A year of living dangerously: part 1

Last week the TU published a report on the Residential Tenancies Act 2010, which draws attention to some of the highs and lows we've observed in our renting laws since they commenced just over a year ago.




We've already mentioned some of these in passing, and we've made the occasional comment about one provision or another as interesting cases have come before the Tribunal... but this report is our first comprehensive statement on the laws since their passage through Parliament in June 2010.

It certainly gives us a couple of things to talk about.

To kick the discussion off, we'll have a quick look at why we need these laws, and whether they've changed all that much from their old ways back in the 1987 Act. Then we'll spend a moment or two looking at the really good bits, before finishing up with our gripes about what's just not working.

...and so to Part 1.

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When the Residential Tenancies Bill 2010 was introduced into Parliament in early 2010, then Minister for Fair Trading Virginia Judge said:

We want landlords and tenants to be clear about their rights so that they are empowered to enforce those rights. We want landlords and tenants to take a responsible approach to their obligations to each other, to the people they share their home with and to their neighbours and the beautiful wider community. We want to see a rental market that is efficient, responsive and well informed. This bill enables that vision. The bill strikes a fair and equitable balance between the often competing interests of landlords and tenants. The reforms embodied in the bill are aimed at the clear need to bring the current law up-to-date, which is acknowledged by all sides. Even the harshest critics of the bill concede that the law in many areas is in urgent need of reform. There is an old saying that all landlords are not devils and all tenants are not angels. This bill protects those who do the right thing from those who would not, whether they are tenants or landlords. It is about striking a balance. (Extract from NSW HANSARD 02.06.2010)

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These words, taken from somewhere towards the beginning of Minister Judge's second reading speech, provide us with a useful summary of why we need renting laws, and why our previous laws needed an upgrade in 2010: landlords' interests are at odds with tenants' interests; landlords and tenants sometimes need to be protected from one another; and the previous laws were beginning to falter in their task of "maintaining the balance".

OK... so if our interests are not the same, and sometimes we forget to look after each other on account of it, then surely balance is just a matter of a little bit of give and a little bit of take on both sides? Well, that's what our lawmakers appear to think, but we disagree. The imbalance is structural, because landlords and tenants make use of the housing market in radically different ways. Landlords seek to generate wealth by buying and selling houses, while tenants make houses into homes...

Landlords and tenants don't bargain as equals. Landlords offer tenancies on a ‘take it or leave it’ basis, and will check up on a prospective tenant’s credentials before offering a tenancy. Tenants, on the other hand, have no sound way of vetting a potential new landlord. Even if they did, many tenants would rarely find themselves in a position to turn down a tenancy when moving from one place to the next, solely based on the nature of the landlord.

Once a tenancy is established, landlords feel little need to compete with others. Tenants, on the other hand, can't ‘take their business elsewhere’, because moving is an expensive and disruptive process. A landlord may threaten to end a tenancy if it suits them, but a tenant who makes good on a similar threat will impose no great cost to the landlord.

Even the most altruistic of landlords holds a great deal of power over the tenant at every stage of the relationship.

What renting laws must do, then, is not achieve balance between the parties, but protect tenants from this structural imbalance. The Residential Tenancies Act 2010 attempts this by regulating the terms of every residential tenancy agreement, and restricting certain types of practice that might otherwise be expected throughout the bargain. (For a good summary of some of these practices, see this old Brown Couch post...)

But this is exactly what our previous renting laws had set out to do. In bringing our old laws up to date, the former Government made no attempt to radically re-align the rights of tenants and landlords. Instead, they hoped to fix some glaring problems within the detail of the law - things like regulating tenancy databases and providing better rules for share-house tenancies. To be fair, most of these fixes have been to the benefit of tenants.

At the same time, they handed landlords the biggest trump card imaginable - the ability to end tenancies without recourse to the Tribunal, and consideration of the "circumstances of the case". We've talked about this many times before, and you can find summaries on the issue here and here.

There have been a couple of other problems with the new laws, too, as some last-minute changes (inspired by real estate agents and landlords) have undermined what would have been useful provisions about rent arrears terminations and breaking leases early. But the problem of landlords’ termination notices without grounds is by far the most fundamental. It ensures that tenants nearly always exercise their legal rights with the utmost of caution, and is in direct contrast to the idea of evening out the imbalance between landlords and tenants.