The REINSW have presented their areas of concern last month with respect to the latest overhaul of the Residential Tenancies Act to The Office of Fair Trading and have scheduled a meeting with new Minister for Innovation and Better Regulation Matthew Kean to provide feedback.
“We felt it was necessary to take action ahead of any proposed amendments to the Residential Tenancies Act 2010 (RTA) being released,”REINSW President John Cunningham said.
“Our Position Statement specifically relates to the 27 recommendations tabled by the government in their Review Report for change to the RTA following on from their public consultation in 2016.
The three most important changes that Cunningham explained were around the proposed provisions for breaking a fixed term lease, electronic service of notices and alterations to property.
The Amendment Bill is expected to be passed by the government by mid this year.
In an exclusive interview with Elite Agent, Cunningham explained that, “We felt it was necessary to take action ahead of any proposed amendments to the Residential Tenancies Act 2010 (RTA) being released”.
Though the statutory review of the RTA has already occurred and produced the 27 recommended amendments, The REINSW is asking for further consideration of the proposed amendments to the RTA to better consider and balance the hardships of property owners, not just the hardships of tenants.
According to Cunningham, some of the areas of particular concern to REINSW are the proposed amendments relating to the breaking of a fixed term lease, provisions for the electronic service of notices and protocols for situations of domestic violence in a rental property.
Breaking a Fixed Term Lease
The proposed amendment has been put forward with the expressed intent (at 4.4.3) of creating greater certainty around the breaking of a fixed term lease. The REINSW has recommended that Section 107 of the RTA ought include a prescribed method of calculation of liability from the tenant to the landlord upon the tenant’s early termination, without grounds.
Currently, the practice is for a fee of six week’s rent penalty to be paid by the tenant, though it is optional and can be removed from the contract in favour of the previous regime where the Landlord claims an uncapped and uncertain compensation amount. Many have welcomed the certainty of the six-week’s rent penalty however, other have questioned its arbitrariness and the need for such a penalty which could far outweigh a landlord’s actual economic loss in the event of a break lease.
However, the level of compensation (calculated either as six week’s rent or case-by-case) is only one aspect of the break lease scenario that ought to be weighed before any proposed changes affect the rights of parties. Cunningham explains, “There are some big gaping holes there, so in this amendment, there is also some potential for either further problems for landlords, and I think the thing that’s missing out of all of this is the fact that the majority of landlords own one investment property, it’s over 80 percent of them.”
“They’re regular people, mums and dads, or they’ve got it in super funds, if they’ve got it in super funds, you’re relying on that as a super income which, in reality, is offset by the fact they probably won’t get a pension. So, they’re being treated almost like second class citizens in this respect, and a property owner still must have rights. I mean, they own the property and I think when you balance that out with the right amount of tenants rights, you want to make sure there’s not that area of abuse and I think there’s a whole lot of area inside these recommendations that could be very easily abused and taken advantage of, which we’ve found over the last couple of years, particularly with break lease.”
“There’s a whole section [in] here on break lease and that’s one of our big ones is that tenants get way behind in the rent during the fix term lease because they want to move out, break the lease and there’s not enough money in the bond to cover the rent and the break the lease fee.”
Electronic Service of Notices
The proposed amendment (4.5.2) calls for an amendment to clarify the position of electronic service of notices, which methods are approved for electronic service, and a platform for parties to consent and agree to the use of electronic signatures on notices. It was widely thought by the review that SMS as a method of sending notices was not suitable.
In NSW, Section 9 of the Electronic Signatures Act (2000) allows for parties to sign electronically, so long as both parties consent. An agreement by parties would allow for the electronic service of notices, for example, entry notices to be electronically signed and then sent by email. The time efficiencies and economies of such capabilities are almost self-evident.
In relation to this topic, the REINSW is recommending measures that pre-empt the practical implementation obstacles of such a change. Measures such as:
- Detailing which methods of electronic transmission (excluding SMS) the parties agree to;
- A standard form that allows parties to opt-in to this functionality;
- A requirement that parties notify one another within 7 days if there is a change to the email address;
- Reference to the Electronic Signatures Act (2000) as the enabling act, on the Standard Form.
In regard to the electronic service of notices and electronic signatures, Cunningham has said, “We don’t have a lot of concerns there. We proposed that for our reform package, was that the current Act didn’t allow for that and therefore there were time delays in serving notices, people were saying “Oh, I never got that in the mail” or “You never handed that to me” and things like that. Whereas electronic delivery ensures that as soon as that is opened or it’s sent, there’s a record of it immediately then. So, there’s been concerns on the other side of the spectrum saying people don’t necessarily open their emails every day and that’s the side of the electronic world that we have to overcome.”
“We’ve got to create those environments, as they’ve done with the bond forms. Now, it’s interesting that the government’s mandated that it [bonds] must be done electronically, and that is great to mandate there, but on the other side there’s a lot of issues with some people who still don’t have electronic access. Now we can bring them into our offices, and we can do all those sorts of things but you’ve got to live in the real world with these things and make sure you’ve got provisions for servicing and also lodgement in both forms.”
“But, serving notices to tenants of vacating or notices of inspections and things like that – we’re in the 21st century; this is the electronic age, we’ve got to bring these things into play.”
In relation to the Domestic Violence Provisions of the Act, the discussion is not in relation to their relevance but rather surrounding the effectiveness of the provisions to reduce the exposure and vulnerability between the victim and the perpetrator of domestic violence, where that perpetrator is also a co-tenant or co-occupant of a residential tenancy.
One of the major criticisms of the RTA from the review is that the termination provision can only be invoked once there has been a Final Apprehended Violence Order obtained against the co-tenant, which can take up to a year, puts the onus on the victim to take action, in any case does not restrain the perpetrator from the premises if the victim has left the property and if the victim remains in the property, a Tribunal must consider the housing needs of the perpetrator before it will terminate the tenancy.
The interim protections that exist in the 2010 Act and which are available to victims with an AVO but not a final AVO such as urgent changing of locks is equally problematic and pale in a crisis where the personal safety is at risk.
The review, and in particular the submission from the Women’s Legal Service, highlights the social and economic obstacles and unfair regulatory burden that the requirement for a final AVO places on victims seeking to terminate a lease, which extends to the victim’s ongoing liability for rent, water and utility charges although they may no longer be living at the property.
While the REINSW supports the position of a clearer pathway out of a residential tenancy that is host to a domestic violence situation, the Position Statement is also calling for some recognition that in many cases, the Landlord becomes a tertiary victim of the situation through economic loss. In commenting on the proposal to increase the efficiencies of the Domestic Violence Provisions, Cunningham said, “For the notice on that, we completely support the concept. There isn’t any provision in here, even though the landlord has been very understanding and completely supportive of the person that needs to get out of that situation, the tenant’s still responsible for repairs and if it’s a husband abusing a wife and he’s smashed the place up, who’s going to pay for it? Now, what’s happening is that this is probably going to bring these sort of exits forward, which is great from a safety point of view, but there’s, again, a big black hole for the landlord.”
“Under the current provisions, the tenant is still responsible. There are sections in here [the review] that sort of takes away that responsibility. Now, I’m concerned about that. We’ve got rental bonds earning interest, we’ve got all the money in trust accounts earning interest. Surely the government could apply some of that interest they’re earning on those accounts to the provision for the repairs caused by domestic violence issues.”
Cunningham said the NSW Fair Trading Policy Department received the Institute’s Position Statement late January and would meet with the new Minister for Innovation and Better Regulation Matthew Kean to discuss the changes to the Act further.
[post updated 1 March, 2016]