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Review of NSW Residential Tenancy Legislation
June 1998

1. Competition Policy and The Public Interest

Under the National Competition Agreement there are requirements for public interest considerations. The notion of public interest is inherent in assessing the 'costs and benefits' as described on page 32 of the Issues Paper. However in the context of competition policy, 'public interest' is also more than this. NCOSS maintains that it is important to recognise that the public interest must also take into account inherent power imbalances between parties to a contract.

Housing is more than a marketable commodity and more than simply shelter. It is fundamentally linked to people's social and physical health and well being. For disadvantaged people on low incomes, access to affordable, stable and secure housing often means the difference between their participation or dysfunction in society.

The power imbalance between landlords and tenants stems mainly from the fact that landlords and tenants are not negotiating over the same thing. One party is arguing over their home and the other over their investment. In addition, the RTA fails to acknowledge these conflicting needs and interests and deals with the landlord-tenant relationship primarily as if it were a commercial venture. The application of consumer protection strategies has had limited effectiveness in ameliorating the imbalance of power between landlords and tenants primarily because the substantive legislation does not provide tenants with a significant level of security of tenure.

From a tenant's perspective security of tenure is of paramount importance. This is for two reasons: first, there is a relationship between security of tenure and tenants interests in a home, in that tenants abilities to realise their aspirations to home are dependent on the strength of their security of tenure; and second, tenants abilities to assert their rights are dependent on the strength of legislative provisions governing security of tenure .

In this context, the notion of public interest becomes vital. In weighing up the 'cost and benefits', the needs and potential dislocation of low income tenants must be integral and may be understated in any cost benefit assessment. The difficulty arises because there is no real way of quantifying the qualitative issues with such an assessment.

2. Market Failure In Housing

NCOSS argues that the private rental market does not operate as a model market for the following reasons:

· in the rental market, there exists an information and knowledge 'gap' between landlords and tenants, generally disadvantaging tenants. This supports a requirement for regulation;

· in a housing market where there is a lack of rental accommodation (as there has been at times in recent history, particularly in Sydney), the tenants capacity to negotiate in a true market sense, is much reduced. In this case, the lack of availability of alternative options becomes paramount, let alone costs associated with moving and starting a new tenancy.

The lack of knowledge and equality between parties in negotiating a range of tenancy issues, demands improved regulatory systems.

3. Housing Affordability As A Key Consideration

Recent research from the University of Sydney demonstrates that private renter 'stress' (ie. people paying more than 30% of household income in housing costs) is increasing. In NSW, the numbers of private renters paying more than 30% of their income in rent rose from 110,000 households in 1991 to 164,000 in 1996.

It is in this context of reduced affordability of housing, that NCOSS argues for both:
· reductions in costs to tenants that maintain barriers to entry and ongoing participation in the rental market, and;
· improved security of tenure to enable stability for tenants and hence decreased costs associated with moving and beginning new tenancies.

4. Residential Tenancies Act 1987

4.1 Regulation Is In The Interest Of Both Parties - the Tenant and the Landlord

NCOSS is of the view that regulation of private rental market is in the interests of both tenants and landlords.

Regulation provides for a level of certainty regarding terms and conditions of occupation for tenants and landlords. Instruments such as leases, notice periods, etc all provide for stability for both parties. This needs recognition in any cost benefit analysis.

NCOSS does not support the use of codes of conduct for landlords (as a response to de-regulation of the industry) as suggested on page 25 of the Issues Paper.

4.2 Need For Increased Regulation In Some Areas

4.2.1 Security Of Tenure

Home ownership is still the preferred option for most Australians, because it is the tenure form that offers the most security of tenure . However given the inaffordability of this option for most poor people and the increasing squeezing of eligibility in the public housing system, private rental is the only alternative for many disadvantaged people. In this context, the lack of security of tenure in the private rental market becomes a paramount issue. NCOSS argues that the government should regulate in order to enhance the level of security of tenure in private rental housing.

4.2.2 Terminations

NCOSS supports the introduction of a 'just cause 'approach to termination of a tenancy. This would require the Act to be changed with regard to the specification of permissible reasons circumstances enabling the termination of a tenancy. NCOSS is of the view that the net community benefit of introducing a 'just cause' approach to terminations will result in a system which better ensures stability and security of tenure, particularly for disadvantaged people.

4.2.3 Rent Increases

At present, rent increases are subject to regulation on the matter of the period of the agreement but not over the level of the rent. Landlords have the ability to increase rent every 6 months to any level. This leaves tenants in a vulnerable position particularly those on fixed incomes such as social security recipients. NCOSS would support a greater degree of regulation regarding frequency and quantum of rent increases. We suggest a review be called to investigate the methods of implementing rent regulation.

On the matter of excessive rents, a minor change to the current regulatory arrangements would be if the onus of proof for rent increases was reversed such that tenants were not required to prove excessive rent as they are under the current provisions. People on low or fixed incomes are those who are most likely to be adversely affected by excessive rent increases but also the least likely to have the resources to challenge the decision.

4.2.4 Provisions For Domestic Violence

The RTA currently has no provision for tenants experiencing violence in their homes. The Act would be enhanced if there was provision to ensure that the person experiencing domestic violence could either exclude the perpetrator from the tenancy or end the tenancy quickly. NCOSS understands that there are provisions for domestic violence under Queensland's Residential Tenancies Act 1994. NCOSS supports the introduction of similar provisions for the NSW RTA 1987.

The provision would need to ensure that:
· a partner/spouse or co-tenant could apply to the Residential Tenancies Tribunal (RTT) for an order of transfer of tenancy if they have been subject to domestic violence (defined as behaviour or conduct for which an Apprehended Violence Order may be made pursuant to Part 15A of the Crimes Act 1900 (NSW));
· the partner/spouse or co-tenant(s) can apply directly to the RTT without having to serve a notice of termination;
· the RTT has the capacity to respond promptly, taking into consideration a broad range of evidence.

4.2.5 Inclusion To The Act To Cover Social Housing Providers

NCOSS recommends that all social housing providers should be covered by the Act. However, NCOSS recommends that the Act be changed to enable the practical implementation of rent rebates.

5. Other Acts

5.1 Landlord And Tenant (Rental Bonds) Act 1977

Both landlords and tenants benefit from the compulsory lodging of bonds and to this end, it is still justified. There is a clear role for government in being the independent holder of these funds.

The interest earned on bonds lodged should be used to further the interests of tenants as it is ultimately tenants monies. The recent State Budget announcements for expenditure of these monies are a good indication of ways in which they can be spent.

Bonds significantly disadvantage low income people attempting to enter the private rental market. In Victoria, security payments no longer exist for essential services such as electricity and gas. This has provided greater affordability to those services for people on low incomes and does not appear to have adversely affected the capacity of industry providers to cover its costs. This is an option which should be seriously investigated by the Department.

5.2 Landlord & Tenant (Amendment) Act 1948

NCOSS supports the retention of this legislation in its current form. There are few protected tenancies still in existence and many are older people on low incomes. It would be at additional cost to the State Government to re-house these people through the Department of Housing, and it is likely they would fare badly in the private rental market.

5.3 Landlord And Tenant Amend. (Distress Abolition) Act 1930

NCOSS supports compensation for tenants should the landlord dispose of any goods belonging to the tenant which may be seized upon termination. If this provision is made in the RTA, then this Act can be repealed.

5.4 Landlord And Tenant Act 1899

NCOSS is of the view that this legislation can be repealed as tenants which previously came under this legislation, now come under the jurisdiction of the RTA 1987.

6. Other Issues

6.1 Notice Periods

If the status quo regarding 'no cause' termination is maintained, NCOSS would oppose any changes to the notice periods.

In comparison to the process which existed prior to the RTA, the eviction process has been fast-tracked. The difference in notice periods between landlords and tenants is clearly an attempt to recognise the power differential existing between the two parties. Given the perennial crisis in rental housing, it is easier for a landlord to find a new tenant then it is for a tenant to find a new property. For this reason, any notice period of less than 60 days given by landlords to tenants is unreasonable. In addition, tenants are generally not able to afford to pay rent on two properties at once, hence the notice period required to be given by tenants to landlords should not be subject to any further lengthening.

There is a risk inherent in any investment. A landlord's property investment also carries risk. Part of this risk includes vacancies between tenancies.

6.2 Other Costs Associated With Tenancy

6.2.1 Advance Rents

Advance rent payments provide an additional barrier to the private rental market for people on low incomes. Access to the market is becoming increasingly difficult for these people. Tightened eligibility for a broad range of social security payments (for example, for young people and migrants), increased costs in accessing unemployment support and programs, high rental costs and lack of affordable housing options in Sydney, are but three of the factors highlighting the pressure on the State's poor people. High costs for entering the private rental market act as a disincentive for tenants. Unfortunately, the lack of alternative options means they cannot act with 'consumer choice' and go elsewhere; they often become homeless.

There appears to be no real reason why advance payments should be required. It is most unlikely that a tenant will leave a property within a few weeks of starting a tenancy. In addition, there are notice periods required of tenants which cover the period of advance payment.

NCOSS recommends that provision for advance rent payments be removed from the legislation.

6.2.2 Lease Agreement Costs

Lease agreements costs add an additional burden for low income people starting a new tenancy. $15 is a sizeable sum for someone on a social security payment, but is minimal for a landlord. It is of particular concern to NCOSS that the Issues Paper suggests this cost is largely inaccurate and the cost of an agreement is actually much lower.

The Act proscribes that the costs for preparation of this agreement are shared equally between the tenant and the landlord. If this is the case, based on the current cost to tenants of $15, then the notional cost of the agreement preparation is $30. This is clearly ridiculous for a pro forma document. In addition there exists further inequity, in that the landlords costs are tax deductible.

NCOSS recommends that the lease agreement costs be borne by the landlord. If, however the Review decides to maintain the current arrangements for the sharing of this cost, then at the very least, an accurate reflection of the cost should be included in the Act.

6.2.3 Phone Line Installation

Telephone communication at the end of the 1990's should reasonably be considered part of a basic tenancy. Access to electricity and water is considered an essential service and it would be a long overdue recognition of the essential nature of telecommunications, if the availability of a basic phone connection was also considered in this light. The connection of a phone line is a fixture which the tenant pays for but cannot take with them at the end of the tenancy.

To this end, NCOSS recommends that a landlord be required to install a telephone connection.

7. Further Inclusions In the RTA

7.1 Shared Housing

Shared housing continues to be a growing component of the rental market (according to recent ABS data) and one which is an increasing reality for people on low incomes. Legislation to cover the issues for tenants in shared housing requires reform. NCOSS suggests in particular, reform should include the following:

· the legislation needs to be able to deal with a change of occupants;
· a co-tenant should be able to make an order to the RTT to terminate a tenancy;
· the Act should be amended to allow the RTT to deal with bond disputes between tenants;
· all bonds in share housing should be lodged with the RBB.

The Tenants Union submission covers this area in detail and NCOSS supports these recommendations.

7.2 Boarders & Lodgers

Many boarders and lodgers are disadvantaged people on low, fixed incomes and continue to be unprotected by legislation protecting their rights as tenants. In the absence of legislation specifically covering this group, NCOSS supports amendments to the Act to include boarders and lodgers.

7.3 Co-Ops

There are discrepancies between the Co-operatives Act and the RTA, making for practical difficulties for co-ops. These issues should be addressed by the Department and the ARCH (Association to Resource Co-operative Housing) submission details how this could happen.

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