Friday, February 18, 2011

Share house mix-ups: getting the house in order...

Pinky rented a house of straw, but it fell down, so he moved in with Perky.

Perky's place was a little more substantial but, being made of sticks, it couldn't really withstand the extra wear and tear that an additional occupant brought upon it. It fell down, too. So Pinky and Perky set off to find somewhere new to live.

Their Great Uncle Porky had just scored a nice, new 3 bedroom brick veneer number out in the 'burbs, so they loaded up the wagon and made a bee-line for the boondocks.

At first, Porky wasn't all that sure about letting Pinky and Perky move in - after all, there was an unexplained gap in their rental references that stretched all the way from 1971 to 2008. But he did have all that extra space, and he really couldn't say no to the kind of money they were offering. After some brief but robust negotiation he had a couple of extra keys cut, and told them to chose their rooms. They all lived happily ever after.

Or did they? Borne of the Depression era, Porky could never quite understand the sheer excesses of his freewheelin' flatmates. After a few too many arguments and excuses about why the rent was late and the fridge was empty, Porky realised that he'd had enough. He packed his bluey, and humped it.

This left everyone with a bit of a problem, because Porky did not transfer his tenancy to either Pinky or Perky, and he did not obtain the landlord's consent to sub-let the premises before they moved in (see this previous Brown Couch post for more on this). Legally, Porky is still the tenant, but nobody knows where he is. The occupants, Pinky and Perky, have no legal relationship with the landlord - in fact he probably doesn't even know who they are.

Thankfully, this has never really been a practical concern, because Pinky and Perky took Porky's departure to heart. They've really pulled back their reckless ways, and getting the rent paid on time has been their number one priority since the day Porky left; and the landlord - being one of those strong silent types - has never seen fit to worry about the place as long as the rent keeps coming in...

But then one day, the landlord sold the place, and a new landlord came along. This new landlord wanted to know who his tenants were, and when he couldn't find their names on the lease, or any evidence of the tenancy being transferred, he threatened to huff, and puff, and to blow the house down.

Thankfully for Pinky and Perky, the Residential Tenancies Act 2010 offers a solution. Section 77 allows an occupant to apply to the Tribunal to be recognised as a tenant, if the original tenant no longer occupies the premises. (This specific provision is in similar terms to section 35 of the Residential Tenancies Act 1987 - now repealed - so it is likely that the Tribunal will be guided by any decisions made with reference to that section).

But, theoretically, the landlord could just establish a new agreement with Pinky and Perky anyway - if he wanted to. This is based on the assumption that Porky's tenancy has been terminated by abandonment or repudiation (section 81(4) of the 2010 Act), so a new agreement can be entered into. A sensible landlord would, of course, obtain Tribunal orders about the abandoned tenancy before entering into a new agreement, to avoid complications if Porky in fact has other ideas (say Pinky and Perky had lied about his disappearance in order to oust him as the tenant - but he'd really only been at his brother George's house for a few weeks).

None of this is particularly new either - the same arguments would equally have applied under the 1987 Act, and the old case law on abandonment should still have some value. The 2010 Act does set out some of the things the Tribunal may consider before deciding whether or not the tenancy has been abandoned (section 106), whereas the 1987 Act did not, but these are the sorts of things that the Tribunal tended to consider under the 1987 Act anyway.

What the 2010 Act does that is really new is something that mixed-up share house occupants ought to be immediately aware of. Under section 95, the landlord can give any occupants (ie anyone who isn't a tenant of the landlord directly) 14 days notice requiring them to vacate the premises, if the tenant no longer resides at the premises and the tenancy has been terminated. As we've already seen, the tenancy could theoretically have been terminated by abandonment, even though the ex-flatmates of the former tenant remain in residence.

Any occupant of a shared rental house who is not the landlord's tenant should therefore seek advice on how to be recognised as a tenant, in order to obtain the protection of a residential tenancy agreement. This will be a lot harder to do once the landlord decides to move you on, and will entitle you to 90 days notice of termination (unless you breach the agreement) instead of 14 days notice to vacate. Contact your local Tenants' Advice & Advocacy Service if you think this might apply to you.

But there's another good reason for cleaning up share house mix-ups. Pinky and Perky may in fact be Porky's sub-tenants with all the rights and obligations provided by the 2010 Act, because of a qualifier in section 10 - the Act's exclusion to share house occupants without a written sub-tenancy agreement doesn't apply where the named tenant resides elsewhere. In other cases, occupants may be sub-tenants subject to a written residential tenancy agreement with the now absent head-tenant.

In such circumstances, a 14 day notice to vacate may provide the landlord with a lawful opportunity to bring the occupation of premises to an end, but it wont end the sub-tenancy agreement... Sub-tenants who are evicted without proper notice may have a legitimate grievance against the head-tenant, and may be entitled to compensation because their quiet enjoyment of the premises has been interfered with.

Monday, February 14, 2011

When co-tenancies end

Last time we talked about the law as it relates to comings and goings in share housing; this time, it's just plain goings. In particular, if you're a co-tenant – that is, you and one or more other persons are both tenants under the same agreement – and you want to sever ties with your housemate/s, the new Residential Tenancies Act 2010 makes some important changes that are worth knowing about.

To help illustrate the changes, let's refer to a co-tenancy with two co-tenants, Will and Cate.

(Will Wales and Cate Middleton – a share house romance.)

Without putting the mozz on real-life Will and Cate, let's pretend Cate wants out. She might physically move out but, until the commencement of the new Act, ending her legal liability was not so easy. In fact, under the old 1987 Act, there was no straightforward way for a co-tenant to unilaterally terminate his or her liability while another co-tenant stayed put. True, under the old law Cate could transfer (assign) her co-tenancy to her erstwhile housemate, or to some new person moving in, and get them to indemnify her in the event of loss, but all these things would require the consent of all the parties and hence a degree of co-operation that is all too often absent when co-tenants split up. Cate could even go as far as giving a notice of termination to the landlord, but if Will dug his heels in and didn't move out, there would be no vacant possession given to the landlord and the tenancy – and Cate's liability – would continue.

That was the old Act; the new Act, fortunately, includes s 101, which allows Cate to give 21 days' notice to both the landlord and Will, and then move out, with her tenancy terminating on the date on the notice, while Will's continues. Note that this does not apply during the fixed term of an agreement – Cate and Will are legally stuck with one another for the fixed term – but after that, if Cate's partnership with Will ends, so too can her liability as a co-tenant. She can also require Will to pay her, within 14 days, her share of the bond (s 174).

Here's a twist: what if Cate wants to end the co-tenancy, but also wants to stay put – that is, she want Will to be put out? The new Act provides for that too. Under s 102, a co-tenant may apply to the Tribunal for an order 'terminating the tenancy of the co-tenant or another co-tenant under the residential tenancy agreement' (my emphasis).

Does this mean that disputes between housemates about whose turn it is to wash up might now be prosecuted as termination proceedings in the Tribunal? We think not: s 102(2) qualifies the Tribunal's power by providing that it 'may make an order under this section if it is of the opinion that it is appropriate to do so in the special circumstances of the case' (my emphasis). So, something special is required before the Tribunal will make such an order. The TU has already heard of a likely case in what we believe is probably the first use of s 102: it's being brought by a woman whose ex-husband agreed to be a co-tenant to help her get the tenancy, but now he wants to move in to the premises with her. With respect to the Tribunal, there's a good argument that these amount to 'special circumstances'. Still, it will be interesting to see where the Tribunal draws the line.

Here's hoping no 'special circumstances' disturb the happy union, forged in share housing, of real-life Will and Cate. Cheers, kids!

Thursday, February 10, 2011

Share housing - comings and goings

Apologies - for the first 10 days of Share Housing Month, the Brown Couch has rather resembled the typical share housing kitchen sink, remaining untouched while your correspondents wait for one another to make a move on it. Expect a flurry of activity soon.

Now let's consider another aspect of share housing life – the comings and goings of housemates – and how these are dealt with under the new Residential Tenancies Act. As with the question of whether you're covered, the new Act makes important changes to the law relating to coming and going.

(The Secret Life of Us. By the end of the fourth series, only Kelly and Simon the barman were left.)

A typical share house might start out with a couple of persons who have a tenancy agreement with the landlord (let's call them Alex and Evan), to whom are added one or more persons who don't (Kelly, and others). We'll use variations on this example to consider a couple of ways of coming and going under the new Act:

As discussed last time, one way for Kelly to take occupation with all the rights and responsibilities of a tenant (rather than a mere lodger) is if she is a sub-tenant under a written residential agreement with Alex and Evan (s 10(b)). This is called a subletting.

To pull-off a lawful subletting, Alex and Evan will need the consent of the landlord (s 74). Because Alex and Evan are remaining at the premises and just subletting a spare room – what the Act refers to as a 'partial' sublet – the landlord must not unreasonably refuse consent (s 75(2)). The Act helpfully indicates what might be a 'reasonable' refusal (s 75(3)): in particular, where the sublet would result in overcrowding, or where Kelly is listed on a tenancy database. If the landlord refuses consent and Alex and Evan believe it is unreasonable, they can apply to the Tribunal to resolve the dispute (s 75(4)).

As a sub-tenant, Kelly still has no contractual relationship with the landlord: her contractual relationship is with Alex and Evan. They are, legally, Kelly's landlord.

Next thing you know, Alex is moving out and Evan and Kelly are looking for a new housemate (and they find one: Marnie). They could do another sublet, but Alex is not interested in being landlord to a couple of sub-tenants in a place where she no longer lives. Instead, Alex might consider a 'transfer' of her tenancy to Marnie.

A transfer - or 'assignment', as the old Act called it - is different from subletting, much in the way that 'duplicate' is different from 'cut and paste'. While subletting creates a new agreement between Alex & Evan and Marnie, a transfer takes the rights that Alex enjoys under her's and Evan's agreement with the landlord and gives those very rights to Marnie, such that Alex does not have them anymore. Under the old Act, there was a problem with assignment: Alex could assign the benefits of the contract, but not it burdens, so if things later went wrong the landlord could still sue Alex. The TU is not yet sure whether the new Act's provisions about 'transfers' clear up this problem, so it's probably a good idea if you're doing a transfer to also arrange for an 'indemnity' to be signed between you (ie Alex) and the transferee (ie Marnie). See a Tenants Advice and Advocacy Service for more about this.

In another respect, transfers are similar to sublets: you need the landlord's consent to lawfully do one. Likewise, if it's a partial transfer - ie just Alex's tenancy rights are being transferred, while Evan remains - the landlord must not refuse consent unreasonably.

A final word on sublets and transfers. Say Alex and Evan were going to move out together (and didn't we all hope they would?). They might consider either subletting or transferring the whole of their tenancy to Kelly (that is, not just a 'partial' sublet or transfer). To do either, they will need the landlord's consent – and this time, the landlord may refuse unreasonably (s 75(1)) and there's no recourse to the Tribunal. In other words, the landlord may refuse to hear any suggestion of a whole sublet or transfer out of hand ('I'm not listening, I can't hear you, la la la') or refuse for a daft reason (doesn't like the colour of Kelly's socks) or simply not give a reason at all. If, however, the refusal is discriminatory (eg doesn't like the colour of Kelly's skin, or her gender, or that she's a young person, etc), Kelly might have a complaint under State or Federal anti-discrimination legislation.

Tuesday, February 1, 2011

Share Housing Month - are you in or out?

Ah, February: the bright summer sun; the shrill of cicadas in the trees and the click of leather against willow on the cricket grounds; the smell of cut grass and fresh paint as landlords get ready for the turnover of rental properties at the start of another academic year (ha!). At the Brown Couch, it's Share Housing Month.

(Share housing.)

At the last Census, about nine per cent of all renter households were, in the ABS's terms, group households. That's about 3 per cent of all households, which seems, to be honest, surprisingly small. But it seems that way because share housing looms so large in tenancy culture and, indeed, in life generally. Social life runs on share housing stories. For so many of us, share housing was the place where we learned – sometimes painfully – our first lessons as adults in when to trust, when to risk it, how to love, and how to hate.


The first order of business for Share Housing Month is the new Residential Tenancies Act 2010 (NSW), which commenced yesterday, 31 January 2011, and the question of whether you, the share house occupant, are covered by the Act. The new Act makes some important changes to the law in this regard, particularly where – as is often the case in share houses – an occupant does not have a written tenancy agreement with the landlord or with another occupant who has a written tenancy agreement with the landlord.

To illustrate the changes, we'll use a very simple example of a typical share house of two persons: Ernie, who has a tenancy agreement with the landlord, and Bert, who does not.

(Share house occupants, Ernie (at left) and Bert.)

In the old 1987 Act there was no express mention of share housing, and whether a share house occupant was covered by the Act depended on the nature of the arrangements in their particular share house. In our example, Ernie would clearly be covered (he's a tenant of the landlord). Bert might be covered: possibly as a sub-tenant of Ernie; possibly as a sub-tenant of some other person on the agreement with Ernie (I don't know, let's say Elmo) who has since moved out. Or Bert might not be covered: he might be merely Ernie's lodger.

In the absence of a written agreement that sets out Bert's status, the question of whether Bert is a sub-tenant (covered by the Act) or a lodger (not covered) would be determined by a variety of factors, such as whether Bert has a lock on his room (tends to show he's a sub-tenant), whether Ernie supplies meals or linen, or performs services like cleaning (tends to show Bert's a lodger), or whether Ernie sets 'house rules' or otherwise controls the premises (lodger).

The new Act changes that. It makes answering the question simpler – at the expense of excluding many share house occupants from the Act. See s 10 on 'shared households':

10 Application of Act to occupants in shared households

A person who occupies residential premises that are subject to a written residential tenancy agreement, is not named as a tenant in the agreement and who occupies the premises together with a named tenant is a tenant for the purposes of this Act only if:
(a) a tenant under that agreement transfers the tenancy to the person or the person is recognised as a tenant (see Part 4), or
(b) the person is a sub-tenant of a tenant under a written residential tenancy agreement with that tenant.

So, to use our example, Bert's covered if he has a written residential tenancy agreement with Ernie (s 10(b)) (or if Ernie's former co-tenant Elmo transferred his share of the tenancy to Bert (s 10(a)). Otherwise, Bert's not covered, regardless of those other factors.

In almost all of the share house arrangements we at the TU have dealt with, there are no written agreements between occupants. This will have to change, if share house occupants want to be covered by the Act.

Note, however, some qualifications on s 10.

First, it applies only where the premises are subject to a written residential tenancy agreement. So if Ernie's tenancy is on the basis of a handshake with the landlord and nothing more, s 10 does not apply, and Bert's status will be determined according to the old tests. There would be a few share houses like this, especially where the landlord is a family friend or relative of one of the occupants, or where a landlord has said to a mate, 'move in and see what you can do with the place,' and the mate starts running it as a boarding house. These occupants might still be excluded as lodgers, but not by operation of s 10.

Second, s 10 applies only where a share house occupant occupies 'together with a named tenant'. In other words, if Ernie does not occupy the premises (maybe he just pops in from time to time), Bert's status will be determined by the old tests. This sort of arrangement is becoming quite common: a person rents a house or flat, doesn't live in it themselves but lets it out to students – often international students – who are stacked several to a room. As above, these occupants might be lodgers and excluded for that reason, but not because of the s 10 test.

Perhaps the most positive way to view s 10 is as an opt-in provision. If you're an occupant in a share house – whether a new share house or one from way back before the new Act commenced – consider making a written agreement with your fellow occupants in order to get in on the Act.