Friday, November 2, 2018

What you need to know about renting reform in NSW: Part 3

We're back with more information about the Residential Tenancies Amendment bill which has passed and is now an Act. It will take effect at a so far unannounced date in the future - presumably before the election in March. In this series of posts, we examine what is proposed and what the changes will mean for renters in NSW. If you haven't already, check out Part 1 and Part 2. Many of these proposals are good, or have potential to be so. Whether they strike the right balance will often depend on whether unfair 'no grounds' evictions remain in the Act. Others have short-comings which will need to be revisited in the future.

Condition Reports

Currently the Act mandates that a landlord must give the tenant two copies of the condition report before or when the tenant signs the residential tenancy agreement. The tenant must then complete and give one copy of the condition report to the landlord or landlord’s agent not later than 7 days after receiving it.

The proposal before government is that the landlord must, before or at the time the tenant signs the residential tenancy agreement, give to the tenant two copies, or one electronic copy, of the completed condition report.

This is a positive change as it more clearly places a burden on the landlord to provide the condition report. The report's purpose is largely to support a landlord's claim on a tenants bond.

Information Statements

Currently the Act does not mandate that the landlord sign any statement acknowledging that they are aware of and understand their rights and obligations as a landlord.

The proposal before government is that the landlord or landlord’s agent must not enter into an agreement unless they have signed an acknowledgment on the agreement that the landlord has read and understood the contents of a rights and obligations information statement that sets out the landlord’s rights and obligations under the Act and any other Act or law in relation to the proposed residential tenancy.

We support this amendment - though are skeptical of its effectiveness. A better approach to improving landlord awareness of rental laws may be placing more obligations on real estate agents to prevent their landlord from breaching the agreement or an education system such as Utah's 'Good Landlord' program and a proper registration program to recognise that landlords are providing an essential service, and need to be fit and proper persons for such an important role.

Rent Receipts

Currently the Act is silent on the use of email as a method of supplying rent receipts. In this absence the Electronic Transactions Act 2000 may apply.

The proposal before government will allow rent receipts for rent paid by cheque to be sent by email to an email address specified by the tenant.

We support this amendment. Our only concern is that tenants may feel pressured to supply an email that they rarely access. This will need to be monitored.

Smoke Alarms
Currently the Act is silent on smoke alarms other than being captured in a reference to a landlord’s statutory obligations relating to the health or safety of the residential premises. All residences are required by the Environmental Planning and Assessment Regulation 2000 to have smoke alarms installed. Smoke alarms are likewise mentioned in the Standard Form Agreement as being a statutory requirement for all residential premises.

The proposal before government is that repairs to smoke alarms be carried out as a matter of urgency. The Manner and time frame by which these repairs are to be carried will be prescribed in the regulations. Breach of this section may result in a maximum 20 penalty units. A tenant can undertake urgent repairs to smoke alarms and be reimbursed accordingly as per the regulations.

This amendment came out of a coroner's report into the tragic death of a child. We support this amendment although we are yet to see the regulations. We do not envisage any problems with the drafting of the regulations.

Employee & Caretaker Evictions

Currently the Act treats the eviction of tenants generally equally - 'at fault' evictions occur because of the tenants behaviour, not because of any personal characteristic. 'no fault' evictions occur because of some change within the landlord or the property, and not because of any personal characteristic of the tenant.

The proposal before government is to treat employees differently to other tenants. Tenancy agreements with tenants who are on periodic agreements who also happen to be employees or caretakers (as defined in section 9 of the Act) will be able to be terminated with as little as 28 days notice. It is intended to assist a landlord employer more easily evict their tenant employees and largely justified on a misunderstanding of the range of ways a section 9 agreements can be formed - the amendment was pushed heavily by the farming industry, particularly aimed at seasonal employees, but the implications are much broader.

We do not support this amendment. Employers ending employment agreements and tenancies should be able to plan around the transition. Employee arrangements are broader than just farms, and this will cause unfair outcomes. The arrangements are not fixed contracts with a forseeable end date which mean the tenant does need sufficient time to find a new home – it is not clear why they are deemed to deserve less than the other tenants. If anything they should be afforded extra time to move out given that they are potentially facing not just homelessness but unemployment.

Our recommendation was and remains that employee & caretaker evictions require the same notice period other tenants do - 90 days in a periodic agreement. There has been no reason given why landlord employees can't work around this period - it appears to be pandering to poorly run businesses rather than legitimate issues with the notice period.

Expansion of Rent Arrears Process
Currently the Act treats rent arrears differently to other breaches of the agreement. You must be in breach of the agreement for 14 days before a notice can be served, and generally if you 'rectify the breach' (buy paying the rent owed) before you are evicted, you can prevent that eviction from occurring. This is a sensible difference which gives tenants more time to fix the problem, and means landlords are less likely to suffer rent arrears losses.

The Act is changing to also include water and electricity charges in this different scheme, and we think this is sensible. Rent arrears and water charges often go hand in hand, but currently, if a tenant is given an eviction notice for owing $1000 for rent and $10 for water, and pays off that $1010 they will still be evicted - under this change, they will not.

We think this is a good change however, the rent arrears process currently has a big flaw in it which needs to be corrected. Where a person has a past history of rent arrears, the landlord can ask the Tribunal not to allow them to stay even if they do pay off the current rent arrears. Originally this was introduced to prevent tenants paying 'on the court house steps' and playing games with the system. Unfortunately it was broadened to mean that even minor, and quickly remedied rent arrears can add up to an eviction. It should be amended to apply only to circumstances where tenants wilfully paying late as originally conceived.

Asbestos & Termination

Currently the Act is silent on asbestos other than a being captured in reference to a landlord’s statutory obligations relating to the health or safety of the residential premises. Under clause 458 of the Work Health and Safety Regulation 2011, if more than 10 sqm of bonded asbestos sheets, or any significant amount of loose or crumbling asbestos, is to be removed from the premises, the removal must be conducted by a licensed removalist.

Once these amendments take effect, tenants in properties that have been listed on the Loose Fill Asbestos Insulation (LFAI) Register during the term of the agreement or listed on the Register prior to the agreement being entered into and that fact was not disclosed to the tenant may terminate the tenancy early without compensation to the landlord under section 100 of the Act.

The LFAI system already allows for some compensation from government to landlords, but prior to this amendment tenants can find themselves trapped in potentially unsafe environments with unfair break costs. This is a sensible amendment.

Expansion of use of Rental Bond Interest Account

Part of the deal when the Rental Bond Board was created and tenants bonds started being held in trust there was that the money would be spent on the renting system and particularly in the interests of tenants. Currently the Act mandates that the Secretary may make a grant or loan, on the  recommendation of the Board and with the approval of the Minister, from the Rental Bond Interest Account for the following purposes:
(a) establishing and administering tenancy advisory service,
(b) schemes for the provision of residential accommodation,
(c) education about tenancy laws and the rights and obligations of landlords of landlords and tenants,
(d) research into matters relevant to the relationship of landlord and tenant,
(e) other activities for the benefit of landlords and tenants.

The amendment will allow the Secretary to also make a grant or loan from the Rental Bond Interest Account for 'other consumer protection purposes.'

We have not been given any further information about what, if any, consumer protection services/products the Fair Trading envisage could be funded from the Rental Bond Interest Account. We do not support bond money being spent on anything other than the renting system – otherwise, bonds would be better left in tenants pockets.

Database Listing Offences
Currently the Act mandates that offences can be penalised by fine or imprisonment but is never or very rarely enforced to be act as an effective disincentive.

The proposal before government creates two new offences:

(1) A maximum penalty of $2,200 for a landlord or landlord’s agent who lists personal information about a tenant or co-tenant in a residential tenancy database if that tenant or co-tenant terminated an agreement in circumstances of domestic violence.

(2) A maximum penalty of $1,100 for a database operator who charges a fee for giving a copy of personal information that is in the residential tenancy database to a person who is the subject of the personal information.

We support this amendment on the proviso that there is effective use of enforcement powers from Fair Trading. Currently enforcement through the use of penalties rarely occurs.

Enforcement generally
While not an amendment itself, it is worth a note that a number of amendments have been to add new penalties to the Residential Tenancies Act 2010, with the intention of regulating bad behaviour by landlords. We have mentioned a few times that the rate of enforcement is very low, and this causes us scepticism about the effectiveness of this strategy - but how low is it?

Over the two years 2016-17 and 2017-18, there were more than 5200 complaints by tenants. Around 1000 allegations of offences were investigated and found to have breached the Act, with the vast majority of those being given either a warning or "education". Just 24 people were fined, at an average fine of less than $500. So very few instances of verified breaches of the Act resulted in enforcement action - and very minor enforcements at that.

We have encouraged the Minister and NSW Fair Trading to consider the message that this low level of enforcement sends to landlords and real estate agents who do the wrong thing - that chances are you'll face no consequences for breaking the law. On the other hand tenants are routinely evicted for not following their obligations. Is that a balanced approach?

If the Act is to include these penalties, then we need to have a rigorous and fearless approach to applying them, otherwise their ability to regulate behaviour is unacceptably weakened. Tenants are mostly pushed to enforce the law themselves - but at great personal risk of jeopardising both their current and future homes.

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