Residential Tenancies Act Review
CPSA's submission to the Fair Trading statutory review of the Residential Tenancies Act 2010.
Summary of CPSA's recommendations
- The Act should clearly recognise and acknowledge the power imbalance between tenants and landlords.
- The Act should provide more security of tenure in the form of longer leases and the removal of no grounds evictions.
- Landlords should not be able to unreasonably refuse minor works undertaken to make a home more accessible for an older person or person with disability, and to more easily enable ‘ageing in place’.
- Additional share-house occupants who do not have a written tenancy agreement, and those living under informal rental arrangements should have protections under the Act.
- The NSW Government should consider providing land tax exemptions to private landlords who provide long-term leases and affordable rents for tenants.
- The maximum allowable bond of four weeks’ rent should not be increased.
- Tenants should continue to receive a percentage of the interest earned on their bonds and this percentage should be increased.
- Notice periods for rent increases should be increased to 90 days.
- Landlords, not tenants, should be required to prove that a rent increase is not excessive if it exceeds CPI.
- The Tribunal should be able to take into account the affordability of a rent increase when making a decision.
- The regularity of rent increases should be restricted to no more than once per year.
- Late fees for rent owing should not be introduced.
- ‘New Tenant Checklists’ should outline lease terms that are prohibited as well as required safety features. Information about a property’s energy efficiency should also be included along with information about significant repairs.
- Basic appliance standards for rental properties should be introduced so that renters are guaranteed a certain level of energy efficiency.
- Section 52 of the Act should be amended to explicitly ensure that a landlord cannot refuse an additional occupant, provided that this does not lead to overcrowding.
- Landlords should be required to commission a regular report outlining the condition of the property, ongoing maintenance which is required, and its energy efficiency levels. This report should be provided to current, and future tenants. ‘Reasonable diligence’ should be removed from section 65 of the Act.
- The number of inspections permissible per year should be reduced.
- Tenants who have lived in a property for five or more years should be classified as long term tenants.
- Notice periods for landlord tenancy terminations should be increased to 90 days.
- Break fees should be applied to all fixed term tenancy agreements and these should be reduced to two weeks rent.
- Funding for the Tenants Advice and Advocacy Program should be substantially increased.
- Tenants should be able to refuse photographs or videos being taken of their home and be informed of this right.
CPSA welcomes the opportunity to contribute to the statutory review of the Residential Tenancies Act 2010. NSW has extremely poor tenant protections. Private rental housing is fundamentally insecure, unaffordable, and unadaptable, particularly for older people and those with disabilities. Tenants can be evicted from their homes with only 30 days’ notice, face no-grounds evictions and there is no legislation against unaffordable rent increases. The only avenue open to tenants to dispute rent increases is to challenge the rise through the NSW Civil and Administrative Tribunal (NCAT) where the onus is on the tenant to prove that the increase is unreasonable.
The lack of safeguards for tenants means that private rental market tenancies are inherently insecure, particularly in strong housing markets, as has been evident in NSW for quite some time. This has produced an environment where rent increases are routinely well above CPI which prices out renters living on income support payments because their incomes have not kept up with rents. Commonwealth Rent Assistance is indexed to CPI, and is currently paid at $64.70 per week for singles while the median weekly rent for a one bedroom unit in the outer ring of Sydney is $350 .
CPSA notes that the NSW Government’s recently announced 10-year social housing reform program, which aims to increase the use of private rental assistance products in order to assist households to avoid, or leave, social housing. CPSA cannot see how this can be a tenable course of action, without greater security of tenure being provided under the Residential Tenancies Act.
Aims and objectives of the Act
Q. 1 Are the aims and objectives of the Act still valid?
The aims and objectives of the Act are not clearly defined within the Act itself. Relying on what the Discussion Paper notes as the aims and objectives, CPSA believes that these remain valid. CPSA would however like to see some clearly expressed policy aims within the legislation and that this be expanded to recognise the inequity and power imbalance between landlords and tenants.
Changing profile of the rental market
Q. 2 How can the regulation of residential tenancies in NSW adapt to effectively support the changing profile of the rental market into the future?
There are far more people renting within NSW than ever before and this trend is growing. Approximately one third of NSW residents live in rented properties, with the majority renting privately . As of 30 June 2013, 290,000 NSW residents lived in social housing. As noted in the Discussion Paper, renting is no longer a short term housing option, with people renting for longer.
CPSA is particularly concerned about older renters and disability support pensioners, and the lack of affordable housing options, as well as the insecurity of tenure that the private rental market leaves them with. People are increasingly reaching retirement without owning a home, leaving them in a particularly precarious situation. They face living on a lower fixed income with limited security. Renting households in NSW are more likely to be in housing stress than home purchasing households (40% compared with 23% ) and the long-term situation of low-income renters is poorer as they do not accumulate an asset. They are also more susceptible to displacement through gentrification and lack the security of tenure to ensure that they are able to ‘age in place’.
CPSA would like to see the Act provide more security of tenure in the form of longer leases and the removal of no grounds evictions to ensure that tenants living on low incomes are not pushed out of premises which they have made their homes, with very little notice and often an inability to find alternative, appropriate and affordable accommodation within the local area.
CPSA would also like to see simple additions to a home, such as the installation of grab rails within a bathroom, being able to be made more easily and that greater protections around repairs and maintenance be implemented.
Q. 3 Are there any types of occupancy arrangements which should be included or excluded from this Act?
CPSA would like to see additional share-house occupants who do not have a written tenancy agreement have protections under the Act. The Act currently excludes sub-tenancies where there is no written agreement, leaving these tenants vulnerable to the whims of the head tenant, with few rights.
CPSA is also concerned about vulnerable tenants who live under informal rental arrangements with relatives. For example, they have moved in with adult children, or rent off adult children but do not have a formal rental agreement in place. It is unclear to CPSA how such family rental arrangements fare under the existing Act.
Starting a tenancy
Q. 4 Are there any provisions of the standard tenancy agreement or condition report which can be improved or updated?
CPSA notes that landlords, and real estate agents, in particular, are incredibly brief in their comments on condition reports, leaving it up to the tenant to fill out the details about existing faults and damage. Tenants are even left to fill in basics about the property, and to cross out irrelevant sections which don’t apply to their home. CPSA fears that this tactic results in tenants being potentially liable for damage that was already present when they moved in. This is particularly the case for those who fail to send it back in time. CPSA would like to see checks in place to ensure that real estate agents and landlords do not disregard this system and that they must make serious attempts to include existing damage and wear and tear.
CPSA is also concerned about the small print used in the standard forms as well as the faintness of the carbon copy, which tenants are given. These are often illegible.
Q. 6 Is the ‘New Tenant Checklist’ a useful resource? Are there other important matters which should be covered in the checklist?; and
Q. 7 Should the ‘New Tenant Checklist’ include, or be accompanied by, specific information on required safety features e.g. smoke detectors, electrical safety switches, pool fencing etc.?
The ‘New Tenant Checklist’ is useful for new tenants and uses clear language to spell out a tenant’s rights and obligations and outlines what they should have received etc.
CPSA recommends that the Checklist include lease terms that are prohibited under Section 19 of the Act, such as requiring tenants to pay for professional cleaning at the end of a tenancy, requiring tenants to take out insurance, or stating that tenants are liable to pay out all or part of the remaining lease if the agreement is broken.
CPSA supports the suggestion that required safety features be listed. This should also include specific details relevant to the property about the requirements in order to meet such safety requirements, such as requiring twice yearly inspections of smoke alarms, as is the case in some apartments, for example.
CPSA would like to see it accompanied with details about the energy efficiency of appliances within the property, such as the hot water system, including whether it is gas or electric and the average cost of running it. This information can have a bearing on what energy offers will work best for them (for example, whether time of use tariffs will be more cost effective, or not). Information about appliances and energy efficiency is currently near impossible to get prior to signing a lease and tenants are left to find out about the energy efficiency, or otherwise, of such items when they receive their first energy bill.
Q. 8 Should any other information be required to be disclosed by landlords at the time of entering into an agreement?
Strata by-laws should be required to be provided to tenants prior to the signing of a lease.
Tenants should also be told about significant repairs that have been undertaken, or which are due to be undertaken on the property. They should also be alerted to any significant developments which have been approved within the building or the local area which may have implications for access, or quiet enjoyment.
Q. 9 What incentives would encourage the use of longer term leases?
The Act should be amended to better facilitate longer term leases (such as five year leases, for example). While such leases are possible under the existing Act, they rarely occur, with six to 12 month leases being the norm. These short term leases have negative implications for people outside the workforce, such as people with disabilities and retirees, who are considerably disadvantaged by potentially being required to move on a regular basis – the cost of moving alone is prohibitive.
CPSA believes that the NSW Government should consider providing land tax exemptions to private landlords who provide long-term leases and affordable rents for tenants.
CPSA would like to see greater security of tenure in place for all tenants, including those on continuous leases so that they do not face no-grounds evictions.
Q. 11 Is the maximum bond amount of 4 weeks’ rent appropriate?
CPSA is against any increase to the maximum allowable bond of four weeks’ rent. Tenants already face difficulty in fronting up a bond of four weeks’ rent, particularly when they must pay their next bond before they have received the bond refund for their previous property.
Q. 12 Should a portion of the interest on rental bonds continue to be paid to tenants, or should this portion also be used to fund services for tenants?
Over $1 billion is held in the form of rental bonds with the NSW Rental Bond Board, generating approximately $60 million in earnings during 2012/13.
CPSA argues that tenants should continue to receive a percentage of the interest earned on their money, payable on the refund of their bond. This percentage should be increased from the current paltry rate of 0.01%. CPSA recommends that regulation 25(2) (related to section 173 of the Act) be amended so that the prescribed rate at which interest is payable is not linked to the Commonwealth Bank of Australia Everyday Access Account on a balance of $1000 but rather to an account which is more reflective of average interest rates obtainable.
Funding to the Tenants’ Advice and Advocacy Service (TAAS) should also be greatly increased – CPSA does not view these as mutually exclusive. At present funding for these services is $9.26 million per annum , a mere 15% of the yearly earnings made on rental bonds.
Q. 14 Are the current notice periods for rent increases appropriate?
CPSA puts forward that the notice period should be increased from 60 to 90 days. This would provide tenants with more time to be able to budget in order to absorb the increase, or to dispute an increase.
Q. 15 Do the existing provisions governing excessive rent increases strike the right balance between the interests of landlords and tenants? If no, how could they be improved?
The existing provisions under section 44 of the Act put too much onus on the tenant to prove that a rent increase is excessive. It should be up to the landlord to make out the case for the rent increase if it exceeds CPI. CPSA also believes that the Tribunal should be able to take into account affordability, and the tenant’s capacity to pay the rent increase.
The regularity of rent increases should be restricted to no more than once per year.
Q. 17 Should the introduction of late fees for rent owing be considered?
The introduction of late fees could compound the disadvantage faced by tenants who cannot afford to pay their rent on time. CPSA is strongly against the introduction of late fees for rent owing.
Sydney is already considered the country’s most unaffordable city. According to the recently released Rental Affordability Index, 40% of households are locked out of rental affordability. The index found that in Greater Sydney an average householder must spend 28% of their income to cover rent but this skyrockets to as high as 65% for low income households . To further penalise such households through late fees would be unacceptable and put these people at increased risk of homelessness.
Water and utilities
Q. 18 How can the ‘split incentive’ issue be addressed in the residential tenancy market?;
Q. 19 What incentives might encourage landlords or tenants to improve energy and water efficiency?
CPSA believes that the ‘split incentive’ issue, where landlords have little incentive to make a property energy efficient as they are not the ones paying the bills, can only be overcome by regulation. Tenants are often simply not allowed to invest in making a property more energy efficient, and even if they do so, they run the risk of not being able to reap the benefits if they do not stay in the property for a significant period of time, something which cannot be guaranteed.
CPSA would like to see the implementation of basic appliance standards in rental properties so that renters are guaranteed a certain level of energy efficiency.
CPSA recommends that a certain standard of insulation in rental properties be required, and that hot water systems should have a minimum energy rating. This information should be required to be disclosed at the time of signing a lease. CPSA notes that New Zealand recently announced that rental homes will be required to be retrofitted with ceiling and under floor insulation from 1 July 2019. CPSA understands that the New Zealand Government offers insulation subsidies, but that there has been a low uptake by landlords.
Landlords should be required to demonstrate that their property meets the ‘water efficiency measures’ (section 39 (1) (b)) and ensuring that toilet cisterns do not leak should be added to the list of measures.
Rights/obligations of landlords and tenants
Q. 20 Is there an appropriate balance between the general rights and obligations of landlords and tenants under the Act?
CPSA believes that the Act does not adequately factor in the inherent power imbalance between tenants and landlords. While the rights and obligations may be spelled out in the Act, the reality is that tenants are not always in a position to assert their rights for fear of eviction or retaliatory rent increases.
CPSA recommends that section 52 of the Act should be amended to explicitly ensure that a landlord cannot refuse an additional occupant in the home, on the proviso that it does not lead to overcrowding. For example, older tenants may need someone to move in with them as they age, such as an adult child or carer, in order to assist them with daily living. They should be able to do this easily without interference from the landlord or real estate agent.
Q. 21 Is further guidance required in relation to whose responsibility it is to repair the premises and when the repairs must be carried out?
CPSA echoes the Tenants’ Union’s recommendation that landlords be required to commission a regular report (at least once every five years) outlining the condition of the property, ongoing maintenance which is required, and its energy efficiency levels. This report should be provided to current and future tenants.
CPSA would like to see ‘reasonable diligence’ removed from section 65 of the Act. It is inappropriate that the Act currently states ‘the Tribunal must not determine that a landlord has breached the obligation unless it is satisfied that:
(a) The landlord had notice of the need for the repair or ought reasonably to have known of the need for the repair, and
(b) the landlord failed to act with reasonable diligence to have the repair carried out.’
‘Reasonable diligence’ is too subjective and should not be a reason used for avoiding obligations to make repairs.
Q. 23 Are there other types of work a landlord should be able to refuse permission for a tenant to undertake?
Landlords should not be able to unreasonably refuse minor works undertaken to make a home more accessible for an older person or person with disability, and to more easily enable ‘ageing in place’. For example, a landlord should not be able to refuse the installation of grab rails within a bathroom, or the addition of a ramp to access the property, provided that there will not be an undue financial burden on the landlord or structural damage done to the property.
Inspections and the right to privacy
Q. 25 Should the number of inspections allowed per year be reduced for long term tenants? If so, how long should a tenant have continuously occupied the same premises to be classified as a ‘long term tenant’?
The number of inspections permissible per year should be reduced for all tenants. The current limit of four inspections during a 12 month period is excessive, particularly if tenants have demonstrated that they take good care of the property. One inspection per year should be sufficient for landlords, unless prior inspections have shown that the home is not being well kept.
Q. 27 Should there be specific provisions in the Act that deal with the use of photographs or videos showing a tenant’s personal property to advertise premises for sale or lease?
Tenants should be able to refuse photographs or videos being taken of their home (and therefore possessions) during inspections and should be informed of this right in the ‘New Tenancy Checklist’ and in the written notice for any upcoming inspections. Tenants should be entitled to see such photographs and consent must be obtained before they are used online (or elsewhere) to advertise a property.
Rights of long term tenants
Q. 31 Are the provisions applying to long term tenancies appropriate?
The Residential Tenancies Act 2010 contains provisions for tenants who have lived continuously in the same home for 20 or more years. These provisions should remain; however, CPSA proposes that tenants who have lived in a property for five or more years should be classified as long term tenants.
Q. 32 Are the current termination notice periods appropriate?
CPSA recommends that the notice period at the end of a fixed term (section 84(2)) be increased from 30 days to 90 days. This is particularly important for tenants on low incomes who may take longer to secure a property. Similarly the notice period during a fixed term agreement when a property has been sold (section 86(2)) should be increased from 30 to 90 days.
Q. 33 Should landlords be required to provide a reason for terminating a tenancy? If so, what types of reasons should be considered?
CPSA calls for the removal of ‘termination without grounds’ from the Act. This aspect of the Act, which allows landlords to evict tenants without reason, plays a significant role in perpetuating the lack of security of tenure which the NSW private rental market provides. Not only does this not allow people to plan ahead and know where they will be living in the future, it also undermines a tenant’s ability to assert their rights in other areas (such as maintenance and repairs) as they know that they can be evicted without grounds.
CPSA recommends that tenancy agreements should only be able to be terminated with specific grounds which should be spelled out within the Act, such as if the landlord requires the property for their own residence.
Q. 34 Should the Act require all residential tenancy agreements to have provisions imposing break fees?
Break fees should be applied to all fixed term tenancy agreements for consistency and to ensure the best outcomes for tenants, rather than the current framework which is by mutual agreement between tenants and landlords.
CPSA believes that break fees should be reduced to two weeks rent, and that the exemption from facing financial penalty should be expanded to include people who are admitted for long term hospital stays, including mental health facilities, and that tenants living within a strata scheme who are notified of a strata renewal plan should be able to end a fixed term tenancy without being liable to pay compensation to the property owner.
When the landlord breaks a fixed term agreement, CPSA sees it as appropriate that the landlord be required to pay for the tenant’s moving costs.
Tenants Advice and Advocacy Program (TAAP)
Q. 39 Do the current information, advice and dispute resolution services operate effectively?
The information, advice and advocacy provided by the TAAP network is a vital service which needs to see an increase in its funding. At present, the service is under-funded and there is a pot luck situation as to whether someone is able to access the support they need based on where they live – demand simply outstrips supply.
Since the closure of CPSA’s Older Persons Tenants’ Service (OPTS) and the Park and Village Service (PAVS) in November 2013 there has no longer been any specialist tenancy service assisting these vulnerable groups. Existing Tenants Advice and Advocacy Services must be adequately funded to ensure that tenants are able to receive reliable and tailored advice and assistance (including representation at NCAT hearings) when required.
With respect to Fair Trading’s own tenancy services, CPSA has anecdotally heard about tenants who have received incorrect information from NSW Fair Trading Tenancy Information Service, which is of concern. CPSA also continues to receive calls from tenants who have been referred to OPTS and PAVS by Fair Trading, despite the services no longer being in operation. CPSA has contacted Fair Trading on numerous occasions to have this rectified but Fair Trading staff continue to make these referrals.