Minggu, 24 Oktober 2010

More on tenancy databases

Previously, we were talking about the tenancy database operator TICA Pty Ltd and its new facility for tipping off agents whenever a current tenant applies for a tenancy elsewhere. It's timely, then, to take a look at how tenancy databases ordinarily operate – quite apart from the new tip-off service.

Tenancy databases have been around for about 20 years (by contrast, we first noticed the tip-off service a few months ago). There are a few of them around – TICA, TRA, Barclays and NTD are the main ones – all of them private companies. They are separate from credit reference databases (NTD is owned by the credit reference company Veda Advantage, but the databases are separate), but they make a similar claim: that they are in the business of 'risk management'. They do this by taking listings from agents of the names and other identifying info of supposedly 'risky' tenants, and making these listings available to agents to search against when a person applies for a tenancy. If you're listed, you may have trouble getting a tenancy.

('Computer says no'. Tenancy database-style thinking.)

We've never thought very highly of the risk management claim. Agents can and do ask applicants for references; and where there is a gap in an applicant's references, an agent is entitled to ask for an explanation. Whether it is satisfactory or not means the agent applying a bit of nous. By contrast, 'computer says no' is not a very smart way of assessing applications.

This is especially because there are real questions about the quality of the information stored on tenancy databases. For most of their 20 years of operation, tenancy databases were not regulated, and in that time they collected a lot of rubbishy, even abusive listings: for example, listings of tenants who had been late with rent but caught up, or who settled debts out of the bond, or who had dared to apply to the Tribunal for orders against the landlord. And listings could hang around for years – long after they were at all representative of the 'risk' posed by a person.

These problems have been somewhat tidied up by a patchwork of regulation, including the 2004 NSW Rule of Conduct under the Property, Stock and Business Agents Act, which provides that NSW agents can list only for certain reasons and in certain circumstances, and sets timeframes for listings depending on the reasons they were made. Nonetheless, TICA still claims to have 'millions' of listings, a fact that TICA boasts as if it is a strength. On the contrary, with this many listings you have to wonder how many are at all relevant for present risk assessment purposes. Also, from the copies of listings we've seen, it appears that TICA no longer includes the reason for a listing in the listing – a move that we assume is designed to exploit a loophole in the timeframe provisions (ie no reason, no applicable timeframe), but which would appear to diminish the usefulness of the listing for risk assessment purposes. Furthermore, TICA is happy to take otherwise non-compliant listings from landlords who, not being real estate agents, are not covered by the Rule of Conduct (another loophole exploited).

Anyway, that's the traditional risk-management role played by tenancy databases – notwithstanding our misgivings about how well they actually play it. The Virtual Manager tip-off service is quite different, and the surveillance it insinuates into tenants' decisions about whether to look for other places to rent derives no justification from proper risk management principles.

The new service, however, is not the first time TICA in particular has departed from the traditional role. For some years now TICA has operated, in addition to its 'Tenancy History Database', an 'Enquiry Database'. Here's how it works:
  • you apply for a tenancy with an agent who is a member of TICA;
  • the agent enters your name and the other info you gave in your application into the search fields of the Tenancy History Database, to see if there's a listing about you;
  • zap – you're now listed on the Enquiry Database.
That's right - you're listed. It doesn't matter if there's no listing about you on the Tenancy History Database – it doesn't matter if you've never rented before. It doesn't matter if you're not offered the tenancy, or if you knock it back. You're listed.

The Enquiry Database is, like the Tenancy History Database, searchable by TICA members, so they can see how many applications you have made, to whom, where and when. None of which is of the slightest use in a sensible assessment of the riskiness or otherwise of an applicant for a tenancy. Some time ago, the Tenants' Union complained to Fair Trading NSW that listings on the Enquiry Database were also listings in breach of the Rule of Conduct: Fair Trading's view then was that even though the listing is made when an agent enters information into the search fields, this is incidental to the search and it is actually TICA that is doing the listing – and not being an agent, TICA is not covered by the Rule of Conduct (that loophole again).

In a way, the Virtual Manager is the mutant offspring of the Enquiry Database: whereas the Enquiry Database waits passively for an agent to search its listings, the Virtual Manager actively tugs on an agent's sleeve and tells them what it knows whenever one of the agent's current tenants applies elsewhere. And to be clear, the Virtual Manager does so because the agent has set it to, by 'flagging' tenants for email alerts – and this act of 'flagging' is not incidental to anything else.

Bring on the Residential Tenancies Act 2010. In contrast to the present patchwork, its regime of tenancy database regulation will apply to agents, landlords and tenancy database operators, set clear circumstances, reasons, and timeframes for listings and – correcting the most serious deficiency on the current regime – allow disputes about listings to be heard and determined by the Tribunal.