Only The Sangfroid

Mark is of fair average intelligence, who is neither perverse, nor morbid or suspicious of mind, nor avid for scandal. He does live in an ivory tower.

These are his draft thoughts…

Quick Post: Notes and Thoughts on the Residential Tenancies Legislation Amendment Bill 2022

The ACT is proposing changes to the Residential Tenancies Act 1997.  A driving policy goal for these changes is more security for tenants.  The big ticket items in the Bill are the end of ‘no cause’ terminations and the further development of minimum standards.  I strongly recommend that all tenants in the ACT have a look at the proposals and provide their feedback (deadline 26 August): https://yoursayconversations.act.gov.au/expanding-rights-renters

The big ticket items are, of course, the ones that are going to get the most attention.  Minimum standards are only going to affect landlords who have properties that do not meet the minimum standards.  The Real Estate Institute of the ACT (REIACT) will claim that this will make it harder for landlords but, clearly, this will only make it harder for landlords who have properties that do not meet minimum standards.

Indeed, the reasoning that REIACT uses to show that ‘properties are leaving the market’ (as if landlords carry their properties around on their backs like shells and that, if it weren’t for their properties, they would merely be slugs) is faulty: they try to match up the number of bonds held by the Territory with taxation data.  What they show is more likely non-compliant landlords failing to lodge bonds with the Territory.

In this post, I wanted to give my views on some of the less obvious parts of the Bill.  And I give these views knowing that the ACT has an extremely good Residential Tenancies Act and that the ACT has been extremely lucky to have had several generations of extremely good legal policy officers working on its development.

One part of the minimum standards framework that’s not well understood is how the Bill suggests landlords will comply.  A new section 19B states that landlords must ensure the premises comply with the minimum standard as soon as practicable after becoming aware of the noncompliance.  Section 71AAA will allow tenants to seek a rent reduction or even compensation if the property fails to meet the standard.  So far, so good.

What is unusual–and probably not intended–is that clause 82 of the standard terms are proposed to be amended.  Clause 82 currently reads:

(1) On giving the tenant 1 week notice (or such other agreed period), the lessor may enter the premises at a reasonable time, having regard to the interests of the tenant and the lessor, for the purpose of making or inspecting repairs.

(2) For urgent repairs, the lessor must give reasonable notice and enter the premises at a reasonable time having regard to the interests of the tenant and the lessor.

In the ACT, a lessor can inspect a property twice within 12 months.  Clause 82 at the moment is triggered by the need for repairs.  If there are no repairs, no right of entry to make or inspect them.

The new proposed clause 82 contains a new right of entry for the lessor:

(1) On giving the tenant 1 week notice (or such other agreed period), the lessor may enter the premises at a reasonable time, having regard to the interests of the tenant and the lessor, for the purpose of—

(a) making or inspecting repairs; or
(b) inspecting the premises to ensure the premises comply with the minimum housing standards; or
(c) undertaking work, or inspecting work  undertaken, to ensure the premises comply with the minimum housing standards.

(2) For urgent repairs, the lessor must give reasonable notice and enter the premises at a reasonable time having regard to the interests of the tenant and the lessor.

The lessor now has significantly more access to the property than twice in twelve months; they potentially have weekly visits to the property to ensure it is meeting minimum standards.

This is a problem because–especially with real estate agents–their access to the property for one purpose will often be used to ensure strict compliance with some other term.  The most common one I’m aware of is where the real estate agent has access to the property grounded in the Act, they see a packet of cigarettes on the table, and then imagine that they can smell smoke in the property and threaten a notice to remedy.  The inspection to ensure that the premises comply with the minimum housing standards should not be in addition to the two inspections within twelve months.

The other big ticket item is the removal of a ‘no cause’ termination.  At the moment, a lessor can terminate an agreement (provided that it does not result in the termination of a fixed term agreement) if they give 26 weeks notice to vacate.  No reason needs to be given.

This is different from other grounds to terminate an agreement that isn’t a fixed term (‘periodic tenancy’).  These are ‘for cause’ terminations, but they do not necessarily need to involve any wrongdoing on the part of the tenant.  For example: eight weeks notice if the lessor wants to live in the property (or if their immediate relative wants to live in the property, or if an ‘interested person’ wants to live in the property).

It is proposed to tighten the ‘no cause’ ground of termination such that the lessor can terminate with 26 weeks notice if they require the premises for a lawful use other than as a home.  For example, if they want to use it as an AirBNB.  I’m not convinced that the landlord’s desire to use the property as an AirBNB should trump the tenant’s housing need.  I cannot think of any use of the landlord’s available under this tightened clause that would trump the tenant’s housing need.

I would, if given the chance, strike out that ground entirely.  I would also take the opportunity to strike out the ground that allows a landlord to give eight weeks notice to vacate if they intend to sell the property.  At common law, a tenancy survives the sale of the right of reversion: the property is sold subject to the tenancy.  The tenant obtains no benefit from the sale of the property to another person and yet bears a significant cost in having to move with only two months to find a new property.  If the landlord sells to somebody who wants the property as a home, then it is a different story.  The sale should go through and then a ‘for cause’ termination should occur.  But the landlord shouldn’t be permitted to evict tenants just for their own commercial windfall.

But the part of the Bill that’s captured my attention the most are the proposed new sections 45A and 51A: dealing with threats, harassment, intimidation or abuse.

In many ways, these provisions are mirrors of each other but are directed to the behaviour of the landlord (in the case of s 45A) and the tenant (in the case of s 45A).  Read at their most extreme, they can be easily summarised: if the tenant threatens, intimidates, harasses, or abuses the landlord, they can be made homeless; if the landlord threatens, intimidates, harasses, or abuses the tenant, the tenant can be made homeless.  In each case, the ultimate outcome is the tenant losing the property.  This seems very strange.

The landlord already has the right to seek a termination of the tenancy agreement under s 51 of the Act:

On application by a lessor, the ACAT may make a termination and possession order effective immediately if satisfied that the tenant has intentionally or recklessly caused or allowed, or is likely to cause or allow—

(a) serious damage to the premises or to other property of the lessor; or

(b) if the lessor is an individual—injury to the lessor or a member of the lessor’s family; or

(c) if the lessor is a corporation—injury to a representative of the corporation or a member of a representative’s family; or

(d) serious or continuous interference with the quiet enjoyment of nearby premises by an occupier of the premises.

This is a reasonable standard.  In contrast, the existing right of the tenant’s has been insufficient:

On application by a tenant, the ACAT may terminate a residential tenancy agreement effective immediately if satisfied that the lessor has intentionally or recklessly caused or permitted, or is likely to so cause or permit—

(a) serious danger to the premises or to property of the tenant; or

(b) injury to the tenant or a member of the tenant’s family.

We know that tenants are subjected to a significant amount of harassment, especially by real estate agents in the form of threatened action.  A recent example was a real estate agent attempting entry to the property without obtaining the correct consent.  Instead of apologising or offering compensation for the interference with the tenancy rights, the real estate agent threatened a notice to remedy for a completely unrelated matter that they only believed they saw because they were attempting trespass.  The threat was baseless but, importantly, the real estate agent had absolutely no intention of going to the Tribunal with this notice.  It was pure harassment from the real estate agent.

But, remember, the tenant is the consumer here.  They are paying rent for the rights of tenancy.  Those rights should be protected from threats, harassment, intimidation, and abuse from the landlord and their agents.  Conversely, the landlord and the real estate agents are supplying a service.  If they feel like a customer is harassing, intimidating, or abusive, then they should–like every other service provider–use alternative legal avenues to address this instead of seeking to make the tenant homeless.

Inserting s 51A into the Act is very likely to be weaponised by real estate agents.  We recently saw examples of real estate agents encouraging tenants to buy Christmas hampers for their landlords.  There is a genuine risk that tenants will feel increased pressure from real estate agents to be appeasing simply because there is the threat of a s 51A action against them.  Further, this is an added disincentive for tenants to defend their rights.  In a recent example, a tenant wrote a very gentle, professional e-mail to a real estate agent complaining about breaches of the Act and received a reply stating that the real estate agents took ‘offense’ at the e-mail.  At conference, the real estate agent again stated that they were offended by the claims that they’d breached the Act and, when the tenant said that he didn’t care if they were offended, was criticised by the real estate agent for being ‘rude’.  Real estate agents simply cannot be trusted with s 51A, and this should not be inserted into the Act as a threat against tenants.  After all, a home owner can be as abusive as they like towards service providers without any real threat at all that they will become homeless as a result.  Tenants should enjoy the same freedom.

But there is an added problem with s 45A: does the Act now prevent the tenant from being able to seek other remedies–especially those under the Australian Consumer Law–if the landlord or real estate deny the provision of service through threats, harassment, intimidation, or abuse?  The transaction is simple: a tenant pays rent and, in consideration for that rent, they are provided with tenancy rights from the landlord.  Threats, harassment, intimidation, and abuse appear to be interferences with those tenancy rights and, thus, the landlord continues to accept payment for the service without the landlord delivering the contracted service.  This would be a breach of Consumer Law and, potentially, attract pecuniary penalties.  I am aware of one tenancy dispute that is headed down this pathway: where the real estate agents actively denied the rights paid for by the tenant and yet continued to accept rental payments from the tenant.

Should section 45A instead be a right to compensation rather than a right to terminate the tenancy?  If the only consequence of threatening a tenant, of harassing a tenant, of abusing a tenant is that they can move out, what disincentive is there for a landlord or real estate agent to engage in this kind of conduct?  Worse, they are just going to put the property back on the market for higher rent and end up in a better position.

Section 45A should instead be a right to compensation.  And, if it is sufficiently serious, the landlord should be blacklisted and prevented from entering into a new tenancy agreement with another tenant.  We are talking about a landlord whose behaviour is so terrible as to warrant the tenant breaking a contract; the landlord should not be continuing to profit.

The Bill also tackles a longstanding difficulty: defective notices.  In the ACT, the Tribunal has the power to correct defects in notices issued by either the tenant or the landlord.  In the case of defective notices from the landlord, this puts the tenant in a terrible situation: can they rely on the fact that the notice is defective and ignore it, or do they need to worry that the Tribunal will correct the notice and enforce it?

Adding to this problem is a legacy hiccough: it was envisaged that notices issued under the Act would be in a form determined by the Minister… but (to the very best of my knowledge) no form was ever determined.

The Bill does away with the problem of the undetermined Ministerial form by simply removing the requirement that things be in this form, but changes the standard for correcting notices.  In the new section 60, if a tenant provides a defective termination notice and vacates, the former lessor may apply for compensation.  There is a protection missing here: if the landlord receives a defective notice and they accept the notice then they should not be permitted to retrospectively seek compensation for accepting a defective notice.  Section 60 becomes a potential trap for tenants who count the wrong number of days for giving notice, who cite the wrong provision in the Act, or who are encouraged to give notice through real estate agents harassing with threats to issue a notice.

This might all seem very negative, but the team working on the Act are extremely skilled and thoughtful people and, on balance, this is a great step forward for tenants.  There is a very good chance that I have simply misunderstood how the amendments interact with other provisions of the Act.

One of the problems in this area is that the members of the Legislative Assembly here in the ACT tend not to be tenants themselves and, as such, do not get a firsthand experience of the sort of shockingly atrocious behaviour of real estate agents.  There is a mistaken assumption that real estate agents behave like professionals when, in reality, they are often poorly educated, initiated in a culture of antagonism towards tenants, and insufficiently monitored by regulators.  The use of keys to tenants’ properties is especially a matter of concern, and the lack of monitoring over real estate agents’ claims against bonds is also disturbing.  To an impartial, arms-length observer, it might seem perfectly reasonable to give a tenant and a landlord similar rights against each other with regard to harassment, abuse, and threats, but this fails to take into consideration the appalling ways that real estate agents in the ACT have tried to undermine other statutory protections for tenants.  Section 51A will absolutely be abused by real estate agents to discourage tenants from relying on their rights.

This is a good step forward, but there are more steps to go.

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