Comment: Residential Tenancies Amendment (Occupancy Agreements) Bill 2011

The Tenants’ Union of NSW (TU) supports the Residential Tenancies Amendment (Occupancy Agreements) Bill 2011 (the Bill) introduced by the Member for Sydney, Clover Moore, and commends it to other Members of Parliament.

The Bill would implement much-needed law reform in relation to marginal renting. It was do so in a sound and balanced way that is fair to marginal renters (‘occupants’) and accommodation providers (‘grantors’).

Marginal rental accommodation includes:

• boarding houses;
• lodgements in private residences;
• refuges and crisis accommodation;
• residential colleges; and
• most share housing arrangements.

Marginal renting is currently excluded from mainstream residential tenancies legislation. It is instead subject to the common law of lodging, which has changed little since the nineteenth century and is inconsistent with current community expectations as to housing rights and standards. Dispute resolution is also deficient: most marginal rental disputes are excluded from the jurisdiction of the Consumer, Trader and Tenancy Tribunal (the Tribunal), and dispute resolution through the court system is not a practical option.

The Bill reflects the ‘occupancy agreements’ model of law reform implemented by the Australian Capital Territory in amendments made in 2005 to its Residential Tenancies Act 1997 (ACT). The ACT’s amendments are widely regarded as a success and the occupancy agreements model has been recommended by the NSW Government’s Interdepartmental Committee on Reform of Shared Private Residential Services (the IDC) as its preferred approach to law reform. The NSW Legislative Assembly’s Social Policy Committee has also recommended, in the report on its Inquiry into International Student Accommodation in NSW, that the NSW Government consider implanting legislation for occupancy agreements.

The Bill’s provisions are fair and balanced. It would provide for ‘occupancy agreements’ between occupants and grantors where residential tenancies legislation does not otherwise apply.

These agreements would reflect the 12 ‘occupancy principles’ in the Bill, which set out the entitlements of occupants and grantors in a general way, without prescriptive detail. This level of detail would be left to individual occupancy agreements, and any standard occupancy terms that may be made by regulation. This means the occupancy principles would have a flexibility that is appropriate to the wide variety of rental arrangements covered by the Bill.

Occupants and grantors could apply to the Tribunal to resolve disputes relating to an occupancy agreement. Grantors would not need to apply to the Tribunal for termination of occupancy agreement, but an occupant could apply for orders where they disputed a termination. This is a balanced and effective regime for resolving disputes and dealing with terminations.

Detailed comments

Coverage

The Bill would define an ‘occupancy agreement’ as ‘an agreement under which a person grants to another person for value a right to occupy specified residential premises as a residence (whether or not with other persons)’ (s 186B(1)). The Bill illustrates, without limiting, the definition with a list of persons and rental arrangements at s 186B(2), and then limits the definition with the qualifications at s 186B(3).

We submit that the general definition, the illustrative list, and the qualifications, are all sound. They provide for appropriately broad coverage, while ensuring that agreements already subject to residential tenancies legislation remain subject to the respective legislation.

Occupancy principles

The Bill would provide for 12 occupancy principles: nine are adopted from the ACT’s legislation, one with a substantial change; three are innovations. We submit that all are sound.

The general scheme of the principles is that they would be reflected in the content of occupancy agreements, which would include:

• terms to the effect of the occupancy principles;
• terms to the effect of any standard occupancy terms prescribed by regulation, provided they are consistent with the occupancy principles; and
• additional terms, provided they are consistent with the occupancy principles and standard occupancy terms.

This scheme is sound and appropriately flexible to the wide variety of rental arrangements covered by the Bill.

We extract and discuss each of the principles below (the text and numbering is per the Bill; the subheadings are our own).

State of repair

(a) an occupant is entitled to live in premises that are:
(i) reasonably clean when the occupant moves in, and
(ii) in a reasonable state of repair, and
(iii) reasonably secure,

This principle does not prescribe absolute standards in relation to the physical conditions and state of repair of the premises. We submit that what is ‘reasonable’ in relation to cleanliness, the state of repair and security will vary according to the type of rental arrangement and the individual case, including the amount of rent paid. The principle would appropriately balance the respective interests of grantors and occupants. 

House rules

(b) the grantor is entitled to set reasonable rules that the occupant will be required to comply with and an occupant is entitled to know the rules of the premises before moving in,

This principle does not prescribe any rules, nor does it prescribe the matters about which rules may be made. It requires that rules be ‘reasonable’, which will vary according to the type of rental arrangement (for example, a women’s refuge might reasonably set a rule prohibiting male visitors at any time, whereas a women’s residential college might reasonably set a rule prohibiting male visitors from staying overnight). It also requires that the occupant be entitled to know the rules before moving in. This is fair to both occupants and grantors and would help prevent disputes.

Written agreements and receipts

(c) an occupant is entitled to the certainty of having the occupancy agreement in writing,

(d) an occupant is entitled to be given a written receipt for the payment of any money to the grantor,

Principle (d) is an innovation (the ACT occupancy principles are silent as to receipts). We submit that it, and principle (c), reflects basic expectations on the part of consumers and sound business practice. Provision of written agreements and receipts is not onerous and helps prevent disputes.

Quiet enjoyment and access

(e) an occupant is entitled to quiet enjoyment of the premises,

(f) a grantor is entitled to enter the premises at a reasonable time on reasonable grounds to carry out inspections or repairs and for other reasonable purposes,

We note that principle (f) does not prescribe a period of notice or grounds, but does require that the grantor’s entry take place at a ‘reasonable time’ and on ‘reasonable grounds’, each of which may vary according to the type of rental arrangement. It and principle (e) appropriately balance the respective interests of occupants and grantors.

Rent increases

(g) an occupant is entitled to reasonable notice before the grantor increases the amount to be paid for the right to occupy the premises and is entitled to know before moving in how much notice will be given,

This principle is substantially different from the corresponding ACT occupancy principle about rent increases, which prescribes six weeks’ notice. The present principle does not prescribe the period of notice for a rent increase, but does require that notice be given, that the period of notice be reasonable (which would vary according to the type of rental arrangement) and that the period of notice is set out before the occupancy agreement begins. We submit that this is appropriate to the general scheme of the occupancy principles, and appropriately balances occupants’ and grantor’s respective interests.

Prohibition of penalties

(h) an occupant is not liable to pay a penalty or fee for breach of any term of the agreement or any of the rules of the premises,

Like principle (d), this principle is an innovation (the Act occupancy principles are silent as to penalties). From our experience, penalty clauses are a common problem in marginal renting, especially for international students, whose agreement often include exploitative penalties and charges for ending their agreements during semester. The principle would appropriately address the problem.

Utilities charges

(i) a grantor is entitled to charge for the use of a utility, provided that the amount charged is determined according to the cost to the grantor of providing the utility and a reasonable measure or estimate of the occupant’s use of the utility,

Like principles (d) and (h), this principle is an innovation (the ACT occupancy principles are silent as to utilities charges). The present principle would allow grantors to pass on the cost of utilities, including where an occupant’s use of utilities is not separately metered, but would prevent exploitative or unfair charges (such as exorbitant charges for internet access – a problem frequently reported by international students). The principle would appropriately address the problem and balance the respective interests of grantors and occupants.

Termination and eviction

(j) an occupant is entitled to know why and how the occupancy may be terminated, including how much notice will be given before eviction,

(k) an occupant must not be evicted without reasonable notice,

These two principles would allow grantors to terminate occupancy agreements, and evict persons remaining in occupation after termination, without applying to the Tribunal. Principle (j) does not prescribe grounds for termination, nor the period of notice of termination. However, an occupant would be entitled to know how and why the agreement is being terminated (principle (j)), and the period of notice would have to be ‘reasonable’ (principle (k)), which would, we submit, vary according to two sets of factors. First, ‘reasonable notice’ may vary according to the reason for termination (for example, if it is because the occupant has been violent to the grantor or another occupant, the period might be very short indeed; if it is because the grantor is selling the premises, the period might be relatively long). Secondly, it may also vary according to the type of rental arrangement (for example, if the agreement is being terminated because the premises are being sold, ‘reasonable notice’ may be shorter in the case of an ordinary boarding house than in the case of a licensed residential centre for people with disability (LRC)).

We note that in Mercury Advisory’s ‘Report on targeted consultations for the reform of the boarding house sector’ (the Mercury report), commissioned by the IDC, boarding house operators were concerned particularly about termination and eviction. In particular, the consultants reported that

LRC and Unlicensed Property owners would like to see some protection for owners and other residents, with ability to evict disruptive residents immediately in line with “typical house rules”. … At present there seems to be some confusion about what they can and can’t do in relation to evicting.

The Bill accommodates this interest, and would clarify confusion around the process for termination and eviction. The principles would appropriately address the problems of terminations without reasonable notice, and uncertainty around how terminations may be effected, and balance the respective interests of grantors and occupants.

Dispute resolution

(l) a grantor and occupant should try to resolve disputes using
reasonable dispute resolution processes.

This is a sound principle, supported by the Bill’s provisions in relation to the Tribunal.

Bonds

In our experience, bond disputes are common in marginal renting, especially in relation to international students, where they are so common that we suspect that some operators treat bonds as part of their ordinary revenues, regardless of whether they actually have a legitimate claim.

The Bill would limit the amount of bond payable by an occupant to the equivalent of two weeks’ rent, and require that the grantor lodge the bond with the Rental Bond Board. These provisions would appropriately balance the respective interests of grantors and occupants. They also make efficient use of the already existing systems of the Rental Bond Board.   

Dispute resolution

Currently, disputes arising from marginal rental contracts are excluded from the Tribunal’s Tenancy Division, but some applications by marginal renters may be heard as consumer claims under the Consumer Claims Act 1998 in the General Division. Whether such a claim may be made depends on whether the accommodation provider is carrying on a ‘business’ for the purposes of that Act, which is not always clear or straightforward. We note that accommodation providers cannot apply in the Tenancy or General Divisions. 

The Bill would amend the existing provisions of the Residential Tenancies Act 2010 (RTA) relating to the powers of the Tribunal to additionally provide that the Tribunal could hear disputes and make orders on the application of grantors, occupants, former grantors and former occupants. Section 190A would provide that applications could be made by any of these parties in relation to a breach of an occupancy agreement or a breach of an occupancy principle. Sections 186G(5) and 187(1)(k) would provide that applications could be made respectively in relation to the payment of bonds and the return of goods left behind after termination. In making a decision on an application, the Tribunal would be required to give effect to the occupancy principles (s 189A). As we noted in our discussion of occupancy principles (j) and (k), there would be no requirement for a grantor to apply to the Tribunal in order to terminate an occupancy agreement, but an occupant who disputed a termination (because, for example, reasonable notice had not been given, or because the basis of the notice was defective (say, termination for rent arrears where the occupant was actually paid up to date)) could apply to the Tribunal for orders resolving the dispute.

These provisions would establish a clear jurisdiction in the Tribunal for the resolution of disputes arising from occupancy agreements, for the benefit of both grantors and occupants. Section 189A would provide appropriate guidance to the Tribunal in its decision-making and ensure that the occupancy principles are given effect. 

Additional matters

We make the following suggestions with a view to enhancing the operation of the provisions of the Bill.

Standard terms for LRCs

Section 186E would provide for regulations about occupancy agreements, including standard occupancy terms (provided they are consistent with the occupancy principles). We suggest that upon passage of the Bill, the Government should develop, as a matter of high priority, a set of standard occupancy terms for licensed residential centres for people with disability. We would welcome working with the Government, operators, residents and other advocates in a process of consultation on possible standard occupancy terms for LRCs.

Uncollected goods

The Bill provides that the Tribunal can hear disputes, and make orders, about uncollected goods (that is, goods left behind at the premises by a former occupant after termination of an occupancy agreement) (s 187(1)(k)). It does not, however, include an occupancy principle relating to uncollected goods and so would leave this matter to individual occupancy agreements and the common law of bailments.

The TU is working with Clover Moore’s office on amendments to clarify how uncollected goods may be dealt with. We suggest that the matter may be dealt with by regulations under the provisions of the Bill; alternatively, the procedures under the Uncollected Goods Act 1995 (UGA) could be made to apply. This would require an amendment to the Uncollected Goods Regulation 2011, which currently provides that the procedures of the UGA are not available where the RTA applies (cl 4). We submit cl 4 could be amended to exclude occupancy agreements from the operation of the exclusion of the RTA, hence placing them with the operation of the UGA.

Penalties

The Bill makes no provision for penalties in the event of breach of its provisions (for example, where a grantor does not give a written agreement or written receipts, in breach of principles (c) and (d), or fails to lodge a bond, in breach of s 186G(1)).

We are working with Clover Moore’s office on amendments to introduce appropriate penalty provisions to enhance compliance with the provisions of the Bill. In particular, we suggest making provision for penalties of up to 20 penalty units for breach of ss 186D, 186F and 186G(1) and (2). This would be appropriate and consistent with similar provisions elsewhere in the RTA (specifically, ss 22, 159(4) and 162(5)).

Further information

To further discuss the Tenants’ Union’s views on the Bill, or marginal renting generally, please contact Dr Chris Martin, Senior Policy Officer, on 0407 065 760 or chris_martin[at]clc.net.au