Residential Tenancies Act 2010 commences today

It's Monday 31 January 2011, and New South Wales finally has new renting laws in place and operating, with the commencement of the Residential Tenancies Act 2010 (NSW).

(Brave New World? Not quite.)

On a scale of one to 10, I give the new Act a six – and that's after taking a mark off for lateness (after all, the review of the State's renting laws started back in 2005, and that's after a non-conclusive review that began in 1998). The new Act is welcome, but more needs to be done to make renting a fairer and more decent way of living.

As we discussed here before, most of the changes made by the Act are improvements. But some old problems remain, and there are new issues emerging that aren't addressed by the Act.

The insecurity of renting remains a major problem – in particular, the new Act does not stop landlords from giving termination notices without grounds. Requiring reasonable grounds for termination is not a big ask. In our society today, if you are to lose your job, you'd expect there to be a good reason; similarly, if you are to lose your tenancy and your home, there should be a good reason for that too.

Another old problem: that of the marginal renters – the boarding house residents, the lodgers – who weren't covered by the old Act, and who aren't covered by this Act. These renters still have nineteenth century-style common law lodging licences and no effective protections against summary rent increases and evictions, and no effective assurance of decent service provision by their landlords. We need legislation that provides for some basic occupancy principles for renters who are not covered by the Residential Tenancies Act.

Beyond the new Act, safety concerns in rental housing should received further attention from government. We're seeing, literally, an epidemic of children suffering horrific injuries from falling from windows. Window safety devices, as well as electrical safety switches, should be required by law in all rental properties.

There's more – but for this Act, check the Tenants' Union's factsheets for more information on your rights and obligations, and check here at the Brown Couch for more analysis of the new provisions. We'll start tomorrow with the some of the new share housing provisions, as we begin... Share Housing Month!

Dispute Resolution 101

Many tenants of Housing NSW will be familiar with the expression "you owe Housing NSW the following amounts...", having received a written demand for payment of a mysterious 'miscellaneous' charge some time in the last couple of months. "You are now in breach of your Tenancy Agreement, which says you must pay your tenancy charges when they are due ..."

Our spies in the Hunter region have just spotted a good one... A tenant - let's call him Bill - received a letter last week asking him to make good an alleged debt of $2.50. Yes, that's right - two whole dollars, and fifty cents, for an unspecified 'miscellaneous' charge.

Let's leave aside the fact that Bill has an intellectual disability, and started to panic before some friends helped him to figure out what the letter was all about... and let's pretend we don't know that Bill always pays a little extra with his rent to avoid running into arrears...

Of course, both of these things should seem important to Housing NSW, who'd do well to avoid upsetting tenants with frivolous and unsubstantiated letters of demand. But no... what's particularly concerning about this kind of letter is that it is the thin end of the wedge for tenants in dispute with Housing NSW.

The letter continues: "We ask that you start making regular payments again and contact your Client Service Officer ... to discuss a repayment plan to reduce the amount you owe. If you do not take the actions above, we may start the process of terminating your tenancy by issuing a Notice of Termination."

This all seems a bit much for a measly $2.50, and it begs the question - what if Bill doesn't pay? A notice of termination... Really? And then what? An application to the Consumer, Trader & Tenancy Tribunal if Bill doesn't leave?

The Minister for Housing is always quick with assurances that HNSW only ever applies to the Tribunal as a last resort. But when we hear of threats - however general - 'to start the process of termination' over a $2.50 debt, we have to wonder.

Adding grist to this mill, it appears that HNSW doesn't keep track of its Tribunal applications. The Housing Minister recently implied that HNSW uses CTTT data for information about its use of the Tribunal; while the CTTT announced that it routinely keeps data on all applications to the Tribunal, but not any record of their outcomes.

So - we can look up the number of times HNSW has applied to the Tribunal to end a tenancy over a debt in the last three months (over 1,000 times), but we can't check up on their actual strike rate. We don't know how many of these applications are vigorously pursued; we can't tell how many are downgraded from termination to 'specific performance' at the time of hearing; and we don't know how many are dismissed.

A spate of automatically generated letters like the one Bill received last week shows just how blasé HNSW can be towards threatening eviction when trying to recover debts. Anecdotally, we know that HNSW makes many applications to the Tribunal to end tenancies, when really all they want is for their tenant to fix up the rent, or pay the water bill, or start chipping away at whatever 'miscellaneous' charge they're chasing at the time. When they get to the Tribunal, HNSW often settles for an agreement that the debt will be paid in installments.

Despite their assurances, it is hard to believe that HNSW sees the Tribunal as an option of last resort. Indeed, it seems to play a leading role in a rigid and cynical approach to debt recovery and dispute resolution... it starts with a threatening letter, then makes its way with remarkable speed and precision towards the Colosseum.

An artists impression of the CTTT

But the hard way does not always yield as sweet a reward as some polite and courteous negotiation.

As for Bill - he was smart... he called his local Tenants' Advice & Advocacy Service for advice about his alleged debt. Fingers crossed that he can keep this one out of the Tribunal.

Surviving, renting

Australia Day is Survival Day for Indigenous Australians, and we at the Brown Couch pay our respects to our Koori readers, their families and communities.

(Harold Thomas's Aboriginal flag.)

Australia's original owner-occupiers are now mostly renters. At the last Census, about 60 per cent of Indigenous households (that is, households that included at least one Indigenous person) in New South Wales were renters. That's twice the rate of renting (30 per cent) for all New South Wales households.

A better deal for renters is a better deal for Aboriginal people.

Holiday law 2: public housing

Speaking of holiday law, a little while ago a Brown Couch reader asked:

I am a public housing tenant. I was told by a tenant advocate that I can only travel overseas twice in 18 months. Is this true? It is not on my lease. I don't see any reference in my rental rebate form. How do I find out about rules like this?

The 'rule' to which this reader refers is Housing NSW's 'Absence from Dwelling Policy'. It is apt to confuse, but it is also a good point from which to get a clearer understanding of the workings of law and policy. Let's take a closer look.

(Tourism Australia should never have taken its campaign slogan from Housing NSW's Absence from Dwelling Policy.)

The first thing to keep in mind is that in referring to the 'Absence from Dwelling Policy', we're calling it by the old name it had when Housing NSW had separate 'operational policies' for different aspects of its tenancy management practices. Unfortunately, last year Housing NSW reorganised its operational policies, and the effect is as if they chucked the lot into a blender. We now find bits of the old 'Absence from Dwellings Policy' in the 'During a Tenancy Policy' and the omnibus 'Tenancy Policy Supplement'.

Here's the relevant bits of the former:

Being away from the property

Public housing is a scarce resource and a valuable asset for those in need. Housing NSW maximises the benefit gained from this resource by making sure that properties are used as homes and not left vacant for long periods.

How long can a tenant be away from their property?

When Housing NSW provides a property for a client, they are expected to live in it. Tenants must obtain approval from Housing NSW to be away from their home for more than six weeks, even if other people will be staying in the home while the tenant is away. When a tenant applies to be away from their property, Housing NSW will ask the tenant for the date that they expect to return. For more information, go to Approving an absence from the dwelling.

Housing NSW may approve acceptable absences for up to six months. For more information, go to Acceptable absences. Housing NSW will not approve absences of more than 12 months in total over a five year period.

There are some additional requirements for tenants who are incarcerated or who are going into a nursing home. For more information, go to Tenants going to prison and Tenants going into a nursing home.

The tenant may apply for an approval to extend the absence beyond six months where there are unusual circumstances, for example medical conditions which require regular treatment at a location that cannot be accessed from the tenant’s home.

If a tenant is away without approval, or has stayed away for longer than the time Housing NSW approved, Housing NSW may decide to:

• Charge market rent from the time the tenant’s absence is discovered, or from the date the approval expired
• Terminate the tenancy.

After that there's a bit on caring for a property while one's away. And from the Tenancy Policy Supplement:

1. Approving an absence from the property

Housing NSW will approve an absence from the property if it is satisfied that:

• The tenant has made arrangements to pay their tenancy charges, such as rent and water usage, while they are away. In some cases, the minimum rent may apply. For more information see the Charging Rent Policy. In some cases, water usage charges may be adjusted. For more information see the Water Usage Charges Policy.
• The property will be adequately cared for while the tenant is away.
• The tenant has an acceptable reason for going away.

2. Acceptable absences

Acceptable reasons for absences up to six months include:

• Caring for sick/frail family members.
• Hospitalisation, institutional care, nursing home care or rehabilitation.
• Escaping domestic violence, harassment or threats of violence.
• Assisting with immigration matters in the country of origin.
• Holidays.
• Employment, education or training.

Housing NSW will not approve repeat absences relating to holidays, assisting with immigration matters in the country of origin or employment/training.

So, to sum up, Housing NSW expects you to seek its approval for absences longer than six weeks, and says it generally will not approve absences longer than six months, or where the sum of all absences is greater than 12 months in a five year period, or 'repeat absences relating to holidays.' And if your absence is not approved, Housing says it can cancel your rent rebate, or terminate your tenancy.

Bit bossy, isn't it – 'so where the bloody hell are you' indeed! But what is the nature of this rule?

As a 'policy', it's not a law, like an Act of Parliament, so it doesn't empower Housing NSW to do things it cannot already do under law. And it's not a contract, like a residential tenancy agreement or lease, so it doesn't create legal rights and obligations between Housing NSW and yourself that the courts will enforce.

Instead, a policy sets out how you can expect Housing NSW will use its powers under law and enforce its rights and obligation under contract, in its dealings with you. A policy can change without notice, and a court will not enforce any expectation it may give you – but a policy is not without legal consequences. A government agency that proposes to affect a person's rights, interests or legitimate expectations – and a policy can be the basis of a legitimate expectation – is generally required to afford procedural fairness (that is, let you know what it is proposing to do, and give you a chance to put your side of the story before it goes and does it) and, if it doesn't afford procedural fairness, you can seek review of the agency's decision, and the agency can be made to go back and make the decision fairly.

As for what Housing NSW may do, the policy states that it may decide to may 'charge market rent' or 'terminate the tenancy'. Let's consider its actual powers under law to do either of these things.

In relation to rents, Housing NSW's tenancy agreements already provide that the tenant is to pay market rent - what Housing NSW is really talking about here is canceling the rental rebate it applies to most public housing tenants' rents. Housing NSW's legal powers in relation to the cancellation of rental rebates come from the Housing Act 2001 (NSW), which provides, at s 57(1) that Housing NSW 'may, after conducting an investigation under section 58, vary or cancel any rental rebate granted under this Part.' Note the qualification 'after conducting an investigation under s 58'. Turning to s 58, we find that it provides:

(1) [Housing NSW] may make an investigation to determine the weekly income of:

(a) a person who is an applicant for, or a recipient of, a rental rebate under this Part, and

(b) any other resident of the house in which that person resides.

The investigation, then, is directed to a tenant's household income. There is a real question whether the investigation and, by extension, any consequent cancellation, can go to matters not related to income, such as whether a tenant is repeatedly off on holidays or absent for other purposes.

As for terminating the tenancy, Housing NSW's powers are those granted to landlords under their residential tenancy agreements and the Residential Tenancies Act. Both give landlords considerable power, but not without qualification. Amongst the numerous contractual terms prescribed by the Residential Tenancies Act (this goes for both the 1987 Act and the 2010 Act), none require the tenant to seek approval for absences for holidays. The TU knows that Housing NSW has included an additional term in its agreements to the effect that the tenant is required to 'personally occupy the premises at all times', and we note that in several cases the Tribunal has given termination orders on the ground of breach of this term – but none of those cases are about holidays, and there's a good argument that a person who is away on holidays but who has left all their possessions in the premises, to return to after the holiday, is still occupying the premises (just like they are still in occupation when they've popped out to the corner shop for milk).

Of course, under the Residential Tenancies Act, landlords are not limited to giving termination notices on grounds of breach - they can give them without grounds too, and there's nothing in the Act (again, either 1987 or 2010) that stops Housing NSW from giving such a notice. However, it has long been established that in the case of Housing NSW, as a government agency, the decision to give a notice of termination affects the rights, interests and legitimate expectations of the person on the receiving end, so Housing NSW - unlike private landlords - must still give reasons for its termination notices, and an opportunity for you to put your case and try to make it see sense before the matter proceeds all the way to the Tribunal and termination orders.

All these angles are well known to the tenants advocates employed by the Tenants Advice and Advocacy Services. Get your local service's contact number here and, if you're a member of the public housing jet-set, don't leave home without it.

Rental affordability is irrelevant

There's been quite a bit of reportage about changes by the NSW State Government to the way it charges rents for jetties and the like for waterfront properties.

There's been rather less said about a change the NSW State Government has made to the law about excessive rent increases for residential tenancies. Nevermind the boaties – in making the latter change, the Government has basically blown a raspberry at every renter in the State.

(Ppppfff!)

The change is this:

Under the old, soon-to-be-repealed Residential Tenancies Act 1987, when tenants applied to the Tribunal for an order against an excessive rent increase, the Tribunal would consider a list of factors (s 48), starting with 'the general market level of rents' and ending with a catch-all:

(g) any other relevant matter.

Now, under the new, soon-to-commence Residential Tenancies Act 2010, the Tribunal's list of factors (s 44) still starts with 'the general market level of rents', but ends with:

(h) any other matter it considers relevant (other than the income of the tenant or the tenant’s ability to afford the rent increase or rent).

So, of all the things in the world that might seem relevant to the Tribunal when it considers whether rent is excessive, it is expressly prohibited from considering affordability.

When the new legislation was first circulated as a draft Bill, this prohibition was not in it – it was added later, apparently in response to the REI's hysterics.

Will the change have a big practical effect? Honestly, no – under the old provisions, the Tribunal was not in the practice of determining excessive rent applications with regard to affordability anyway. And overall there's still more to like than dislike in the changes made by the new Act.

But it's not a good look, is it? The affronted reader might well ask how serious are the legislation's authors when they say they're concerned about housing affordability.

Holiday law

Happy new year, Brown Couch readers. Here's a holiday story, for those still on holidays or just wishing they were.

*

For his 1969 Christmas holiday, Mr Jarvis went on a tour. He tidied his desk at the local council at Barking, England, and set off for two weeks' skiing in Morlialp, Switzerland.

(Switzerland)

The brochure from which Mr Jarvis had selected his tour promised a 'house-party holiday' at the Hotel Krone ('Mr Weibel, the charming owner, speaks English'), with a welcome party on arrival, afternoon tea and cakes for seven days, Swiss dinner by candlelight, a fondue party, a yodeler evening, and a farewell party in the hotel's Alphutte Bar. Mr Jarvis was looking forward to his holiday very much indeed.

He returned very disappointed.

For a start, Mr Jarvis had expected to be one of a house party of 30 or so people, but during the first week, there were just 13 guests. In the second week, there was no house party at all - Mr Jarvis was the only person there. And Herr Weibel, as it turned out, could not in fact speak English.

The skiing was a disappointment too. In the first week, the only skis available were 3 ft-long mini-skis; in the second week, Mr Jarvis was able to get some ordinary length skis, but because of the boots his feet got rubbed and he could not continue.

To complete the catalogue of Mr Jarvis's disappointments, I refer now to the judgment of Lord Denning MR in the English Court of Appeal, where Mr Jarvis took his suit against the tour operator, Swan Tours, for breach of contract (Mr Jarvis, you see, was a solicitor):

There were many other matters, too. They appear trivial when they are set down in writing, but I have no doubt they loomed large in Mr Jarvis's mind, when coupled with the other disappointments. He did not have the nice Swiss cakes which he was hoping for. The only cakes for tea were potato crisps and little dry nut cakes. The yodler evening consisted of one man from the locality who came in his working clothes for a little while, and sang four or five songs very quickly. The 'Alphütte Bar' was an unoccupied annexe which was only open one evening.

The result, held Lord Denning, was that Mr Jarvis's holiday was 'pretty well ruined'. The Court ordered that he should be compensated not merely half the amount he paid for the tour (as the County Court had ordered), but an amount in excess of what he paid, recognising the contract's specific purpose of providing entertainment and enjoyment to the plaintiff, and 'the disappointment, the distress, the upset and frustration caused by the breach.' After all, 'Mr Jarvis has only a fortnight's holiday in the year. He books it far ahead, and looks forward to it all that time. He ought to be compensated for the loss of it.'

*

Jarvis v Swan Tours [1972] EWCA Civ 8 is a case beloved by law students and one of the foundational cases in what might be called 'holiday law': the law of contracts that promise to provide enjoyment and of the special types of non-economic loss that arise from breach of these contracts. Holiday law explores exceptions to the general rule that a party to a contract who has suffered a breach is not entitled to compensation merely for the feeling of disappointment or distress caused by the breach.

This area of the law has deeper foundations in the case of Hobbs v London and South Western Railway Co (1875) LR 10 QB 111, in which the defendant failed to convey the plaintiff all the way to his destination, and was ordered to compensate him for the 'physical inconvenience' of having to walk the remaining five miles home. As we've seen, Jarvis v Swan Tours goes further, and did not limit Mr Jarvis's compensation to merely physical inconvenience (his rubbed feet, perhaps) but to his 'distress... disappointment... [and] upset'. In Australia, the principal case in the holiday law caselaw is Baltic Shipping Company v Dillon [1993] HCA 4, in which the High Court considered the disastrous holiday of Mrs Dillon and 122 other passengers of the cruise ship 'Mikhail Lermontov', which struck a shoal and sank off the South Island of New Zealand. There Mason CJ sets out the general rule about compensation for breach of contract, and the holiday law exception:

the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation.

Now, you might be thinking: that's all very well, but what does holiday law have to do with tenancies? It's this: residential tenancy agreements are, like holiday contracts, contracts 'the object of which is to provide [to the tenant] enjoyment, relaxation or freedom from molestation', and breaches of terms of residential tenancy agreements (particularly the terms about quiet enjoyment, habitability, security and repairs and maintenance) are capable of causing physical inconvenience to tenants.

Therefore, like holiday-makers, residential tenants (and, for that matter, residential park residents) can make claims for compensation for the disappointment and distress they suffer when landlords breach their contracts.

This proposition was first established by the NSW Supreme Court in Residential Tenancies Tribunal v Offe [1997] NSWSC 10752 and affirmed by that court in Strahan v Residential Tenancies Tribunal [1998] NSWSC 30008. In Strahan, a park resident suffered the inconvenience and embarrassment of dirt and mud being tracked through their dwelling for over a year as a result of the park operator failing to seal a road as required; the resident was held to be entitled to compensation in the amount of $1000. Since then, the Tribunal has regularly made similar orders. Here are some examples:

• Over a period of four months, a tenant with an infant suffered three break-ins and interrupted an attempted fourth in insecure premises where the landlord refused to install window locks – $3 000 for distress and inconvenience (Ferguson v Crawford [2003] NSWCTTT 148).

• A tenant and her two young children were without a working hot water service for six weeks because of unrepaired plumbing defects – $320 for inconvenience (Saxby v Turner [2007] NSWCTTT 219).

• The friend of a tenant suffered multiple hypodermic needle stick injuries while cleaning premises that were let in an unclean condition by the landlord – $750 for the tenant’s distress (Potts v Pious [2007] NSWCTTT 71)

• A tenant and his family was required to vacate premises not approved by the local council for use as residential premises – $1 500 for inconvenience (Murphy v Xiao and Gao [2007] NSWCTTT 120).

With respect, the Tribunal's orders in these particular cases, and in non-economic loss cases generally, have been modest, responsible and uncontroversial. These sorts of orders properly reflect the community’s expectation that the value accorded to the home life of individual persons and their families will be acknowledged at law - and they have probably also sent a message to landlords that they should take care to comply with their contractual and statutory obligations.

That, at least, was the way things were until the case of Insight Vacations Pty Ltd v Young (2010) NSWCA 137 - another holiday law case, but this time the law has been turned on its head - with potentially similar upheaval in residential tenancies law. In Insight Vacations, the NSW Court of Appeal considered the effect of the Civil Liability Act 2002 (NSW) on compensation for 'distress and disappointment' arising out of a ruined holiday, and held that the thresholds and restrictions of that Act did apply to the plaintiff's claim.

The effect of the Civil Liability Act in this regard is reduce the compensation payable for all but the most extreme cases of non-economic loss, and to knock out small claims (ie less than 15 per cent of 'the most extreme case') altogether. Claims arising out of residential tenancies will nearly always be less than that threshold - the TU reckons each of the examples given above would not meet the theshold - so it may be these sorts of compensation orders will now be difficult or impossible to get.

That's a big change to the way the law has operated for more than 10 years now. There may still be some avenues for pursuing these claims - for example, where the landlord's breach is an 'intentional act' (Civil Liability Act s 3B(1)(a)) - so tenants who have suffered non-economic loss and are thinking of bringing a claim are urged to seek advice from a Tenants Advice and Advocacy Service.

The best thing that could happen, though, is for the Government to acknowledge that claims arising out of residential tenancies legislation were never intended to be subject to the Civil Liability Act, and to formally exempt such claims from that Act. As for whether claims arising from ruined holidays should also be exempt, we'll leave that to a latter-day Mr Jarvis to take up.