Residential Tenancies Amendment (Social Housing) Bill 2018: Mid-Tenancy Bond Demands

Nicole Kennedy and Kimberley McKenzie from RLC’s Tenancy & Housing practice explore the prevailing issues of the Residential Tenancies Amendment (Social Housing) Bill in an article in the lastest edition of Around the House, from Shelter NSW.

The Residential Tenancies Amendment (Social Housing) Bill 2018 was passed unopposed by both houses of the NSW Parliament on 15 August 2018. It introduces a mechanism to allow Housing NSW and the Aboriginal Housing Office to demand a bond from a social housing tenant after the tenancy has already commenced. This will be based on “rental bond guidelines” yet to be published by FACS.

The second reading speech indicated that safeguards will be in place for vulnerable clients, although what shape these safeguards take is not clear, and nor has the definition of “vulnerable person” made clear. It is said that payment plan and deferral options will be offered to those suffering financial hardship, but again “financial hardship” is not specifically defined. It is also said that victims of domestic violence will not be required to pay a bond based on damage Housing NSW deem caused by the perpetrator.

“Vulnerable people” has no definition attached, other than a loose list in the second reading speech that includes mental and physical impediments that interfere with the tenant’s ability to care for themselves and their property. We are concerned that many vulnerable people will not have access to the proposed safeguards.

In particular, Hoarding Disorder was recognised as a mental illness 2013 in the DSM-5, but there is no clarity around whether a person who has shown hoarding tenancies in the past will be exempt from the bond due to suffering from a mental illness.

The fact that a number of existing social housing tenancy agreements currently include a clause that requires the tenant to agree not to engage in, participate in, or allow hoarding,and that this clause paves the way for termination of tenancy on the basis of this mental illness illustrates that our concerns about the proposed safeguards for people with mental illness are not frivolous.

The determination of the need for a bond to be imposed on a specific social housing tenant will be determined by a set of guidelines that will be developed by the Department and approved by the Minister.

The guidelines will be a predictive risk assessment for the likelihood of damage being done to the property. This has very real potential for tenants who have caused no damage in their property being required to produce an extra four weeks rent within a two week period or risk losing their tenancy.

While it is positive that the Minister has promised that victims of domestic violence will not be liable for damage caused perpetrators, this does not mean that it will not occur. Damage caused by a perpetrator is not necessarily easily identified or defined. Such damage can go way beyond what many may assume is damage related to domestic violence, for example a hole in a door or blood on the wall.

At Redfern Legal Centre we have seen cases where victims of domestic violence have been charged for damage caused by a perpetrator, and cases where this has prevented them from accessing social housing for many years. For this reason we are concerned that victims of domestic violence will not be adequately protected by the proposed safeguards.

The current legislation already provides a robust mechanism that allows landlords—both social and private— to recoup the cost of repairing damage to properties. Indeed, social housing landlords currently utilise these provisions. A tenant providing a bond does not alter the process that a landlord will need to engage in to recoup losses associated with tenant damage.

A bond is not money that automatically goes to a landlord to cover damages, it is tenants’ money that is held by a third party. A landlord still requires either consent by the tenant or an order from the NCAT to access bond money or receive compensation from a tenant.

The proposed legislation contains provisions that would allow for a tenancy to be terminated as a result of a demand for a bond during the course of the tenancy. In such a scenario, a tenant would be given just fourteen days to raise and pay this bond to avoid termination proceedings. It must be remembered that social housing tenants’ incomes, especially when they enter social housing, are very low.

Household income is assessed every six months to ensure that the household is paying what is deemed the maximum affordable rent based on its total income. This is usually much less than market rent, and generally calculated at 25% of household income. With this in mind, it is not realistic to require a social housing tenant to pay an additional amount equating to four weeks rent within a two week period.

Social housing tenants are already paying the maximum amount deemed affordable. This type of financial impost would put the average household living in social housing tenant into immediate and extreme financial stress.

The likely result will be a termination of their tenancy, which could in turn lead to homelessness. This would be a terrible outcome for social housing tenants, and one that would place even further pressure on overburdened specialist homelessness services (perversely, also funded by FACS).

Missing from the Bill and the Minister’s second reading speech is any indication as to how the amount of bond will actually be determined. While the amount of four weeks rent is stipulated, this is not as clear cut: will this refer to four weeks based on tenants’ current rent, or will it be based on market rent? Further, while the tenant named on the agreement is legally liable for the entire rent, when rent is calculated an amount is apportioned to each household member.

Whether the rental bond will be calculated on the basis of the tenant’s portion of rent only, or on the basis of the entire household’s rent, or on the basis of the market rent, has not been clarified. It is also important to point out that these measures are not afforded to private landlords. There are currently provisions within the Residential Tenancies Act for a landlord—private or public—to require a bond prior to entering a tenancy. Neither public nor private landlords can currently demand a bond mid-tenancy, nor use the inability of the tenant to raise a four week bond within fourteen days mid tenancy, to terminate the tenancy.

This legislation is only open to social housing landlords. Importantly it will not change the process for recovering costs for damage done by a tenant. Instead, it will just provide a way for a social housing tenant who is up to date with rent and not breaching their tenancy agreement in any way, to be terminated from the safety net of social housing and be faced with homelessness.

With the commencement of this law on the 21 August 2018, we are now in the position that a tenant can be terminated from social housing for a reason other than a debt to the landlord, as though it is a debt to the landlord. A bond is not the landlord’s money, nor a debt owed to the landlord, it is the tenant’s money held in security against possible future debts.

Under no circumstances does a landlord automatically have access to this security. The landlord would need to make an application and justify the claim, to access this security. However, if the tenant does no damage to the property secured, then the bond comes back to the tenantin full, as it is the tenant’s money.

So, a tenant may be terminated for not paying the landlord, Housing NSW or AHO, money which is not owed to the landlord and the tenant did not agree to pay the landlord before entering the tenancy, and even though this money may never be owed to the landlord. Doesn’t sound like circumstances private tenants would tolerate, so why are we subjecting public tenants to it?

The article was orginally published by Shelter NSW in the Spring 2018 edition of Around the House (Edition No.111)

Passed by both houses of the NSW Parliament on 15 August 2018, the Bill introduces a mechanism to allow Housing NSW and the Aboriginal Housing Office to demand a bond from a social housing tenant after the tenancy has already commenced.

Currently, a landlord—private or public—may only require a bond prior to entering a tenancy and may not demand a bond mid-tenancy. This legislation, only open to social housing landlords, will thus provide a way for a social housing tenant who is not breaching their tenancy agreement in any way, to be terminated from the safety net of social housing and be faced with homelessness.

It must be remembered that social housing tenants’ incomes, especially when they enter social housing, are very low and it is thus not realistic to require a tenant to further pay an additional amount for bond within a two week period.

The determination of the need for a bond to be imposed on a specific social housing tenant will be determined by guidelines based on a predictive risk assessment for the likelihood of damage being done to the property. This has very real potential for tenants who have caused no damage in their property being required to produce an extra four weeks rent within a two week period or risk losing their tenancy.

The article appears on page 18 of the edition, attached below or here.