Tuesday, August 23, 2011

Negative gearing is not your friend

An updated version of this post is now available here.

On this day 38 years ago, a gunman walked into the Kreditbanken branch at Norrmalmstorg Square in Stockholm, Sweden, to hold up the bank. Police were called, the gunman took hostages, and a six-day siege ensued. When the police finally took the bank and the gunman and his associate, there was observed amongst the hostages a feeling of solidarity with their captors. A criminologist dubbed this feeling 'Stockholm syndrome.'

In the Brown Couch's never-ending quest for elaborate extended metaphors by which to describe the Australian housing system, Stockholm syndrome sounds like an appropriate diagnosis for our relationship with negative gearing – that is, Australia's almost unique tax arrangement that allows landlords to deduct interest payments from not just their rental income or capital gains, but from all their income, thus reducing the amount of tax they pay.

Talking with tenants, we occasionally hear them mutter ruefully about how their negatively geared landlords are making out like bandits, but then say, 'oh well, I wouldn't be able to afford to live here if it wasn't for negative gearing.'

Our political leaders feel captured too, repeatedly refusing to countenance any changes to negative gearing and, furthermore, positively supporting it. Politicians of otherwise such divergent points of view as John Howard and Tanya Plibersek have defended negative gearing, claiming that if it were ever changed, rents would go up.

That's the claim: that negative gearing makes renting cheaper than it would be otherwise.

We need an intervention. Negative gearing does not make renting cheaper. On the contrary, negative gearing pushes rents up. Tenants, policy makers: negative gearing is not your friend.

First, let's be clear: landlords set the rent at what they can get. If you really think that because of negative gearing, a landlord will accept less, try this experiment: pay your rent $50 short, and tell your landlord that you're helping him reduce his tax. Observe his angry reaction. Note his insistence that you must pay the going rate and if you don't, he'll find another tenant who will. Try another experiment: offer to pay more rent. See if your landlord doesn't take you up on it.

The committed negative gearist who finds themselves faced with the prospect of actually making money – that is, their revenues are greater than their costs – is not going to cut their revenues just to keep posting a loss. They are going to refinance, take on more debt, and buy another property.

But, we hear you say, negative gearing works to reduce rents by expanding the supply of rental housing.

Well, it certainly has expanded the supply of landlords. The popularity of negative gearing saw the number of Australian landlords grow by almost 50 per cent over the last decade-and-a-half, and the proportion of them posting a net loss grew similarly.

(ATO TaxStats, various years)

But look what they've spent their (borrowed) money on: established dwellings, not new construction.

(RBA, Table D06)

So they've expanded the supply of rental housing, but only by turning dwellings that might otherwise be owner-occupied into rental. In other words, along with any expansion in the supply of rental housing goes an expansion in the supply of renters.

This is reflected in the declining rates of home-ownership amongst younger households (25-44 year-olds) – and, for that matter, middle-aged households (44-65 year-olds).

(Source: Flood and Green (2010) 'Australia's Changing Patterns of Home Ownership' AHURI Research and Policy Bulletin no 133. Click here for more.)

These households are in the prime income-earning years of their lives, and many would be owner-occupiers if they weren't priced out by big-spending negatively geared landlords. Instead they are renting – alongside the low income households who have always rented. AHURI researcher Maryann Wulff and her colleagues have charted over the period 1996-2006 the rise in the number of renters who are in the higher segments of the income scale:

(Wulff, et al (2009) 'Australia's private rental market: changes (2001-2006)', AHURI positioning paper. Click here for more.)

Wulff et al explain: 'overall, the number of private renter households in the lowest seven income categories (Y1-Y7) stayed relatively stable over the three census years [ie 1996, 2001 and 2006]. The growth in private renter households occurred in the top five income segments.'

Now, these higher-income renters can afford to pay more than their lower-income competitors, so their presence in the market helps push up rents. They also out-compete the lower-income households in terms of risk and general attractiveness to landlords, so if they want to save a bit of money and live in a relatively cheap rental dwelling, they very often can – which means a lower-income household, who really needs the lower rent dwelling, will have to look at renting another, more expensive dwelling.

We can put some number on this problem, thanks to the National Housing Supply Council. As of 2007-08 (the latest figures), Australia has 814 000 low-income households (that is, in the bottom 40 per cent by income) who are renting in the private market... and the private rental market has 1 410 000 dwellings that would be affordable for these households. That's apparently more than enough affordable rental dwellings... except that fully 1 089 000 of those relatively cheap dwellings are occupied by households above the 40 per cent line. That leaves 493 000 low-income households paying a higher rent.

And it is not just a problem of how the relatively low-rent properties are shared around, because the number of low-rent properties is declining, too – thanks to negative gearing. As a strategy, negative gearing depends on the prospect of capital gains: the negatively geared landlord makes a profit only if the (lightly taxed) capital gain at the end of their speculative adventure is more than the total income lost to interest etc along the way. So negatively geared landlords will go for properties where there's strong expectations of capital gain... and pass on properties that are not so blessed. The latter properties, as economists Woods, Ong and Stewart point out (in a paper for the Henry Review), are the relatively low-value, low-rent properties that low-income renters seek out. Over time, as properties are bought and sold, these sorts of properties drop out of the rental sector, and as they become scarcer, they become less cheap.

We can put numbers on this too, again courtesy of the National Housing Supply Council. Between 1996 and 2006, Australia's private rental stock grew by 234 000 dwellings. All of this growth was in dwellings that rent for more than $200 per week – and mostly more than $300 per week. Over that period, we lost 125 000 dwellings in the $232 or less price range (and all those dollar amounts are 2006 dollars, so we're comparing apples with apples). The Council provides a graph to illustrate the changing shape of the rental market, under the influence of negative gearing. Notice the bulge in properties around $200 flatten down and push up further along the scale of rents at $300 per week, $400 per week....

To recap:
  • negative gearing does not cause an individual landlord to charge less rent;
  • negative gearing does not create net additional rental housing;
  • negative gearing has contributed to more higher-income households renting, which both pushes rents up, and pushes lower-income households out of lower rent properties;
  • negative gearing has contributed to low-value proprties dropping out of the rental market, which pushes up the rent for those that remain in rental; so therefore
  • negative gearing is not your friend.

Wednesday, August 17, 2011

A postcard from the Older Persons Tenants Service

We like getting mail at the Brown Couch, especially when the sender is legendary tenants advocate Dr Robert Mowbray... and doubly especially when the subject is the excellent work of the Tenants Advice and Advocacy Services. Robert points out that it is now over 100 years since this sort of work first began in New South Wales:

Tenancy services existed as early as 1910 when the New South Wales Rent Payers Association acted as advocates for tenants in early cases before the Fair Rents Court.

(No harpies! An election dodger c 1910)

Contemporary tenants' services only appeared in the 1970s due to the fillip provided by the Commonwealth Government’s Commission of Inquiry into Poverty. The Tenants' Union of NSW emerged in 1976 and has played a crucial role in lobbying for tenants. From its establishment it built up a network of tenants' services, initially relying on volunteers.

In 1986 the NSW Department of Housing funded a Housing Information and Tenancy Services Program. In 1994 NSW Fair Trading refunded a revamped program now called the Tenants’ Advice and Advocacy Program.

The need for tenants' services in 2011 is as great now as it was one hundred years ago, as tenants get pushed from pillar to post, with a shrinking private rental market and landlords extracting very high rents. 'Affordability' and 'housing stress' are now words in our lexicon.

To illustrate his point, Robert has kindly provided a 'postcard' from the Older Persons Tenants Service, noting some of the cases that he and his fellow tenants advocates have been conducting recently.

Hello from OPTS.... let's take a look at some of the cases that crop up on a typical day at a Tenants Advice and Advocacy Service.

First, an update on an OPTS client, Arthur, an elderly tenant in the southern suburbs who has developed dementia. Arthur's family had moved him to a nursing home, but forgot to place a stop on rent payments from his bank account to the real estate agent and these continued for many months. After the threat of legal proceedings against the real estate agent, combined with a complaint to NSW Fair Trading, the real estate agent has refunded the full amount overpaid, which was around six and a half thousand dollars. Apparently the real estate agent had re-allocated the account number to another landlord at another address, who never queried getting two lots of rent for the same property!

Now the case of Hilda, a tenant of a social housing provider in Western New South Wales, who sought our help to recover $2,500 overpaid rent. After a letter plus reminders over a number of months, the social housing provider has written back acknowledging double payments because, in bureaucratic language: ‘We were installing a new computer system. The retrospective subsidies created in the new system duplicated actions taken in the old system just prior to the implementation of the new system’.

A case under the Landlord and Tenant Amendment Act 1948 – Maria lived in a small cottage on the Lower North Shore for over 60 years, and with her now-deceased husband raised their family there. Maria is a protected tenant under the 1948 Act, but that legislation is silent on the issue of repairs. Nevertheless, Maria asked for some essential repairs and in response received a ‘Notice to Quit’. The house timbers had become riddled with white ants, so we organised a builder’s report and this advised that the house was fix-up-able without the need for Maria to vacate. However, Maria has decided to negotiate a settlement payment in return for her giving vacant possession.

Another protected tenant, Shirley, lives with her son in a beachside cottage owned by her local government council. Her landlord applied to the Fair Rents Board, asking that it set a fair rent on the property. There have been very few fair determinations across New South Wales in recent years. However, Council were unable to pull together the necessary documentation. (Remember ‘Yes, Minister’ and ‘the floods of 1967’.) After three hearings of the Board, we're negotiating a new rent through a deed to be signed by both parties, which also will comply with the requirements of the legislation.

Bob and Beryl have rented a flat over a shop front on the Northern Beaches for 27 years. The landlord has done his little repairs over the years and the flat needs a good coat of paint. But when the hot water system broke down, Bob sent a letter to the real estate agent asking for it to be fixed. The next day he was served with a termination notice. The landlord's story is that he intends to refurbish the flat. Bob and Beryl have stayed put and so the real estate agent has taken them to the Consumer, Trader and Tenancy Tribunal. Bob was prepared to defend the matter on the grounds of a retaliatory application and his and the landlord’s circumstances, but we had to advise him that there was no certainty that the Tribunal Member would dismiss the landlord's application, even if it ruled that the application was retaliatory. The Tribunal still might give more weight to the landlord's intention to refurbish the flat, given its age and condition. If this was the case it might only give Bob and Beryl 90 days to leave (this being the statutory minimum for long leases under the new legislation). Besides, even if the Tribunal had dismissed the landlord's application, the landlord may have re-applied for the same orders at any time or increased rent upon 60-days' written notice. Bob and Beryl feared that any rent increase would make their rent unaffordable and thus force them out, given that their current rent is substantially below market rent. So, in the end, the parties have settled, with Bob agreeing to give vacant possession some six months down the track.

Isabelle and Claude are both in their seventies. Claude faces hefty medical bills because of emphysema. They have been renting their current house on the South Coast for nine years and have a long association with the area. Recently they received notice of a hefty rent increase of $55 per week. They cannot afford the new rent. And then they were told that the property is to be auctioned. They received a no-grounds termination notice. Isabelle seized the initiative and approached the owner of a holiday house a few blocks away. She asked whether he would be interested in renting. The owner said that he didn’t want to rent to strangers, but he’s would consider renting to her. But first he’d need to finish some building work. Isabelle said that that would be OK … let’s hope it works out, because it would take years for Isabelle and Claude to re-establish a network of friends in a new area and, also, Claude needs to be close to his specialist.

Kris has only just moved into social housing. His landlord has provided him with a copy of his residential tenancy agreement and a condition report, the landlord's part of which is clearly fudged, with all squares marked 'Y' saying everything was rosy, including for one non-existent room! We're seeing a lot of this sort of thing. In total there were 45 discrepancies and eight matters requiring immediate attention ... although, overall, the premises were in good shape. OPTS has asked the social housing provider to re-do its part of the condition report. We're also looking at recent changes to the law in New South Wales – both under the new residential tenancy legislation and the Australian Consumer Law – that may give redress to a tenant in this situation. Hopefully that won’t be necessary here.

The injustices and anomalies that occur in the lives of tenants who seek advice and help from OPTS all get fed into the policy development activities of the Tenants Union, so that in the long term tenants get a modicum of justice from the system. The day is never dull at a tenants’ service…
Too right, Robert. Thanks for the postcard, and thanks OPTS for everything it does for older tenants in New South Wales. (Thanks also to Shelter NSW, which has previously published some of Robert's case studies in its newsletter, Around the House.)

Tuesday, August 16, 2011

Ombudsman reports on Licensed Residential Centres

The media has recently shone a light on Licensed Residential Centres (LRCs, sometimes called licensed boarding houses) for people with disability. Now it's the turn of the NSW Ombudsman – again, with yet another report on LRCs and their regulator, NSW Ageing, Disability and Home Care.

Read it and you will be appalled, both at what it shows of life – and death – in LRCs, and at a decade of government inaction in the face of desperate need for reform.

We reproduce the Ombudsman's introductory message, with our own emphasis added:

This report is about marginalised and vulnerable people living in accommodation that does not afford them adequate protection, support, or rights; and the need for significant reform to address this longstanding and unacceptable situation.

For nine years, my office has highlighted the vulnerability and poor circumstances of people living in licensed boarding houses. The majority of residents have a mental illness or a cognitive impairment, or both; have considerable health problems; and require daily supervision and support. They are typically reliant on income support, and hand over most, or all, of that money to the boarding house operator to pay for their board and lodging.

While there are standards and conditions that licensed boarding house operators are required to meet, our work has identified that these requirements are often not met, and the health, safety and wellbeing of the people living in these facilities suffers as a result. We have repeatedly found critical failings on the part of Ageing, Disability and Home Care (ADHC) to fulfil its responsibilities to monitor licensed boarding houses and ensure their compliance with requirements.

However, the problems are much larger than poor monitoring and enforcement. The current legislation governing licensed boarding houses and the standards expected in such facilities are inadequate to protect already vulnerable residents from harm and violations of their fundamental human rights. People living in unlicensed boarding houses have even fewer safeguards and protections.

Significant reform is required to provide adequate protections and appropriate support, and to uphold the rights of people living in the boarding house sector. At a minimum, our work demonstrates that there is a critical need for legislative change to improve the circumstances of, and outcomes for, people living in licensed boarding houses. In part, this is about improving standards to enable people with disabilities to obtain appropriate support to meet their needs; and delivering greater protections, that are rights-based. This must be accompanied by a rigorous system for ensuring compliance and removing providers that are exploitative or do not meet minimum standards.

My office has made many recommendations over the past nine years aimed at improving the circumstances of people living in licensed boarding houses and progressing the broader reforms. We have received repeated advice from ADHC about its intentions to progress a review of the legislation governing licensed boarding houses, and interagency work to explore options for reform of the boarding house sector. However, almost a decade in, the legislative review has not been completed, and no decisions have been made about the proposed reforms.

The slow pace of work and the lack of practical action to commence necessary reforms are unreasonable given the implications for the individuals living in boarding houses. The need for concerted and sustained cross-government action to achieve real and improved outcomes for people living in licensed and unlicensed boarding houses is overdue.

The Ombudsman has, in journalistic parlance, 'slammed' ADHC and the previous State Government. And if the Ombudma's message is not blunt enough, consider the first of the several case examples from the Ombudsman's investigative work that's cited in the report:

The death of a licensed boarding house resident in 2008 raised questions about living conditions in the facility and the adequacy of monitoring by ADHC. Our review of the man’s death found that hospital staff had raised concerns about his hygiene and nutrition during an admission to hospital for pneumonia three months before his death. At that time, hospital staff noted that the man was at high risk of malnutrition and staff had to use a peroxide solution to remove dirt from his skin and nails.

The man was found in his room by a staff member at the boarding house. He had been dead for at least 12 hours and had blood stains on his fingers, head and clothes. There was also evidence of blood stains on the walls and body tissue was found on two exposed nails on the back of the door to the room.

The police officers who attended the scene reported that the man’s bedclothes were covered with cobwebs and dust, and faeces and used toilet paper were strewn around the room. There was also several unopened sandwich packages in the room.

At the same time as our review of the man’s death, Official Community Visitors complained to us about the failure of the licensed boarding house manager to address concerns they had identified. These included domestic duties not being attended to, smoking by residents indoors, the selling of cigarettes on the premises, broken windows, limited access to bathrooms and the dining room, and unsecured medication left on a shelf in the kitchen.

We met with ADHC to discuss these concerns. They told us about initiatives in place to improve the support provided to residents at the boarding house and to monitor compliance with the licence conditions. They also advised us that they were seeking legal advice in relation to the boarding house operator’s ongoing failure to comply with many of the conditions of their licence.

ADHC subsequently told us they received legal advice that they did not have the power to enforce the licence conditions that apply to the health, wellbeing and cleanliness of residents and the facility. They said they were considering their options – including prosecution and/or revocation of the licence – in relation to the licensee’s failure to comply with a fire safety order issued by the local council.

As a result of unrelated factors, the boarding house subsequently closed and the residents moved to alternative accommodation.
In the midst of this awful scene, note the reference to ADHC's legal advice regarding the unenforceability of licence conditions. This legislative defect was repaired in the Youth and Community Services Regulation 2010... 11 years after the problem was first identified. And as the Ombudsman says, the review of the Youth and Community Services Act is still not complete, and the government has yet to commit to a broader reform of the boarding house sector.

In response, the new Disability Services Minister, Andrew Constance, has stated that he shares the Ombudsman's concerns. And prior to the tabling of the report, his colleague, Fair Trading Minister Anthony Roberts, also indicated to the Parliament that boarding house sector reform is a 'key issue' for the new State Government. Amongst these positive, encouraging signs from the O'Farrel Government, the Ombudsman's report is a powerful reminder of past promises unfulfilled, and a warning that the new government must do better – and urgently.

Thursday, August 11, 2011

Know your residential tenancy agreement

Brown Couch enthusiasts will recall our recent comments on real estate agents seeking to charge tenants for their time in the CTTT. Well, since then, a residential tenancy agreement with a strange set of additional terms has caught our attention.

It reads:

clause (x) - Should a dispute arise as a result of the tenants responsibilities, or neglect or failure to follow the Residential Tenancies Act or this agreement & the agent or its employees is required to prepare for &/or attend a CTTT hearing the tenant will be charged at a rate of $xxx.00 +gst per hour or part thereof.

clause (y) - The tenant agrees that inspections of the above property will be held on a quarterly basis. If the home is found in an unsatisfactory condition at these inspections a second inspection will be made and you will be charged $xx.00 for this return visit.

Now we've already suggested that it's a silly idea for real estate agents to try and charge tenants for their costs in the Tribunal. But it's worth revisiting some of that information because it similarly applies to fees for a 'second inspection' of the home. Here's what we said earlier:

The Residential Tenancies Act 2010 stipulates that tenants can only be required to make certain types of payment to the landlord under their residential tenancy agreement. These are bond and rent, and in many instances charges for water consumption ... Requiring a tenant to pay [other, non-prescribed costs], would be in breach of the law, and could leave a landlord liable for a $2,200 fine.

Clause (y) presents an additional problem, because a landlord (or their agent) is only allowed to inspect the property a maximum of four times in any twelve month period. Technically, a 'second inspection' would be okay (as long as proper notice is given), but it should be counted as one of the four... so sensible landlords might want to consider other ways of harassing tenants into doing the washing up more frequently.

Right. So legislation doesn't allow landlords (or their agents) to ask tenants for more money, or to visit too often. But what if terms allowing such things are actually written into the contract? Can a landlord or a real estate agent use additional terms in a residential tenancy agreement to hold a tenant to a higher standard of behaviour, or to place upon them further liabilities, than are allowed under the Act?

The answer is a resounding 'NO'!
The Act is clear (at section 219) that 'contracting out' is prohibited. Any term that excludes, evades or limits the operation of the Act (or the Regulations) is void, and steep penalties can apply to anyone who tries it on.

"Great news!", you might be thinking... "we can all relax and give thanks to the Parliamentary Council for drafting such a useful law, and to the NSW Government for keeping it intact! Our rights as tenants are impervious to the innovations of the real estate industry!"

But let's not get carried away...

Something that has also caught our attention of late is the curious case of Grima v Plummer - a decision made under the old (1987) Act, to which a similar 'contracting out' provision applied. In this matter, the CTTT allowed a landlord's claim for cleaning charges, after the tenancy had ended, based on additional terms that created obligations "more onerous than those contained" in the standard form residential tenancy agreement. These terms required the tenant to leave the premises "in a clean and tidy state (as per the condition report)", and to "meet the full cost of flea extermination"; whereas the 1987 Act required tenants to "leave the residential premises as nearly as possible in the same condition, fair wear and tear excepted, as set out in any condition report".

With respect, we'd have thought that an outgoing tenant's cleaning obligations were pretty bread and butter stuff for the Tribunal. For a decision this kind - which relies on terms that contracted out of sensible legislative provisions - to appear on the record is surprising. But it serves as a pertinent reminder that additional terms can bite - even when they're not actually allowed!

If you've got a residential tenancy agreement that contains strange additional terms, do what the lucky punter with clauses (x) and (y) did - call your local Tenants' Advice service for a chat.

Tuesday, August 9, 2011

When landlords sell: part 3

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

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

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

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

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

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

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

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

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

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


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

Thursday, August 4, 2011

When landlords sell: part 2

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

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

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

(2) A landlord or the agent of the landlord for the sale of the residential premises must make all reasonable efforts to agree with the tenant as to the days and times when the residential premises are to be periodically available for inspection by prospective purchasers.
(3) A tenant must not unreasonably refuse to agree to days and times when the residential premises are to be periodically available for inspection by prospective purchasers.
(4) A tenant is not required to agree to the residential premises being available for inspection by prospective purchasers more than twice a week.
If you and the landlord cannot come to an agreement about access, the Act also provides a fallback position. Section 55(2)(f) provides that in the absence of agreement, the landlord can have access to show the premises no more than twice a week, and they must give you 48 hours' notice each time. Note that if you have no agreed schedule of access and you are given a valid notice of this kind, the landlord or agent can access without your consent, and regardless of whether you will be there at the premises or not. You can also apply to the Tribunal for an order specifying or limiting the days and times when the landlord may access to show the premises.

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

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

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

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

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

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

Or (3) Going nude.

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


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

Tuesday, August 2, 2011

When landlords sell: part 1

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

(Selling agents. Grr.)

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

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

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

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

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

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

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

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

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

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

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

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


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

Homeless at the Census

Next Tuesday night (9 August 2011) is Census night. The Census is important for all sorts of reasons: one of the most important – and challenging – is getting a count of the number of people who are homeless.

Our colleagues from the homelessness sector have created this poster to let homeless persons know how to get counted as such.

As the posters says, write 'NONE' in the 'suburb/locality' box at question 10 ('Where does this person usually live').

This goes whether you are spending Census night in a refuge or crisis accommodation, or a boarding house, or if you're staying with family or friends and you've no home of your own.

Spread the word.

Monday, August 1, 2011

Tenancy culture studies field trip: the Australian Museum of Squatting

It's a long time between classes at the Institute of Tenancy Culture Studies – sorry, students.

In the meantime, why not take a field trip to an allied institution: the Australian Museum of Squatting. It's great!

Well done to the curators, and hat-tip to Brown Couch reader Warren Wheeler.