. This addition – cl 89(5) – is misconceived and introduces uncertainty into an otherwise sensible regime.

Clause 89(5) provides that ‘the Tribunal may, on application by a landlord, make a termination order despite subsection (2) or (3) if it is satisfied that the tenant has frequently failed to pay rent owing for the residential premises on or before the day set out in the residential tenancy agreement.’ This presents the following problems:

• Clause 89(5) refers to an application by a landlord; it is unclear whether this is a special application of which the tenant should be specifically notified, or whether the provisions of cl 89(5) are available for use whenever a landlord makes an application for termination on the ground of rent arrears. If the latter, it opens the possibility that a tenant may make a payment of arrears based on the assurance given by cl 88(2), then subsequently find that the landlord has gone ahead with the termination application.
• Clause 89(5) refers to the Tribunal making an order ‘despite subsection… (3)’. Subsection (3) refers to events subsequent to the making of a termination order, so ‘despite’ does not make sense. The effect of the connection between these two provisions subsections is uncertain.
• The adverb ‘frequently’ is open to widely varying interpretation and may be the basis of disappointed expectations. We anticipate that some landlords will expect that any plurality of instances of late payment will constitute ‘frequent’ late payment and hence that the principles otherwise enshrined in cl 89 will not apply to their proceedings.

The uncertainty of the new clause is such that it may be ineffective, or it may undermine the rest of the regime.

The TU understands that the intention of the addition of cl 89(5) is to prevent dishonest tenants from deliberately and repeatedly paying rent in arrears at the last hour before their eviction. We submit that this intention will be given effect by the Tribunal when it considers the circumstances prescribed at cl 87(5) – particularly (b) ‘any previous breaches’ – in deciding to terminate a tenancy and setting the date for return of possession. We further note that landlords who experience hardship because of deliberate and repeated arrears could apply for termination under the hardship provisions at cl 93.

Alternatively, the Bill could be amended to provide, in addition to the factors at cl 87(5), that the Tribunal must consider whether the tenant’s failure to pay rent until just prior to enforcement of termination and possession orders is deliberate and repeated.