Selasa, 06 November 2012

Sick of over-regulation (part 1)

Do you rent? Ever had a cold, flu or other bug?

If yes, did you notify your landlord? Because it's probably a term of your tenancy agreement that you do.

Up the back of the standard form of residential tenancy agreement published by the Real Estate Institute of NSW – and used widely by agents and landlords throughout the State – there's an additional term under which you're obliged

47.8... To notify the landlord promptly of any infectious disease....

We're yet to hear of any actual cases of landlords asserting their contractual right to know about tenants' lurgies or other ailments. But the infectious diseases term is a symptom of the bothersome, burdensome overegulation of tenants, by their landlords.

In our view, probably the most bothersome common additional term is one we've discussed previously: the term against pets (and you can see our recent submission of this point to the NSW Companion Animals Taskforce, here). We object to this additional term because it bars many tenants from one of life's simple pleasures and from making decisions that responsible adults should be free to make for themselves. And in terms of legal liability, it is entirely unnecessary: under the prescribed terms of every tenancy agreement, the tenant is liable for any damage they intentionally or negligently cause or permit – whether that's damage done by an occupant with two legs or four.

It should be said: the additional term about pets comes courtesy of NSW Fair Trading, which included it in the standard form of agreement under the Residential Tenancies Regulation 2010. Otherwise, most additional terms come from the version of the standard form published by the REI, or are cooked up by individual agents and landlords.

We've seen some shockers. We've seen additional terms that purport to prohibit tenants from having sex at the premises, from drinking alcohol, and from even possessing (never mind playing!) a musical instrument. We've seen additional terms that purport to reserve for the landlord the right to inspect the tenant's furniture and refuse to allow it inside if it doesn't suit.

And then, less extreme, there's the dreary lists of everyday proscriptions: no blu tack, no posters, picture hooks, no nails, no screws, no smoking, no clothes drying on balconies, no clothes drying inside, etc, etc.

Our practical advice about bothersome additional terms is this. First, there are some additional terms that the Act expressly prohibits (section 19). The prohibited terms are:
(a)  that the tenant must have the carpet professionally cleaned, or pay the cost of such cleaning, at the end of the tenancy,
(b)  that the tenant must take out a specified, or any, form of insurance,
(c)  exempting the landlord from liability for any act or omission by the landlord, the landlord’s agent or any person acting on behalf of the landlord or landlord’s agent,
(d)  that, if the tenant breaches the agreement, the tenant is liable to pay all or any part of the remaining rent under the agreement, increased rent, a penalty or liquidated damages,
(e)  that, if the tenant does not breach the agreement, the rent is or may be reduced or the tenant is to be or may be paid a rebate of rent or other benefit.
And clause 5 of the Residential Tenancies Regulation 2010 adds another prohibited term to the list:

A residential tenancy agreement must not contain a term having the effect that the tenant must use the services of a specified person or businessto carry out any of the tenant’s obligations under the agreement.

Note that there's a big qualification on the prohibition of the 'carpet cleaning term' at section 19(a). Section 19(3) provides that such a term is allowed 'if the landlord permits the tenant to keep an animal on the residential premises.'

Apart from that, prohibited additional terms are void and unenforceable, and it's an offence for your landlord or their agent to put them in (maximum penalty: $2200).

Second, even if an additional term is not on the prohibited list, there will be a question about its validity. The Act allows additional terms, but only if they are consistent with the prescribed terms, and inconsistent terms are void to the extent of their inconsistency (section 21). (To be precise, the Act does allow contracting out of certain prescribed terms in the case of tenancy agreements for a fixed term of 20 years or more – and we have never seen such a long fixed term.)

Easily offended prescribed terms include the term protecting your reasonable peace, comfort and privacy (section 50(2) – so we wonder if the infectious diseases term might be void, at least to some extent) and the term obliging you to keep the premises reasonably clean (section 51(2)(a) – so no additional terms are allowed that impose a heavier obligation than keeping the place 'reasonably clean').

That's the practical advice, but at a deeper level, there's the question of why so many landlords and agents – who would no doubt otherwise call themselves as the sworn-enemies of 'over-regulation' and 'red-tape' – would engage in such bothersome, burdensome, boring over-regulation of tenants.

Speaking generally, our impression is that the longer the list of additional terms, the less the landlord or agent actually knows what they're doing, and the less well they're actually managing the property and the tenancy. They micro-manage, instead of effectively manage.

Where the ineffective, micro-managing landlord freaks out about blu tack and picture hooks, the effective landlord plans and budgets to repaint the premises after so many years – and is more likely to have longer tenancies, and shorter vacancies.

Where the ineffective, micro-managing landlord presumes, by virtue of their status – and not any actual  expertise – to know more than their tenant about how to run the tenant's household, the effective landlord knows that a good tenant is like quicksilver, or even love: clutch it and it darts away, but open your hand and it will stay.

Private rental housing is a $28 billion per year industry run mostly by amateurs. Most engage agents to manage tenancies on their behalf. Agents could do landlords and tenants alike a power of good by ruling out bothersome, burdensome over-regulation in tenancy agreements.  

[UPDATE: thinking of having your partner move in? Having a baby? Better check with your landlord about that too – see part 2.]