Residential Tenancies Act Proposed Changes

Brian Cannan: Today I'm with Lisa Jemmeson from Jemmeson Fisher Solicitors and Accountants. Good afternoon Lisa.

Lisa Jemmeson: Hello

Brian: We're going to talk about the proposed changes to the residential tenancy act

Lisa: Yeah today is just a bit of an overview for property managers and for licensees in charge and just to be aware of what's being floated out there. This is certainly not in law, it's just a bit of an overview about what's being discussed out there in the marketplace.

Brian: So is it going to come?

Lisa: Eventually will come and we will see some changes so I think it's just interesting to be mindful of what's coming there might be some measures that property managers wish to take now under the current legislation that they may lose in the proposed changes.

Brian: What are they?

Lisa: Some interesting points came out of the discussion paper so the act's been out for five years so this is going through a review process and that's to ensure that the act is still meeting the objectives that it was set out for and that's to balance the rights of tenants and landlords under the legislation so in the initial discussion paper that was released by Fair Trading it showed that one third of the 2.47 million private households in New South Wales live in rented property so it's quite a big market of rental properties in the last 10 years there's been a 7.2% increase in the number of tenancies lasting longer than three years and we see a big push to try and encourage landlords to enter into long-term leases with tenants.

Brian: Over 7% increase in tenancies going over 3 years now. Interesting.

Lisa: So in the last financial year 64% of all bonds were refunded had been held for more than 12 months so it's another interesting fact. As of June 2015 there are total of 754,000 bonds held. They were holding a value of $1.2 billion. A lot of money there in the kitty so it's quite interesting. So we might start just by going through some of the things that have been proposed and the first thing is pre contractually about disclosures that are being made to tenants and so this can include any proposal to sell the property any court proceeding so if there are proceedings before the Supreme Court by a mortgagee to take possession then there are requirements to disclose if the property's flooded or if there's been a fire there in the last five years if it's subject to if it's on the loose fill asbestos register any significant total safety risks that are apparent on an ordinary inspection and whether or not the property has been the scene of a violent crime in the last five years and so tenants groups are really pushing to make sure that everything is disclosed upfront so that people contracting understand all the things that go with the property right from the beginning.

Brian: If I was the agent how would you recommend they disclosure this?

Lisa: Well I think it's very important to go back and get updated instructions from your clients especially if you're a new agent taking over the property because you may not be aware of things that require to be disclosed so you're going to have to have that conversation with landlords and then document that as well. Now what is interesting and there's a big push from tenants groups to say that under the legislation currently if there's a failure to disclose then it's an offence but they want to they want some stick so to speak so what they would like is that it would still be a breach of the legislation for failing to disclose but the remedy is to allow a tenant to be able to terminate for non-disclosure and that's rather problematic and I think that's where you're going to get a landlord's attention and they know that they're going to lose a tenant based on non-disclosure. Now the other thing in relation to disclosure has been in respect to drug manufacturing and drug crime so what they're looking at doing is making it necessary and a requirement for an agent to disclose if there's been manufacturing on the premises in the last two years and also a drug crime. Problem is drug crime is very broad.

Brian: So we get asked about that. How does the agent know there's been a crime there?

Lisa: We're going to have to ask questions you have to ask the landlord now.

Brian: How's the landlord going know if there's been a crime they're? If the agent gets prosecuted and comes out on a bond and so they've never been to jail then how do you know there's been a crime there?

Lisa: We can only disclose what you know that you have to make reasonable inquiries and I'd suggest that a lot of agents locally would know if they're an issue with a particular properties.

Brian: So let's say that they've been charged but it hasn't gone to court yet.

Lisa: Well again this would come down to the definition of this term "drug crime" in the act and it will need to be defined otherwise it's going to be left to NCAT to develop the common law to describe at what point has the crime been proven at what point disclosure is required.

Brian: It's going to be in the legislation you think?

Lisa: I think we'll see it in there and I think it's necessary to see it in there so especially where there's been manufacturing so with these ice labs and whatnot not every Council has been as proactive to ensure that proper decontamination of premises are taking place and so it's an issue that's sort of simmering out there in the community because there are now claims being made by tenants that have rented properties but properties haven't been cleaned properly and they have a personal injury claim because they're now ill or their children are ill based on the chemicals that are leeching out of walls and so it is a live issue.

Brian: Yes, very much so.

Lisa: Some other things that have been pushed in the changes are in regard to rent increases and so tenancy groups would like to see the frequency of rent increases limited and also having them tied to CPI as well.

Brian: Really?

Lisa: Yeah so that's an interesting one.

Brian: That is interesting!

Lisa: Bonds is another big issue and I think we were expecting different groups to make further submissions and that doesn't look like we've had a lot on it but for example the issue of pet bonds has been raised and with such high rates of pet ownership in Australia a lot of tenants find it very difficult to rent with a pet and a lot of tenants will offer to pay an additional bond if they can have the pet at property but of course agents can't take it under the legislation.

Brian: Just recently the insurers are going to insure for pets now.

Lisa: That's right, Terri Sheer and the like are now going to insure that's right which which helps but it would also help if there was an additional bond that could be paid a proposal has been pushed so that no longer would the bond amount be capped at four weeks for example for properties over $450/week and there are certain circumstances which there is a view that it's warranted to charge an additional bond and it might be where tenants don't have rental history their higher risk tenants so they don't have the ability to show that they can pay or situations where they have a pet but it looks as though the the four weeks is going to be capped and that's also to include furnished premises as well. The discussion paper looked at rental arrears as well and there was a suggestion put out there about charging late fees which the industry got very excited about but it's died down and that's based on the US model where tenants are charge late fees to encourage prompt payments.

Brian: What was the Tennant's Union idea about late fees?

Lisa: No they weren't so keen. Inspections and privacy so looking again to encourage long-term tenants if you are a long-term tenant trying to limit the amount of inspections that agents can do so they're not coming through every quarter and then sitting a definition for what is a long-term tenant and also looking at privacy and and so some of the issues that arise that the agents are coming through and photographing on periodical inspections all the tenants goods and so there's a discussion going on about how appropriate that is what's the agent doing that information and can it be used. In Queensland and Tasmania their acts prohibit they prohibit the use of those photos but not the taking of the photos so we're trying to find some even ground there.

Brian: You can take the photos but you can't use them?

Lisa: Yes that's right, so you can't use it in marketing so when the tenants gave notice for example you can't pop it up on the internet and show all their and put its own possessions and whatnot it's in New South Wales the property stock and business agents regulation requires agents don't use or disclose any confidential information obtained while acting on behalf of a client or dealing with a customer so you have that already in the agents legislation. Nothing they raised was rental housing standards you know having minimum standards and while in theory that's great so for example in Tasmania they've recently passed legislation requiring rental properties to have certain facilities heating, ventilation, cooking, running water, thought it was standard but, that aside the problem where you start having these minimum standards and we have compliance issues then the rents go up and so we're trying to find that balance. Nothing in relation to termination notices the agents that have been in the industry for some time will remember that with the amendments to the previous legislation one of the windfalls for the landlord was pushing out a no grounds notice from 60 days to 90 days but when it went to the tribunal the tribunal the discretion went and the tribunal had to terminate a tenancy well there's lots of discussion around this and us has been put that these 90 day no grounds notices are used by agents as a retaliatory measure to get rid of tenants a complaint or that we just don't like and would like to see it go all together so in the discussion paper there's talk of removing a 90 day notice and what's being proposed is that there are more grounds for termination so for example if you need to you're the landlord and you need to move back into the property because you're unwell or you've lost your job you list it so they're actually saying no you have to nominate why you're going to terminate see it flies in the face of you know your interest in that land what you're giving in to a tenant is a leasehold disposition and it really does infringe on that's right so it's being fought fairly strongly by the industry to say this is one of the wins that we got back in 2010 we'd like to keep it so it would be interesting. Down in Victoria they're no grounds notice period is 120 days they're looking at a German model as well which is tied into the length of the tenancy so for anything over eight years it's anywhere between three and nine months notice, which we don't want to see.

Brian: That's something to watch isn't it.

Lisa: Yes indeed, so if you've got any tenants that you think might be better to moved on you might be giving consideration to that now. Technology was obviously looked at you know we're changing the way in which we communicate with parties and how documents are signed and there is a proposal in respect to SMS and email and looking at removing fax as a method of service of notices and looking at emails where email addresses are nominated on the face of the residential tenancy agreement so if you nominate an address and you don't check it we can still get a valid service of notices.

Brian: The tenant has to opt in for that?

Lisa: Yeah that's right, that's what's being proposed.

Brian: I think most property managers would cheer when they hear you say that.

Lisa: Indeed, because a lot of with the changes with the Australia Post now with the delivery of notices even though you've got deemed service using ordinary mail most agents are hand delivering to the letterbox now for effective service so those types of changes are good and the again in New South Wales strata Scheme Management Act allows service of notices via email so I think it's just catching up bringing the tenancy legislation inline now some big changes in regard to domestic violence so in the 2010 Act provisions were put in in respect to victims of domestic violence being able to terminate the tenancy by giving 14 days notice and they've been a lot of submissions not just from tenancy groups but from women's advocacy groups about how ineffective this actually this is and what the legislation currently requires is that victims need final orders so final orders apprehended violence orders to terminate the tenancy and the problem is in practice is that sometimes these can take 12 months so it just it just doesn't play out well. So the proposal put forward is that the tenancy can be terminated immediately if there are interim orders issued and that's problematic for landlords and for agents because in the context of AVOs a lot of alleged perpetrators will enter into interim orders because interim orders are look to stay away from each other and don't go near the property and I'm free to do so I agreed to do so and then I'll go have the fight about final orders so it's problematic if people can terminate so that's one area that they are looking at changing but there is strong advocacy from property groups to say it's not fair on a landlord if people can go and get interim orders and then just walk out of the lease.

Brian: It could be a way to break the lease.

Lisa: That's right, now the other area is that tenants have always been vicariously responsible for lawful invitees onto the premises.

Brian: You invite someone onto your premises, and if they do damage, you're responsible.

Lisa: And the proposal being put is it in domestic violence situations that shouldn't be the case that a tenant shouldn't be held responsible for the damage done so if someone comes in and punches holes in walls and whatnot the tenant not be held responsible.

Brian: It's hard for the landlord is it.

Lisa: It's very difficult for the landlord and again that's strongly being opposed by property groups. The other thing that the is being advocated is that a tenant can't be listed on a tenancy default database for damage to property or rental arrears if the situation's surrounding those two breaches are as a result of domestic violence so there's quite a lot in it REI put forward an interesting proposition where they're saying look you've got all this money and we mentioned the figure earlier how many billions they've got and you take the interest from that bond and you set up a special fund and in circumstances where properties are damaged money is used from that fund to fund repairs and damages but how workable that would be is still to be seen I mean something has to change but whether or not it goes as far as what's been proposed.

Brian: When are they looking to bring out the legislation around this, do you know?

Lisa: Well it'll be coming shortly I think the parties have put their submissions in and you know there are proposals that are that are currently out there obviously has to go before Parliament but it's just about you know striking that that balance.

Brian: Are you thinking they'll be out this year?

Lisa: No.

Brian: No, okay so 2018?

Lisa: Yeah, possibly.

Brian: Right obviously there's a lot of discussion still happening.

Lisa: Oh absolutely there's still discussions trying to find that balance and I mean domestic violence is a very big issue and an important issue but we have to just strike that balance the other thing I mean owners that need to be protected as well and you know ensure that people that they put into the property are going to look after it and have those additional rights protected through the tribunal otherwise you could have a situation where if a land an agent knew that a tenant was involved in a previous domestic violence situation you may have tenants being discriminated against based on that and you know they don't get rental properties and you don't want that situation occurring.

Brian: Lisa that's very interesting indeed we've just got to wait and see what they do and all the discussions around that but we'll be finding that out hopefully in the next 12 months. Thank you very much.