This report was tabled in the ACT Legislative Assembly on 25/9/97 by the Attorney-General, Mr Gary Humphries.
(c) Australian Capital Territory, Canberra 1997 - Copyright in this publication is waived. It may be copied freely without the need for permission being sought. Acknowledgment of the source should be made.
1. In December 1994, the 8th Report of the ACT Community Law Reform Committee ("the committee") on its review of ACT private residential tenancy law was tabled in the ACT Legislative Assembly. The report made 182 recommendations for reform of the existing law relating to private landlords and tenants covered by the Landlord and Tenant Act 1949. The committee notes that the Government, on 15 May 1997, introduced the Residential Tenancies Bill 1997 into the Assembly, giving effect to most of the recommendations of that report.
2. In transmitting the report to the Attorney-General the Chairperson of the committee foreshadowed that two separate reports would be issued dealing with
* public tenancies; and
* caravan parks, hostel accommodation, boarders and lodgers.
3. A further, short, report will also be prepared on community housing and, a more substantive report on innkeepers and serviced apartments.
4. The committee indicated at paragraph 34 of the report that it had formed the preliminary view that ACT Housing should be bound by the proposed residential tenancies legislation, subject to consideration of possible exemptions from particular provisions.
5. Since that time, the committee has further considered the issue of exemptions within the context of the preparation of the Residential Tenancy Bill 1997 and against the background of National Competition Policy.
6. The committee takes as its starting point the desirability of the private and public housing markets being subject to the same rules. This report identifies a limited subset of exceptions and a number of transitional provisions which will achieve these objectives. The committee has been closely involved in the finalisation of the existing legislation and notes that proposed Government Amendments to the Bill before the Assembly are consistent with the recommendations made in this Report.
7. ACT Housing (ACTH) is by far the biggest single landlord in the ACT with a rental stock of some 12,500 houses and flats, representing about 30% of the ACT residential rental market. The majority of these dwellings are allocated to applicants for assistance through the gazetted Public Rental Housing Assistance Program operating under the Housing Assistance Act 1987. The object of that program is to provide rental accommodation to eligible people in the ACT who are unable to afford or obtain adequate and appropriate housing.
8. At December 1995 there were over 12,000 ACTH tenancies and some 5,000 applicants on the waiting list, with typical waiting times of 3 to 4 years for a three bedroom house and 4 to 5 years for an aged persons unit. At March 1996 income barriers for admission to the waiting list were set at $381 per week for a single person and $635 per week for a couple, with an extra $63 per week added for each additional person in the household.
9. Rents for ACTH dwellings are set at market levels and the average weekly rent for a 3 bedroom house is about $156 and for a 2 bedroom flat, about $143. Gross rent receivable in 1995-96 is about $93 million. Tenants who cannot afford to pay market rents are granted a rebate. This means that tenants are required to contribute no more than 25% of their income towards the rent for their dwelling. Currently about 87% of public tenants receive a rental rebate at a current annual cost to ACTH of about $48 million. Practically all new tenants are eligible for a rental rebate.
10. The public rental program operates in accordance with the principles of the Commonwealth State Housing Agreement (CSHA) to which the ACT, like the States and the Northern Territory, is a party. The primary principle of the CSHA is to ensure that all Australians have access to secure, adequate and appropriate housing within their capacity to pay. Assistance is to be provided to all sections of the community without discrimination, with priority determined by need. A key principle of the Agreement is that people in rental housing shall have security of tenure. This means that tenants are entitled to remain in public housing while they continue to observe the conditions of their tenancy agreement. If it is necessary to move a tenant to another dwelling, a choice of dwellings and locations appropriate to their needs is to be provided.
11. Funding provided under the CSHA is targeted principally for capital purposes such as the provision of new housing and the upgrading of existing dwellings. The committee is advised that CSHA funds may not be used to cover the cost of general maintenance and repairs or rental rebates, two areas of high expenditure for ACTH.
12. Through a variety of targeted programs, ACTH assists a wide range of people with particular needs in addition to people who are simply on low incomes. These include people with intellectual and physical disabilities, youth, single parents, groups and the aged, whose housing requirements often cannot be met through the private rental market. The profile of public tenants therefore tends to be somewhat different from that of tenants on the private market.
13. This, together with the sheer size, nature and diversity of the public housing property portfolio, presents particular management challenges not experienced to the same degree by private landlords.
14. The committee believes that there is no justification for maintaining a separate body of rules for private and public housing markets. Such a distinction is not sustainable on the grounds of basic fairness and cannot be maintained in the face of National Competition Policy. The remainder of this report examines a series of possible exceptions to this basic proposition
15. References to "recommendations" in the following text are to recommendations made by the committee in the 8th Report of the committee in its review of ACT private residential tenancy law.
16. Recommendation 60 proposed that the new legislation should continue to restrict rent increases to one per year (for individual tenancies). The standard tenancy agreement prepared by the committee provided that there should not be a rental increase in the first year of the tenancy. It is this later requirement which raises difficulties in the context of ACTH.
17. ACTH has advised that, in relation to its 12,500 houses and flats, rents all rise (or fall) on the same day where they are assessed as being different from market levels. This practice is consistent with the requirement of the Commonwealth State Housing Agreement that rent levels for public housing dwellings be reviewed at least annually.
18. Under this proposal, rents for individual tenancies let during the 12 months preceding the day rents are scheduled to rise could not be increased because these tenancies would be less than 12 months old. These rents could not be increased until some time after the date of the general rent increase and this time would vary with the age of each tenancy. Rent increases for these tenancies would remain unsynchronised with general rent increases each year thereafter. This situation would be compounded by the same thing happening for new tenancies let in each subsequent year, until the opportunity for an annual general rent increase ceased to exist altogether.
19. ACTH has indicated that the principle of an annual general rent review is soundly based, that it is an equitable and practical mechanism, and is well understood by public tenants. The concept accords with the spirit of the proposed legislation. Although rents for new tenancies increase less than 12 months after the tenancies commence, this occurs only in the first year. Thereafter, these rents do not increase again until a full 12 months has elapsed. Furthermore, as almost all new tenants qualify for rebated rents, tenants are not disadvantaged even in the first year. Also, the practice of increasing all rents simultaneously helps to keep rents for similar accommodation at the same or comparable levels.
20. An issue that needs to be addressed in this context is the timing of rent increases to cover increased amenity arising from the upgrading of dwellings. Current practice is to increase the rent on completion of upgrading outside the general rent increase arrangements. ACTH has indicated that it would postpone these increases until the general rent increase takes place in recognition of the principle of 12 monthly intervals between rent increases. The impact is likely to be negligible because 87% of tenants pay rebated rents and therefore are unaffected by increased market rents.
21. The committee believes that it is in the public interest for ACTH to be able to review rent on a 12 monthly basis. In coming to this conclusion, the committee has had regard to the cost which might otherwise be occasioned to the public and the negligible net effect on tenants.
The committee recommends that the prescribed terms be amended to permit rental review of housing under the Commonwealth State Housing Agreement to occur on a twelve month basis, regardless of whether this is during the first year of the tenancy.
22. Recommendations made by the committee raise a number of significant issues for ACTH. Under the proposals, a lessor is required:
* to maintain the premises in a reasonable state of repair throughout the tenancy (Recommendation 94);
* to make repairs arising from fair wear and tear but not from tenant negligence or wilful damage (Recommendation 96);
* to make non urgent repairs within 4 weeks after notification (Recommendation 98); and urgent repairs within a reasonable period after notification (Recommendation 99). If the landlord cannot be contacted or fails to make urgent repairs within a reasonable time after notification, the tenant may arrange repairs up to a maximum value of $1000 and bill the landlord who must pay the bill within 7 days after receipt; if the payment is disputed the matter must be referred to the Residential Tenancies Tribunal for adjudication (Recommendation 102).
23. These recommendations represent a series of significant departures from the formal requirements under existing legislation (which requires that the premises be let in reasonable condition and does not prescribe standards for the maintenance of the premises throughout the tenancy).
24. ACTH has advised that it accepts the need for reasonable conditions to be placed on landlords in relation to urgent repairs such as burst water pipes, sewerage faults, or dangerous electrical problems. It has a system for handling after hours emergency repairs, particularly:
* burst water service
* blocked toilet system
* serious roof leaks
* gas leaks
* total failure of electricity, gas or water supply
* dangerous electrical faults
* serious damage caused by flood, storm or fire
* a fault or damage which causes the premises to be unsafe or not secure.
25. Tenants are advised to call on the 24 hour maintenance telephone numbers immediately in the event of storm damage, gas leaks, burst water pipes or other emergency items which are identified in an information brochure. Less urgent items are dealt with promptly but on a more routine basis.
26. ACTH has advised that it generally accepts the definition of "urgent repairs" (which is different from the concept of "emergency repairs" within the ACTH maintenance system) provided at recommendation 100. However, it originally sought an exemption from the proposals outlined at recommendation 102 on the ground that, potentially, control of its limited maintenance budget would be seriously compromised if tenants were able to arrange urgent repairs privately. It considered that low income public tenants could be severely disadvantaged if they misjudged the situation or misinterpreted the guidelines and arranged for repairs to be carried out privately only to discover later that ACTH was not required to compensate them for their expenditure.
27. Following discussions between the committee and ACTH, these concerns were not pressed. The committee notes that these issues are largely resolved through the existence of the 24 hour maintenance service. ACTH agreed that, given its policy of attending to urgent maintenance promptly, it was unlikely that urgent repairs would not be attended to within a reasonable time.
28. ACTH had concerns about the meaning of the terms "undue inconvenience to the tenant" and "inhibits or unduly inconveniences the tenant" as used in the recommendations and draft standard tenancy agreement. It also had concerns that what constituted a reasonable time to effect urgent repairs would vary according to the item in question. The committee notes that these issues have been addressed in the drafting of the Bill.
29. The proposals for non urgent repairs will have a major budgetary impact on ACTH, with its large stock of dwellings, many of which were built pre-1960. Over 30 per cent of stock is more than 30 years old and 50 per cent over 20 years old. In many cases, these older dwellings require significant work to bring them up to contemporary standards. Furthermore, the majority of ACTH's major flat complexes in inner Canberra are over 30 years old and require extensive renovation work in kitchens, wet areas, water and sewerage lines and roofing. The Committee accepts that, realistically, these works can only be done in a programmed way over a number of years.
30. ACTH has assured the committee that it does not seek to avoid its responsibilities as an owner in this area. However, with a stock of 12,500 dwellings, the scope of its operations far exceeds that of any other landlord in the ACT. Given the financial adjustments since self government and the current structure of the CSHA, the committee does not believe that it is realistic to require ACTH to immediately assume the responsibilities for routine maintenance and repairs implied by the committee's proposals.
31. The financial viability of public rental operations including the capacity to undertake repairs and maintenance is greatly influenced by the level of rent subsidies provided to public tenants. In 1995-96 the cost of rent rebates is estimated at about $48 million representing assistance to about 87% of tenants. Rent rebates are currently funded from rental operations and simply represent rent foregone. The committee is advised that CSHA funds, including Territory matching funds, cannot be used to fund rebates or maintenance.
32. ACTH, like other housing authorities throughout Australia, is greatly restricted in its capacity to exercise flexibility in the use of CSHA funds and to maintain effectively the housing assets provided for public housing. This situation may change over time.
33. ACTH originally sought deferral of the proposed arrangements for routine repairs (Recommendations 98, 101, 103 and 104) to enable it to gear up operations and develop a financial capacity to address the increased financial responsibilities under the proposals. Given that the CSHA negotiations are encompassing principles of competitive neutrality ACTH expects to be in much the same position as landlords in the private market to respond to routine maintenance over the next 3 years.
34. The committee notes that these issues have been partially addressed in the drafting of the application provision of the Bill. Under this provision, the new law will progressively apply to tenancies on the happening of specified events until 1 July 2000 when the law will apply to all rental properties. Notwithstanding these provisions, the committee considers that it would be in the public interest that ACTH should be expressly exempted from these provisions until 1 July 2000. In coming to this decision, the committee has had regard to the potential diversion of funds at the early stage of the new regime of law away from the provision of housing to routine housing maintenance.
The committee recommends that ACTH should be expressly exempted from non-urgent repair provisions until 1 July 2000.
35. ACTH considered that significant issues arose because of recommendations concerning inspections and access, including:
* routine inspections by the lessor restricted to 2 per year (Recommendation 81);
* an inspection within 4 weeks after the commencement of the tenancy and another upon vacation by the tenant would be additional to these two routine inspections (Recommendation 82);
* unless otherwise agreed, lessor to give 14 days written notice of routine inspections and of required access to make repairs; (Recommendations 87 & 89) ;
* notice appropriate to the circumstances to be given for access for urgent repairs (Recommendation 89);
* access for all purposes to be unavailable on Sundays, public holidays, and before 8am and after 6pm on any day, unless otherwise agreed or unless such access is necessary for urgent repairs (Recommendation 90).
36. ACTH agree that the rights of tenants to quiet enjoyment of their homes is an important issue. They argued that while two routine inspections might be adequate in most cases there would be instances when additional inspections could be justified; eg, in the case of a tenant with a history of property abuse.
37. The committee agrees that the Tribunal should be able to order additional inspections. It is the committee's view that, in the appropriate case, the Tribunal would have the power to make such an order.
38. Recommendation 109 proposes that the new legislation should continue to prohibit the lessor from requiring the tenant to effect any improvements, alterations or repairs at the tenant's own expense with the exception of repairs necessary due to negligent or intentional damage by the tenant or person for whom the tenant is responsible.
39. ACTH believe that, consistent with established practices (which help to keep rental costs down), tenants and owners should be able to agree on the tenant undertaking various tasks (including cleaning the roof guttering, replacing tap washers and light bulbs, and maintaining gardens).
40. Having considered this matter carefully with ACTH, the committee does not believe that the Bill or proposed prescribed terms have this effect and does not believe that any change is necessary.
41. Recommendation 41 proposes that the landlord could not charge for electricity, gas or water usage unless a separate meter is provided to measure actual usage by individual tenants.
42. All units built for ACTH under current construction programs are separately metered. However at the Northbourne Flats, an older housing complex, ACTH charges tenants at a determined rate for the use of centrally provided hot water and space heating because individual flats are not separately metered. The charge is based on average consumption rates and is considered an equitable arrangement overall.
43. Having considered this matter carefully with ACTH, the committee does not believe that the Bill or proposed prescribed terms should be altered. Instead, ACTH should either factor such costs into the rental costs of the tenants or provide separate meters.
44. Recommendation 57 proposes that the lessor should be required to issue a receipt for all payments of bond or rent except where the rent is paid by direct deposit into an account nominated by the agent or lessor; the receipt is to specify the date, amount, period, premises, and whether the payment is bond or rent; the receipt is to be issued immediately if the payment is made in person or within 7 working days otherwise,
45. Having considered this matter carefully with ACTH, the committee does not believe that the Bill or proposed prescribed terms should be altered. The committee notes that a receipt is not necessary if the rent is paid by the tenant directly into an account nominated by the lessor (as is the case in most of ACTH payment arrangements).
46. Recommendations 78 and 79 propose that the lessor be required not to cause or permit any interference with the reasonable peace, comfort or privacy of the tenant and that the Residential Tenancy Tribunal have the power to order a reduction in rent in the event of any such interference.
47. ACTH is concerned about the use of the word permit. ACTH has a social and legal obligation to house people from all sections of the community without unlawful discrimination. It is concerned about any prospect of being held legally accountable for the behaviour of tenants, which in some instances might interfere with the quiet enjoyment by other tenants of their rented dwellings.
48. In response to substantiated complaints, ACTH advised that it routinely takes action to remind its tenants of their responsibilities under their tenancy agreements not to use their properties in such a way as to cause a nuisance to other residents.
49. Having considered this matter carefully with ACTH, the committee does not believe that the Bill or proposed prescribed terms should be altered. The committee agrees that the owner should not be responsible for every nuisance of the landlord's tenant. Indeed, within the framework of the tenancy agreement, the owner will not have the legal capacity to prevent many such nuisances. The meaning of the word `permit' in this context is constrained by both the legal powers and the knowledge of the owner.
The committee recommends that it examine and report on possible reforms concerning disputes between neighbours.
50. Recommendation 107 proposes that the tenant should be required not to leave the premises vacant for more than 21 days without notifying the lessor.
51. ACTH was concerned that this would seem to allow a tenant to be absent without notification from the dwelling for any period, provided that a person, including one with no connection with the tenancy, occupies the dwelling during the tenant's absence.
52. Having considered this matter carefully with ACTH, the committee does not believe that the Bill or proposed prescribed terms should be altered. The proposal does not have the effect originally argued by ACTH.