Residential Tenancies (Miscellaneous) Amendment Bill

Committee Stage

In committee.

(Continued from 14 November 2023.)

Clause 26.

The ACTING CHAIR (Mr Odenwalder): There is still some time left for the member for Heysen, if he has any more questions on clause 26.

Mr TEAGUE: I think I was presented with the immutable laws of the universe at about three minutes to midnight last night. There we were, and I think I might have had a question on clause 26. I think the minister began to just indicate an example of an exempt animal. I just wonder if there is a comprehensive reference to that or even by class. Is it well established or is it open? But we understand the nature of an exempt animal.

The Hon. A. MICHAELS: It is defined in section 3 of the act. There is a definition included in that now, which will provide for 'an assistance animal within the meaning of the Equal Opportunity Act' and 'a therapeutic animal within the meaning of section 88A of the Equal Opportunity Act'.

Mr TEAGUE: So it is. That is a good answer. For those following at home, that is a reference to clause 3 of the bill, so I am grateful for the direction. Perhaps to round it out, and because there has been some reference to pets or animals of different kinds, including in the course of the briefing, and what might be customary to bring into the house and what sorts of animals are not ordinarily kept inside, I note that in subclause (9), page 17, at about point 2 on the page of what is new section 66C(9), paragraph (b) refers to the pet not being a type of pet ordinarily kept inside, 'a condition requiring the pet to be kept outside'. Is that directed to the kind of animal or is it directed to the particular circumstances? Are we applying an objective test? I do not see any reference to regulations, so is it a matter of really just assessing case by case and animal by animal?

The Hon. A. MICHAELS: It is a case of looking at it case by case, animal by animal if there is application to consider those conditions. Off the top of my head, many people keep chickens as pets. They would probably not ordinarily be considered to be kept inside is my guess. That is one example that jumps to mind.

Mr TEAGUE: I think for the benefit of the committee that reference was made to, of course, the briefing to practices in time gone by of having animals in the house for warming and, otherwise, protection. If it is to be understood as being determined on a case-by-case basis without categorisation, then that is of assistance.

Mr PATTERSON: We are up to clause 26, just to make sure I have been following. Forgive me if you may have been asked these questions before, but with regard to the grounds for refusing pets being kept on premises, it states that keeping a pet will contravene a by-law or rule applying to the premises under this act. In the case of strata groups, where maybe a strata group has outlawed having pets—and strata is a mix of owner occupiers and tenants—and they have said that no pets are able to be in this group of strata units, how would this clause apply in such a case? My interpretation is that it is because there is a by-law in that strata group that prohibits pets being there, so even though this amendment would allow pets, that by-law would override this amendment.

The Hon. A. MICHAELS: It is a decision of the strata corporation. All the owners get together and they have a strata corporation and make their by-laws. If it is a decision of that group to not allow pets, it would be reasonable for that landlord not to contravene those by-laws and therefore refuse that pet.

Mr PATTERSON: In terms of subclause (10), where it talks about conditions for a landlord's approval for a tenant to keep a pet on the premises, it prohibits having an increase in rent or bond payable for having a pet. You could not have it two-tiered, I take it, that is trying to prohibit the case where a landlord might say, 'Well, okay, we will charge X amount of rent for people without pets but, then, if you want to bring a pet that's fine, but we will charge you a bit extra.' This is basically saying that there is to be no change in rent. That being the case, the only recourse would be if there is damage to the premises.

In the previous bill that you brought, there was discussion around the occurrences of damage by virtue of having pets that is way in excess of anything that the bond would cover, and also, added to that, the bond has now been reduced from six weeks to four weeks. What feedback have you had from stakeholders around the possibility of damage to premises?

Sometimes, it is originally their house. They might be going overseas for a time, for a year or two, but they are intending to move back and they want to rent the house out. This is their home, and ultimately they want it to be their home again, so they might be a bit cautious about damage and the like. What feedback have you received around the potential for damage, what landlords could do to mitigate this and, potentially, what the tenants could do to alleviate the landlord's concerns around this?

The Hon. A. MICHAELS: In terms of that, we have had very strong advocacy on the proposal of allowing pets in rental properties—very strong advocacy. In terms of damage, groups like RESA and others representing landlords are comfortable that the position is that the bond would cover it or there would likely be insurance available, landlord insurance, that might cover pet damage. One thing that has been told to me over and over again is that often children cause more damage than pets. So there is always that risk of property damage, and that is why a cautious landlord would no doubt take out landlord insurance.

Mr PATTERSON: Just further to that, did you receive any feedback from the insurance agency? Yes, it is the case that landlords could insure for risk of damage. Previously, landlord insurance would cover this damage. Did they have any concerns? This does move the ability. It makes it more likely for pets to be in tenanted properties, ergo the risk of claims to them potentially increases. Have you received any feedback from the insurance industry around this and if in fact it may increase premiums?

The Hon. A. MICHAELS: In fact, most other states already allow pets in this sort of format. Some go further in terms of the model that is being used in terms of presumptions of tenants being allowed pets. I have not seen any feedback of any increases in the Eastern States in insurance premiums. I am not aware of any issues being raised by insurance companies.

Clause passed.

Clause 27.

Mr TEAGUE: As I addressed in the course of my remarks on the second reading, and I had referenced a number of aspects of the bill to the Real Estate Institute of South Australia's observations, or submission as it then was, on a consultation paper, and I highlight that because the proposed section 67A is the subject of REISA's very strong opposition. That is that top category of opposition. I just perhaps give the minister the opportunity to give an explanation to the committee as to why notwithstanding that very strong opposition to proposed section 67A in particular that the government is pressing on with proposed section 67A.

I draw particular attention to the existing section 68(1)(b), which is the existing obligation of the landlord to comply with statutory requirements affecting the premises and therefore REISA's submission that the landlord is already bound by relevant statute. What purpose is proposed section 67A serving and particularly in the face of that strong opposition from the institute?

The Hon. A. MICHAELS: Following that submission, we obviously consulted with REISA. I think that it could fairly be said that that opposition is tempered. Really, this is not doing substantially more than what is already required of all properties in terms of housing improvement, and we are talking about some quite basic things. So from the housing improvement regulations, we are talking about properties having a toilet, bath or shower, a hand basin, a kitchen sink and a laundry trough or basin. We are talking about some basic things, like an oven and a cooktop. We are talking about a food storage cupboard or a pantry.

So the requirements in the housing improvement regulations we are talking about in here are fairly basic. I understand that most stakeholders are quite comfortable that the property either does comply or ought to comply with those standards because they are fairly basic standards, and really what we are looking at is making sure that rental properties are meeting those standards. We are just adding in that that the tenant can request urgent repairs if they do not meet those standards as well.

Mr TEAGUE: I appreciate the answer. I listened to the answer in the context of the existing section 68. It may be that there is not much that is asked of the landlord in order to comply with what will be the new section 67A but the same proposition might apply to the existing section 68(1) both (a) and (b)—the same measure. To say, 'Well, it's not imposing very much,' it may impose a lot or not much, and that is not really the point that I am endeavouring to make or indeed as I appreciate REISA is endeavouring to make.

Is it somehow imposing some greater level of active intervention by a landlord in a way as to time or as to the triggering of some actual conduct that takes it further than, for example, 68(1)? I say that in the context of what is a very significant maximum penalty that is associated with 67A(1), so I am not really arguing the question of, as it were, the standard or the level or whatever change might result from the application of 67A, I am really drawing an equivalency to the existing section 68 and saying, 'Doesn't clause 68 do it?', in which case how come these provisions and how come the very substantial new maximum penalty associated with them?

The Hon. A. MICHAELS: Clause 68 includes it as a term of the agreement; it does not create the offence, so that is the addition. What we have clearly said is that this is not requiring any more on the landlords in terms of an inspection either before the commencement of a lease or an annual inspection or anything like that. It needs to comply, as it ought to comply, with the current legislation, so it does create that offence and it goes further in specifically allowing tenants to request those urgent repairs if something, during the term of the tenancy, goes awry and requires that.

Mr TEAGUE: I am at risk of testing the limits, I suppose, of what further might usefully be commented upon. In terms of section 68, I will accept that section 68 is a regime that, yes, applies these obligations as a term of the agreement and ultimately leaves it to the tribunal at subclause (5), and here there would be an offence created with a penalty. So, okay, there is that difference. Not to perhaps suggest alternative drafting mechanisms, but, if it is the desire only to create the imperative to take action, then would not a neat alternative have been to say that a breach of that term is an offence and it is punishable by this new maximum penalty, do away with the existing regime—indeed, simply create the offence associated with failure to comply with 68(1)?

The Hon. A. MICHAELS: You might be right, but your suggestion effectively does the same thing with different drafting. I do not see any particular issue with this that you are raising but they would do the same thing. Either you include it in 68 or you have the separate 67 and 67A. It then goes through, later on in the bill, to create an ability for the tenant to terminate if those repairs are not done as well, so it feeds through the rest in certain aspects.

Mr PATTERSON: Talking about the testing and remediation in relation to drug contaminations, on reading that, is that trying to take into account finding out maybe if there was drug-related conduct and that perpetrator has since moved, or does it take into account the fact that you are a landlord and you find out there is drug-related activity happening in the premises at the time and it is the landlord's responsibility to then inform the tenant who is actually conducting the drug-related activities that you are going to do a contamination test?

The Hon. A. MICHAELS: It is both. It applies to premises that are occupied and premises that are proposed to be occupied. If a previous tenant has undertaken that illegal drug conduct on the property—a drug lab—that would, by all the science, indicate there might be health issues for a new tenant moving in. That is the aim of that: to make sure we are not causing any health issues for new tenants but also with existing properties, if the landlord becomes aware there is that illegal activity on the property, there is a certain process in terms of giving the tenant notice to then go on to be able to remediate that property.

Mr PATTERSON: In the case of there being any issues, I would imagine that would also have obligations around informing SAPOL and the like. How would you see this interacting with police operations, and also the fact that, as a landlord, this is actually finding out about drug-related activity on site? For landlords, that is grounds for termination, as is laid out in terms of the reasons for termination—that is, in the consultation process if a landlord finds out that drug-related activities are occurring on site. I can certainly understand finding out previously and that tenant has since left, but I suppose the complication is if it is ongoing activity. I would have thought that there would be higher-order issues for a landlord to worry about, as opposed to issuing a notice that you are going to do a contamination test.

The Hon. A. MICHAELS: I imagine landlords may choose to report to the police. That is outside of the Residential Tenancies Act. I do not believe there is any other legislation that requires mandatory reporting in terms of someone who might observe illegal conduct, but that is outside of the Residential Tenancies Act. This is about remediating the property and making it safe for tenants going forward.

Clause passed.

Clause 28.

Mr PATTERSON: Clause 28 talks about minimum efficiency standards. These efficiency standards will be prescribed by regulations in relation to water and energy efficiency. In terms of the energy efficiency aspect of that, maybe you could give some examples of what fixtures and fittings this would apply to within a property that a landlord will be leasing out?

The Hon. A. MICHAELS: For example, if a property has an existing dishwasher in it and that dishwasher breaks, it would be specified in regulations as to what energy standard or water rating the replacement would need to be. We have not gone so far as some people are advocating—which is essentially to replace all sorts of things, such as insulation—to make rentals meet a certain minimum standard. We are hoping this gives landlords some relief to be able to do it over time; that is, when they replace something in a property, they must make sure that it meets certain standards that would be specified by regulations in terms of water ratings and star ratings for energy, etc.

Mr PATTERSON: From that response, I take it that it is more to do with electrical appliances in terms of their energy efficiency, as opposed to insulation in the roof or double-glazing of windows for the ability for homes to have an energy rating.

The Hon. A. MICHAELS: We will limit it to appliances, fittings and fixtures, so it is unlikely to require insulation.

Clause passed.

Clauses 29 to 34 passed.

Clause 35.

Mr TEAGUE: Clause 35 would substitute part 4, division 12. I note at the outset that, for the substituted heading for part 4, division 12, as it presently stands, division 12 provides for assignment and section 74 provides for assignment of a tenant's rights under a residential tenancy agreement. The question of the circumstances in which a tenant's obligations remain to the landlord is provided for. As I read the substituted criteria, there is a relatively analogous series of steps to be taken but, at the outset, the heading is altered to 'Assignment and sub-letting'.

Is there any magic in the change of the heading, other than to say, 'This is now rather more fulsomely contemplating tenants assigning both their rights and their obligations under a tenancy agreement?' There is obviously some thought that has been put into the changing of the heading.

The Hon. A. MICHAELS: We have added 'sub-letting', and that is for the purpose of not assigning your entire rights and obligations under a lease but where you might have someone subletting a particular room or space. That was always a little bit of a confusion as to whether or not you actually needed landlord approval for that, so we have clarified that that does need to have landlord approval and we have clarified that the landlord cannot unreasonably refuse that. So it is subletting rather than assigning all the rights and obligations over a particular area.

Mr TEAGUE: So as to accommodate subletting, there is a contemplation there that the tenant's right to sublet is now contemplated by the division. To take then a rather more existential question in light of this new regime—and it is a matter of interest in terms of where things might go structurally, given that we now have a situation in which a tenant in a fixed-term residential tenancy agreement is, on one view, a tenant for life or for an indeterminate period of time, unless and until one of those disruptive factors occurs on the landlord's side like retaking possession or undertaking substantial renovations, the tenant is in a relatively more permanent set of circumstances while they are willing and compliant.

In terms of then the tenant's rights to sublet and assign, are we not in a situation where one might structurally contemplate a new form of sublandlord in which a tenant might be perfectly content to remain a tenant but to enter into subletting and other derivative arrangements—again, over a medium term—and that the poor old landlord is actually two steps removed?

I know that there is a desire to augur towards longer-term tenancies. I think the member for Morphett gave an example of a landlord that might be a family that might be going away for a couple of years and they want to rent their house out and they want to come back into that residence. The same might apply in relation to a tenant looking to maintain the tenancy over the long term but having a set of circumstances that are affecting them; they might be wanting to retain the tenancy but to exercise rights of subletting and then to come back and continue indefinitely.

Are those sorts of circumstances contemplated? Are they regarded as saying, 'Yes, that goes with the territory now'? The nature of a tenant in a residential tenancy is such that all of those possibilities might ensue. I can give another example: the idea that a tenant might be a tenant of multiple premises but taking an approach that subletting those premises and even profiting from doing so, might be something that evolves. But I will concentrate on the first part, on the sort of relative permanency of that primary tenant and what might then be a more lengthy or thoroughgoing normal arrangement that we would see between tenants and subtenants on properties where the landlord was last heard of some time ago, and what is going on is then between tenant and subtenant.

If I just draw an analogy again to my short observation in my second reading contribution about analogies to Europe and long-term renting over there, where it might be completely ordinary to have a tenancy—often known as a firsthand tenancy—from a civil authority, from a local council or from the state that might have a housing estate, rental apartments in the housing estate, and the rights of subletting to those primary tenants, but in all circumstances the headline tenancy is really running for years if not decades.

The Hon. A. MICHAELS: I think essentially what you are putting is right. I think what you are saying is right. The difference that we are clarifying in here is that you would need the approval of the landlord for those subtenants. You would need to get that approval. In the previous version, we had that absent of consent does not invalidate the assignment or sublease unless the landlord is a registered community housing provider.

In this, we are saying that an assignment or subletting of the whole or any part of the premises without the landlord's consent is invalid unless the tribunal determines that consent is not required. It is giving the landlord more of a say about people coming in to their property, but it might have the result that there are longer-term subtenants, as you described.

Mr PATTERSON: Maybe we can talk about the assignment of leases as well. I think some of the submissions to the consultation around this is because further on the clauses around termination of fixed-term leases means that landlords cannot unreasonably terminate leases. At the front end of the process it is beholden, from a risk management point of view, to put more effort into assessing the tenant you are putting in, because it seems that the intent of this legislation is to allow tenants to not be unreasonably terminated.

Therefore you want to make sure, as a landlord or the land agent, that the tenant that is being put in is going to be of good standing, having a good relationship and making sure that they are paying rent on time, etc. There would be a lot of effort put into that assessment process.

Then, as a land agent, you may well select a tenant based on certain risk mitigation parameters and then down the track that tenant, for good reasons, may want to move on and do the right thing. Rather than just leave the lease and have the landlord re-tenant it, they say, 'I know an associate who is also of good standing. I am going to assign the lease to them.' There could be a side effect where ordinarily the landlord would not have selected that tenant, whereas here it is saying that the landlord has to give approval but the landlord must not unreasonably withhold consent. I would be interested to understand, in terms of assigning leases, what would be reasonable grounds for a land agent or a landlord to withhold consent?

The Hon. A. MICHAELS: I am actually not sure that the premise of your question is correct. To start with, I think most agents will lease out to the best tenant who has applied for the property. We still come down to the situation, about which I think you are expressing concern, where there are breaches of agreements either by the tenant or it might be breaches or damages caused by a subtenant. That would still be provided for in the prescribed reasons. If there is something going wrong in terms of the tenancy with breaches by anyone occupying the property in terms of damage or if the tenant is not paying the rent, they are prescribed reasons that would enable to landlord to end the tenancy. I am not sure there is that much additional concern by these changes.

Mr PATTERSON: I suppose my question was not so much about the subletting, it was more about the assigning. It might well be there are valid reasons for the tenant to assign the lease. They are leaving and they are leaving on good terms. They have not damaged the property, they have paid their rent, and they are wanting to assign it over to someone else. I suppose the question is: that marks a transition from one tenant to the other and so the landlord might say, 'I was quite happy to choose the best tenant up-front. I am not so certain about the tenant who has been introduced to me.' In that case, the landlord might have reasons to withhold consent. To get to the bottom of that, from an assignment point of view, what would constitute reasonable grounds for a landlord to withhold consent for a tenancy to be assigned?

The Hon. A. MICHAELS: It would be for similar reasons why you would not take on a tenant: if there is poor payment history or if their income does not necessarily establish that they are able to pay that rent. They are reasons you would, as a landlord, be able to say, 'This is not the subtenant or the assignee that I would like for my property.'

The ACTING CHAIR (Mr Odenwalder): Are there any more questions on clause 35?

Mr TEAGUE: I am conscious of the time. Let's draw a line under it. I guess the observation that might be made in the broad about assignment and subletting in the new environment is that the stakes are really rather higher for the landlord on the receiving end of the assignment.

Under the existing regime, there are rules around not unreasonably withholding consent for assignment, but those are in circumstances where a fixed term is a fixed term at least. They can say, 'I have had this new tenant come along and be introduced by the current one.' As the member for Morphett has indicated, that might all be against the background of a clean bill of health, but it is kind of like a nepotism of some sort that here comes an assignee introduced by the tenant. They get the walk-up start, they are not one of the throng that would be seeking the premises, and this assignee is now the tenant for life.

To use my term again—and I am being broad about that—they then are in receipt of all those rights and yes, they may prove to be whatever ensues. They may breach, they may do whatever it is, they might be perfect, but they have had that higher stakes intro as an assignee under this new arrangement, if I could put it that way.

The Hon. A. MICHAELS: Again, not necessarily so in that if there is something going wrong, if there are breaches, the landlord has the ability to terminate. So I am not actually convinced there is any higher level because there is a mechanism for landlords to deal with tenants who are breaching their agreements—either way, the original tenant or an assigned tenant.

Sitting suspended from 17:59 to 19:30.

The ACTING CHAIR (Mr Odenwalder): Are there any more contributions on clause 35? No.

Clause passed.

Clause 36.

Mr TEAGUE: This is a matter of construction again. I am curious here that there is the insertion of a new division 13A for the purposes of introducing the new section 75A. Just as a matter of determining, so this will sit as a standalone division after tenant's vicarious liability and before division 14 harsh and unconscionable terms.

I just wonder, given that it is dealing with the maximum liability for rent that is payable following a tenant's termination, and given that part 5 is concerned with termination by landlord, termination by tenant, termination by tribunal, why is it not more conveniently included, say, as an 86C or something of that nature within part 5, division 3, for example?

The Hon. A. MICHAELS: I do not have a specific answer to that other than that was the advice from parliamentary counsel to draft it in that way. The actual section itself is the result of a national cabinet decision for that policy position, but I do not have any advice on why that was carved out.

Mr TEAGUE: There is no particular magic. It is just a curiosity that it is very much concerned with the consequences of a tenant's termination, the balance of those provisions being in part 5, division 3. In terms of the substance of what will be the new section 75A, this is one of those very substantive changes in terms of setting out the maximum exposure of tenants in circumstances of termination, and it again comes in circumstances where the intent is to augur towards longer tenancies.

I note—and I might not have perhaps emphasised this enough—I do not hold REISA to every last comment in its response to the consultation paper. I acknowledge that that has led to some change and it has led to some amendment of view. That said, a lot of what is in the response is with respect to provisions that have not changed. One observation that the institute makes is the concern about not having any tenant exposure where there is a termination occurring in less than 12 months, or part thereof of a 12-month period, and that does not seem to have been addressed in response to the submission.

I suppose the question that I would ask is: in circumstances where the intent is to have longer tenancy agreements, how is it that imposing a cap which at the maximum would represent only a relatively small proportion of the term outstanding as a maximum exposure to liability from a tenant in any circumstance of termination?

The Hon. A. MICHAELS: The end result of that is to give the tenant some ability to exit a fixed-term lease where it is more than 12 months. In the end, a landlord would get their four weeks' rent plus any compensation in terms of advertising or re-letting fees or anything like that. That would be, in the national cabinet's view, sufficient for a property to be re-let.

That was the policy position taken at national cabinet that we signed up and agreed to, but in reality I would think most landlords would be able to re-lease their properties certainly within that four-week period as it currently stands and going forward. It may be, if we do get to the point of longer fixed-term tenancies—and that is a question of whether that happens or not in the market—if it is a five-year lease and someone leaves after two years, there is a substantial period of rent that would be owing under that clause.

Mr TEAGUE: In that sense, it might be regarded as an attempt to codify a period of reasonable mitigation of loss, I suppose.

An honourable member interjecting:

Mr TEAGUE: That was a preamble.

The ACTING CHAIR (Mr Odenwalder): That was a preamble, was it?

Mr TEAGUE: I was still on my feet. I appreciate the minister's response. There is a question I think I raised in the course of my second reading speech in relation to section 4 and the short-term fixed tenancies, the 90-day. I would raise it more particularly when we get to section 83A, but it might be an opportunity to address that concern, or part thereof, by the institute about a period clearly less than 12 months, where the short fixed-term residential tenancy pursuant to section 4 is an example of a very short tenancy.

It would be an unusual set of circumstances where you would have termination coinciding with something short of the month and so on. There is no specific carve-out in the legislation, as far as I can tell—maybe that is deemed unnecessary—but has the connection to short fixed-term tenancy subject to section 4 been contemplated for the purposes of section 75A and, in turn, any period short of 12 months?

The Hon. A. MICHAELS: The intent of the national cabinet agreement was to have a minimum of one month even if it is less than a 12-month lease. Like the member said, that is not likely to happen, but we might just take that, or part thereof, on notice and between the houses answer that question with parliamentary counsel.

The ACTING CHAIR (Mr Odenwalder): On a generous interpretation, I have given you more than three questions, and we are not going to go down the rabbit hole of supplementaries and clarifications. Are there any other members who have questions on clause 36?

Mr TEAGUE: Do I get this final opportunity on 75A? It is a matter already on notice. I just might put it on the record.

The ACTING CHAIR (Mr Odenwalder): On clause 36?

Mr TEAGUE: It is clause 36, which creates section 75A.

The ACTING CHAIR (Mr Odenwalder): No, because you have had three questions. These are the standing orders. Do any other members have any questions on clause 36?

Mr TEAGUE: I will come back to it.

The ACTING CHAIR (Mr Odenwalder): Yes, there must be another way you can slot it in.

Mr PATTERSON: I would just be interested to flesh out what was raised in national cabinet, and the point made that it was felt at national cabinet that four weeks is a reasonable time frame, and there are different markets. Of course, our market is different to Melbourne, which is different to Hobart, which is different to Brisbane, which is different from regional Queensland, etc.

Certainly, at the moment I think there would be no contention that just about most properties that are in a fit state would be able to be relet within a four-week period because supply and demand is such that the demand for rental properties is so great at the moment, with vacancy rates at less than 1 per cent. But at some stage the market does turn, and supply outstrips demand to the state where you do have properties sitting on the market for four weeks through no fault of the landlord. I note in terms of later on, when we look at clauses, there needs to be reasonable grounds for a landlord to terminate an agreement.

I would be interested to hear whether there was any consideration given to putting in place reasonable grounds for a tenant to terminate before the fixed agreement. As the member for Heysen said in his second reading speech, the idea of these contracts is that it is trying to bring two willing parties together, not forcing them or not trying to skew the balances so that one is at a higher priority than the other. They come in, they are not forced to sign a 12-month agreement, they willingly as a tenant do that.

Who is to say that there might be tenants' remorse where they get into the property, they have been there for only a month, and then they see a better place come up that they would much rather live in and they say, 'Okay, we will move on.' Getting back to the question, was there any consideration of putting in, on reasonable grounds, that tenants can do this knowing that, because there is a maximum liability, they know, 'Well, the most I am exposed to is four weeks.'?

The Hon. A. MICHAELS: No, there were no submissions to us to put in prescribed reasons for tenants. There are certain reasons within the bill and within the current act for tenants being able to terminate. For example, we just went through the minimum housing standards, but there was no consideration of that and I do not propose that there is. That four-week period of per 12 months is what is deemed to be at the moment appropriate and, if that needs to change, that can be considered later in further policy development.

Mr BASHAM: My question is in relation to my understanding at the briefing of the opposition in this space. There was a commitment by the minister's office to have a look at whether early terminations of a fixed tenancy term was an insurable risk?

The Hon. A. MICHAELS: Yes. On that insurance issue, if it is a term of the agreement that the tenant can provide whatever period of notice to exit, and there is not a breach of the agreement, that is not covered by insurance is our advice.

The ACTING CHAIR (Mr Odenwalder): Anything else on clause 36? Member for Morphett.

Mr PATTERSON: Can I just confirm, getting back to this, if there were no reasonable grounds is it the case that, as I laid out, a tenant may take up a fixed-term lease of 12 months, and they are only shortly into the lease, and then they see another property that is a lot cheaper and they say, 'Well, I'm going to get out of this lease even though I signed up for a 12-month period because I'm going to save money by going to a cheaper premises and I know my maximum exposure is four weeks of rent maximum, and hoping that the property gets tenanted out even quicker so then my exposure is less.' Does this allow that possibility to occur, and how does it compare to the existing legislation if a tenant were to terminate a lease after, say, only one month of a 12-month lease?

The Hon. A. MICHAELS: If it is a 12-month lease, there would be the four weeks plus expenses. I would dare say most landlords do not want a tenant in their property that does not want to be in that property, as a practical matter. So I dare say that is probably not going to be a significant practical issue because I would think that, once you know your tenant wants to go, you are probably better off finding a new tenant.

Clause passed.

Clauses 37 to 40 passed.

Clause 41.

Mr TEAGUE: I have one question in this regard while we are still on termination of the residential tenancy, and it might be a catch-all question of principle. We have addressed the point that a fixed term tenancy is not necessarily going to end at the end of the fixed term and it might continue for a long period of time. I am just trying to get my head around what the new world of fixed tenancy looks like in the context of clause 41 perhaps.

A tenant might not be readily wanting to sign up to this perhaps, but would it not be in the interests of a landlord to proactively look for signing up for a longer-term fixed term—five, six years—say six years is maximum pursuant to 75A in terms of liability for rent in the event of early termination for no reason by the tenant.

There has been reference to the national cabinet. Is there some more specific contemplation that six years, for example, might be the new standard fixed term and that therefore a tenant terminating very early would be exposed to that relatively substantial exposure for unpaid rent and that that might be one of the new parameters of the rental environment, which would be a significant departure, of course, from the sort of protection that a fixed term of short duration might be perceived to have played in the present circumstances.

The Hon. A. MICHAELS: I guess it is a little bit hypothetical. It might be that it goes to six years, it might be that people, as you have mentioned, decide that you might as well do a periodic tenancy in any event, so I cannot really answer that because I think it is a bit hypothetical at this stage to see what the market does.

Mr TEAGUE: I guess it stands to reason in circumstances where there is excess demand for rental properties where tenants are competing, if the tenancy was offered on a fixed term for that maximum liability period then, yes, the stakes are raised from the beginning, but on the other hand there is a maximum liability involved for rent for early termination. That might just be a passing comment at the beginning of what might be a new environment. I just wonder if any of that has entered into the consideration around the national cabinet process, issues like maximum liability for rent.

The Hon. A. MICHAELS: It has not been raised with me. I was not at national cabinet but it has not been raised with me.

Clause passed.

Clauses 42 to 45 passed.

Clause 46.

Mr TEAGUE: Clause 46—and it will follow on to clause 47—is really where a peak of controversial difference of view has been expressed. With respect to what will be the new section 83, the effect of the change, which is done by way of an amendment to what has been a right of termination by the landlord without specifying a ground of termination, is to really flip that and now amend the whole section to provide for termination by a landlord only on grounds that might be prescribed by regulations. This is where the first part of the key changes to landlords' rights really kicks in.

I had some reference to the Real Estate Institute's observations about that in the course of the second reading. The way that that is described in the commentary—I am just looking to bring up the way that is dealt with in the overview document. It must be useful to reference it. I think it is really dealt with by reference to the treatment on ending tenancies that is subject to the paper, although it is just not described in that section. So I will just go to the institute's observations.

The description, or the argument, about the reform has been put in terms that it would provide greater certainty for tenants and landlords. The observation is made that in fact it puts full control of the tenancy duration within the control of tenants and eliminates certainly for landlords and really requires that there be one of those prescribed grounds in the regulations cited in the event of a proposed termination.

I suppose the first question might go to what might be expected in the regulations. I think we had an indication of that list from the explanatory paper and I think the minister indicated yesterday the nature of that list, but are we to take it that it will be the same list in regulations for the purposes of this section as for those others that have been addressed earlier in the course of the debate?

The Hon. A. MICHAELS: I expect it to be so. We will consult on the regulations, but I do not expect there to be any significant difference between them.

Mr TEAGUE: I think we have addressed this in the context of clause 3 as it happened because that was the first point at which it came up, in the context of granny flats and so on being more explicitly included in those categories of residential tenancies. The real purpose then of providing for termination only on those specific grounds in this section—it might mislead the reader in a way, because the existing section 83 carves out and says, 'Well, you can't terminate for no reason if there is a tenancy for a fixed term' and for a whole variety of other reasons. Is it a convenient means of introducing termination by prescribed grounds? It has been shoehorned here into 83 and replaces 83, but it is really doing something quite different; it is now introducing termination by prescribed reasons that we are going to see expressed in regulation.

The Hon. A. MICHAELS: I might ask for clarification on the question. I want to answer the specific question you might have.

Mr TEAGUE: I guess on the one hand, perhaps, it might be put that the amendment to section 83 could have sat alongside the existing 83, in that they are doing quite different things. The new section 83 is going to do away with no specified ground of termination altogether, as I read it, and replace it with termination only on a ground prescribed by the regulations. So I suppose the question is: what is so terribly wrong with the existing section 83 and why could this provision not, at the very least, sit alongside what is currently there in section 83?

The Hon. A. MICHAELS: The distinction between 83 and what we will get to in 83A is that 83 is applying to periodic, hence you see at (2)(a)(i) it does not apply for a fixed term. So if it is a periodic tenancy it is to be terminated on prescribed reasons. We then flip into the next clause which deals with fixed-term tenancies. So, in terms of that section 83, it is for periodic tenancies and is introducing a prescribed reason for termination, rather than being able to terminate without any cause whatsoever for a periodic tenancy.

Mr TEAGUE: I appreciate the distinction between the work that 83 is doing and that 83A is doing. I guess to be clear, this is really providing that under no circumstances is there to be a termination by the landlord without a prescribed reason, the subject of regulations—and we will get to 83A in a minute—but we are limiting that right both with respect to fixed terms and periodic tenancies.

The Hon. A. MICHAELS: Yes, absolutely that is the intent.

Clause passed.

Clause 47.

Mr TEAGUE: We are now dealing with notice of termination at the end of a fixed-term tenancy, and it is here yet again that we encounter the highest level of opposition from the institute on freedom-of-contract grounds. To be clear about what is going on here, we are moving away from circumstances of long standing where, as we approach the end of the fixed term, the tenant has an obligation to provide 28 days' notice of an intent not to continue after the end of the fixed term. The landlord has the same obligation of 28 days' notice of intention not to extend at the end of the fixed term.

What might be at a lower level of controversy is the extension of that 28-day period to a longer period. I think I referred in the course of my second reading remarks to some voluntary longer periods that have been trialled by property managers. The example I cited was a 42-day period. This is now going to introduce a 60-day period for a landlord in terms of the necessary giving of notice. But that is then not of any real comparable character to the current 28 days on each side because not only is it an extended period of notice, but it has also got to be, in the landlord's case, armed with one of those prescribed grounds for termination even at the end of the fixed term.

As we have covered, that is triggering then a right of the tenant to give seven days' notice in response. We have departed from reciprocity, we have departed really from the notion of a fixed-term tenancy at all, and we are still left scratching around to figure out what real purpose the fixed term is serving.

I think one of them might be that, if it is a fixed term over a period of years, it provides for a sort of liability for rental in the early part, maybe, but we are very much re-characterising what is occurring in the final two months of any fixed-term agreement, from the landlord's point of view, and the tenant is now going to be in a position where notwithstanding the concession that one of those prescribed grounds might be valid, the tenant has their 60 days and they have the notice of a period of seven days up their sleeve as well. So let's say the prescribed ground relied upon is the failure to pay rent. They can continue the argy-bargy about that and we have heard the anecdotal evidence about what the consequences are for payment of rent following the notice of termination, so it is a sort of encapsulation of the nature of what is going on at that point.

Perhaps one specific question that arises is: what if the prescribed reason arises only within the final 60 days of the tenancy? In one of those ones that was cited as a potential example, it is the third breach in relation to rent. There might be those that build up over time and the third one occurs but not until within the final 60 days of the tenancy, but in any event, if whatever it is that is the prescribed ground occurs short of 60 days, what happens then to the notice period in particular in terms of compliance with the 60 days?

The Hon. A. MICHAELS: Are you asking the question that at the end of the fixed term the landlord does give that 60-day notice to end the tenancy, so the tenant is on notice that they are going?

Mr TEAGUE: No. There is no notice of termination. We get to 60 days. There is no ground upon which to give notice. Let's say it is in the cascading or the build-up version where there is a third breach required. The landlord might be on the lookout for the fulfilling of one of those prescribed grounds, but they might think, 'I haven't got one yet.' So we get within 60 days of the end of the fixed term and the ground is fulfilled. We are 50 days out, say. Where is the landlord at in those circumstances? Is the landlord basically lost as far as the capacity to give notice because it is now within the final 60 days?

Just to keep that flowing while we are looking at it, if I refer back to section 83, the way I interpret that, we bear in mind that section 83 is being amended by the clause 46 changes, as opposed to a fresh clause being inserted, and so, just for completeness, termination by a landlord generally would rely on the same list of prescribed grounds that is in a 90-day notice framework, as I read it, given the amendment, so that would not avail the landlord of any better opportunity to rely on a prescribed ground.

The Hon. A. MICHAELS: The answer is it depends, and it depends what the reason is. I think the answer is if you are heading up towards the end of the 12 months and you do not tell them that you are exiting them for a prescribed reason, it is assumed that tenancy will continue for another 12 months. If in that period of time there is a breach of the agreement, I think that would give the landlord the right to terminate as a breach of the agreement rather than certain other of the prescribed reasons that are not a breach. If it is a reason that is not a breach of the agreement, I will clarify but I think 83A means that you have an ability to terminate at the end of that next rolling 12 months. It depends on the reason, if you have given them that 12 months. So I think it depends on the reason, if that makes sense.

Mr TEAGUE: That might, and that is pretty instructive if they are the sorts of circumstances that are being dealt with in that it would create a situation where once you are in the final 60 days of a fixed-term tenancy, if something offensive were to occur—bear in mind the landlord is very much on the rails—then that opportunity is effectively denied the landlord because it occurred within the last 60 days. I would tend to agree with that interpretation. On the face of it, it looks as though you are somehow going to trip into the reliance on the 90-day regime or be somehow into the next term and, if it is a tenancy of longer duration, there might be other complications.

I have the list that I have scribbled down following the overview last night and I also have the list that is in the explanation. Some of those prescribed grounds that one might anticipate be regulated are really precipitous events. Some of them might have a warm-up, some of them might be in the nature of a deteriorating situation with the reliability of the tenant or other things that are related to the ordinary course of dealings between landlord and tenant. Others might be quite precipitous like the criminal conduct—the premises being used for illegal purposes.

If I was to use that as an example, the premises being used by the tenant for illegal purposes, that is something you discover right then and there, and that might be discovered at day 45. Similarly, to use another one, if the tenants failed to comply with a SACAT compliance order, that is going to happen as of a particular moment. I might be repeating the question, but in each of those rather precipitous circumstances where it happens where it was not there and then it is there and it is a serious reason—no-one is disagreeing—why would the landlord not in those circumstances reasonably have an expectation of being able to benefit from a curtailed notice period at the end of a fixed-term tenancy?

The Hon. A. MICHAELS: I might take that on notice, in terms of the notice period where there is a breach, and whether we have to clarify that in the regulations with some of those prescribed reasons. We might just take that on notice, in terms of the notice period.

Mr TEAGUE: I perhaps draw attention to the balance of section 80 that continues to be there. It might be that there is somehow a sweet spot that remains relying on the provisions of section 80. Perhaps if I can just address some remarks about what is going on and maybe why these sorts of questions, these concerns arise. We are sort of using what, under the current arrangements, is an entirely mutual set of provisions in the context of what has been understood to be a contract which has a fixed term, and really the mutuality of the notice obligations is one that is just in the interests of the orderly bringing to an end of a fixed term, not taking anyone by surprise but not, as it were, needing to rely on any particular rights.

By introducing the additional notice period required by the landlord, that just contributes because it makes the period of exposure greater, by introducing a grounds-based notice at the end of a fixed term, it changes the nature of the arrangement and puts the emphasis very much on the establishment of that ground which does not arise within the landlord's control. So you have a fixed time for notice but you are depending on a ground that might arise any time and yet it is being presented as a replacement for a mutual courtesy, if you like, or a mutual obligation not to take each other by surprise at the end of a fixed-term contract.

Might a better characterisation of what is going on really be about a kind of stage in the ongoing bargain? The fixed-term contract is really not doing much work as a concept anymore. You are rather approaching a juncture in the negotiation and you need to know, therefore, what to do about the precipitous breach that occurs, and what you might need to do about it might vary depending on when in the process that occurs.

I am still struggling to figure out what purpose the fixed term is serving in that context. But really is there not the potential for problems to arise because we are still trying to deal with things in terms of what is being described as notice prior to the end of a fixed term, as opposed to a need to give an indication on grounds, really, as a point of negotiation for what might be the continuing tenancy. It is just a punctuation point now.

The Hon. A. MICHAELS: In terms of that relationship, we are at the end of the fixed-term lease and a tenant wants to exit, the tenant will give their 28 days' notice. I think that is fairly clear. If there is a breach that would qualify for a section 80 breach during that last 60 days, for example, we have a seven-day notice period essentially under section 80 if it cannot be remedied. That would get the tenant out.

Without that section 80 breach, we need a prescribed reason. That is in fact the intention of the policy. It is to make sure that tenants have the sense of security that at the end of their rolling 12-month leases, if that is what the market will continue to do, which is really what the market does now, they have a sense of security that that will continue to be their home until they have done something wrong. So it is the intention of the policy to react in that way.

Mr PATTERSON: In terms of subsection (1), having the prescribed regulations, I think part of the consultation, as pointed out by the member for Heysen, is what you have just said there, that the intention is that it is just a rolling 12 months. By that, I interpret it to mean that, at the end of a fixed term, it just does not roll over to a periodic lease: it then goes to another fixed term of the equivalent length of the existing lease. I will operate under that premise. I will ask that as a question, I suppose. So at the end of the fixed term, if the landlord does not give the 60-days' notice that they want to terminate—they leave it be—is it a fact that a new fixed-term lease of equal length is entered into, or does it go to a periodic lease?

The Hon. A. MICHAELS: At the end of that, to have another fixed-term agreement you need another agreement entered into. So the landlord and tenant will be signing a new agreement for a term that is specified in that agreement. If not, we are having a periodic tenancy.

Mr PATTERSON: That then goes to the question at the outset. One point made as part of the consultation was that by having the ability for this to occur more readily because of subsection (1), where there are grounds prescribed by regulations, an unintended consequence may well be that when a tenant is first selected by the real estate agent or the landlord, that selection will become more exhaustive now because there is this implied compact that the tenant knows that, once they are in, they can stay on an ongoing basis.

Could this potentially have the adverse reaction that tenant selection is skewed against newcomers to the market? If you have come from overseas and have no history, or you are young and it is your first time trying to get a lease, because the rental agent may be trying to mitigate risks, they might make it harder for new tenants, people who are new to tenancy with no history, to get access to the market. Whereas, at present, because we know that the lease is fixed for 12 months, it could be the case that they do not have to have as exhaustive a tenant selection process, and therefore it may make it harder for new entries to the market to actually get a lease.

The Hon. A. MICHAELS: Not necessarily because I think in any situation, even under the current residential tenancies agreement, landlords and agents are cautious about who they are letting into their properties. For example, for some of those younger tenants it might be a question of looking at their income and making that a priority. If they can afford the rent, a landlord might quite willingly let it to a younger couple, for example. I am not sure that it is a fait accompli that that is what will happen.

I also want to correct something for the member for Heysen where we talked about the seven days. If it is a breach, that needs to go to SACAT for an immediate eviction. That will happen if it is a breach that is capable of remedy within the seven days, otherwise you are going to SACAT.

Mr Teague: You are in a narrow window there.

The Hon. A. MICHAELS: Yes.

Mr PATTERSON: Could you explain the balance that you arrived at? With the present situation, at the end of a fixed-term lease, both the tenant and the landlord have to give 28 days' notice if they wish to terminate, and now for reasons you have explained the landlord has to give 60 days, because then that gives the tenant more time to go off and find alternative premises and makes it easier for them. However, it seems that the obligation for the tenant to give the 28 days' notice has now been reduced down to seven.

Could you explain why the amount of notice the tenant has to give has been reduced substantially from 28 days to seven days? If you feel that that skews the balance between landlord and tenant so it gives, in a way, a fair bit of power to a tenant because they do not have to give much notice—whereas the landlord does have to give substantial notice—do you think that could skew the relationship between the two parties?

The Hon. A. MICHAELS: Assuming there is no prescribed ground, assuming the landlord has no reason to end that tenancy, the tenant still has to give 28 days' notice at the end of that fixed. It is still a substantial period of time and notice for the landlord who, obviously, will want to relet their property.

The seven days only kicks in if the landlord has told you that you need to be out by a certain date: 60 days. If you go looking for a property, and it happens on weekend one that you happen to find one, knowing you have to leave because the landlord has told you—they have given you their 60 days' notice—we have made that policy decision that if you have told your tenant to go, and your tenant happens to be in the very fortunate position to be able to find something quickly, the best policy decision is to let that tenant go and have your property relet.

The CHAIR: Are we finished with clause 47?

Mr TEAGUE: Just one more, if I may.

The CHAIR: You have already had one more. I was lenient.

Mr TEAGUE: I am sorry. May I just very briefly—

The CHAIR: Briefly? Is that the normal definition of briefly or your definition of briefly?

Mr TEAGUE: And in the interests of brevity, generally.

The CHAIR: And in the interests of brevity—okay.

Mr TEAGUE: This goes to the amendment to section 83A(4). That is a proviso to the tenant upon whom notice of termination is given and may give up possession on seven days' notice. However, subsection (3) is said not to apply 'if the notice of termination is on a ground prescribed by the regulations for the purposes of this subsection.'

They seem to be regulations that are very specific. The question might be: are they specific to the subsection and are there therefore contemplated circumstances under which a tenant may not be able to avail themselves of that capacity to give up possession and rely on seven days' notice? Is that how one should read that, and, if so, what are the regulations going to provide for? This might be a cure for what we have been talking about in that if it is found that they are dealing drugs at the premises, it might be that these are specific regulations that can provide that, actually, no, they do not have that capacity to rely on the seven days' notice.

The Hon. A. MICHAELS: The advice is that that subsection (4) might be used in circumstances where there is a deliberate breach by the tenant in that circumstance to cause the eviction and then be able to get out with only seven days. That is the nature of what we might use those regulations for: to carve that out and not give the tenant the benefit when they are doing something intentional to be able to exit.

Mr TEAGUE: So they are catered very specifically for the purposes of that subsection?

The Hon. A. MICHAELS: Yes.

Clause passed.

Clauses 48 and 49 passed.

Clause 50.

Mr TEAGUE: At 50, and here I just refer, and I do so again at 51 for the purposes of 85B, to the really more strident observations of the Real Estate Institute of South Australia, in this respect indicating that their perceived lack of reciprocity, at least at the time of first consideration, in allowing tenants to 'terminate for successive breaches but not extending the same rights for landlords is absurd and once again reflects the completely tenant-biased rationale of the amendments'.

I am not wanting to put the institute on the mat in that sense but I think that might have been—I do not know, I have asked the question whether or not that view has been moderated by the expectation of those categories of regulation, including two breaches, plus a third being likely to be included among those prescribed grounds in the regulations. Is that, therefore, an example of a position that has been moderated by a sharing of what regulations are to be anticipated?

The Hon. A. MICHAELS: That is right, and the expansion of the prescribed reasons after consultation with REISA for the landlord has got them to accept that that is the balanced approach in terms of that our tenants will be able to exit if the landlord breaches. It is less likely landlords are exposed to an ability to breach but it would be not rectifying something. I guess, if coming onto the property without giving proper notice constantly keeps happening, then that particular section gives tenants the ability to terminate and exit.

Mr TEAGUE: To come back to a theme that I have been endeavouring to articulate from the beginning, mutuality or reciprocity is an important principle in terms of the relationship between tenant and landlord. So I suppose we are in circumstances here where the provision in respect of the right of termination by the tenant for successive breaches of the agreement will be set out in the principal act and will be looking to the regulations for the reciprocity. A question might be: what virtue was there in referring to regulation those prescribed grounds? Given that we have now seen them fairly thoroughly articulated, what is the benefit to leaving them to regulation, as opposed to putting them in the act, including for these purposes?

The Hon. A. MICHAELS: In the context of having a broad set of prescribed reasons, having them in regulations makes it easier. In reality, there is more a tenant can do to breach an agreement than a landlord can do, so we intend to put that in the regulations with all those prescribed reasons, and consult on them. It is obviously easier to change if circumstances change and people start identifying other things that need to go in the regulations. For landlords, their opportunities to breach are more limited, so we have put it into the legislation. We have those two third-time breaches as an ability for a tenant to exit.

Mr TEAGUE: Just to underscore this theme then, that augurs to the importance of maintaining a fluent line of communication and cooperation with stakeholders, such as the institute and other informed participants, so that where circumstances are changing the regulations might easily reflect that over time.

The Hon. A. MICHAELS: Yes, absolutely.

Clause passed.

Clause 51.

Mr TEAGUE: I would address the insertion of new section 85B. Again, I am just seeking some indication of whether or not the Real Estate Institute has found some comfort, following its expression of strong opposition to this provision. Section 85B would provide for termination by the tenant due to the condition of the premises. The terms of subsection (1) are such that there is notice to be given to terminate where the premises do not presently comply with minimum housing standards—and we now see again a reference to the Housing Improvement Act 2016, which is also found elsewhere. A perhaps more straightforward example is if the premises are destroyed totally or rendered unsafe—that might be less controversial—or termination in prescribed circumstances, which are presumably prescribed by regulation.

I do not see, therefore, anywhere in subsection (1) there remedied the concern that the institute expressed at the consultation stage. I will quote that small part of its observations where the institute says:

The fact that the proposed amendments do not incorporate provisions for the landlord to remedy the breach is breathtaking and is directly in contrast to proposed section 67A…

That is the subject of clause 27 which does provide—and I think it was in 67A(2)—for the tenant to request the landlord to carry out repairs and for there to be an opportunity to be given, and so on. So the chief concern in section 85B remains that the landlord is not, in those circumstances, given any opportunity to repair the premises in whatever of those three circumstances the premises is found to be in.

The Hon. A. MICHAELS: The tenant will effectively have a choice: they can ask the landlord to repair, or they can exit and they can provide a notice under section 85B. That is a choice for the tenant, bearing in mind the fairly basic standards we are talking about that I took the member through last night—a toilet, a kitchen. We are talking about fairly basic requirements, so this is giving the tenant the option to terminate. Some of these things might not be easily rectifiable, so it is open to the tenant to exit giving that notice of termination under 85B.

Mr TEAGUE: I take it then that that might be one of those circumstances where the view of the institute might not have altered too much, or comfort found, but I think that is there on the record. In terms of 85C and the prescribed circumstances, is there an indication, presumably by regulation, of what those prescribed circumstances might be?

I stress again in this regard, I take on board that they might be very basic standards. I do not read the institute to be having any difficulty with that level of standards; it is the precipitous nature of the termination right that applies. I even understand if premises are presented without one of those basics and it is readily apparent that they are not going to be able to be remediable—alright, that might be one in which you would say, 'Well, offering the landlord an opportunity to remedy is a moot point because it's not practical to do that, so off you go and terminate,' but that could be captured in 67A. In terms of those prescribed circumstances, are there any, and are there any among them, that really would be amenable to a ready remedy?

The Hon. A. MICHAELS: At this stage, we do not have any intention of those prescribed circumstances. We do not have anything to give you. Having discussed the basic nature of the Housing Improvement Act standards, the Real Estate Institute—as I understand it—is comfortable with both 85B and the earlier section which gives a tenant the option to ask for things to be rectified. They are there in case we need them, but I cannot give you any indication of what they might be.

Clause passed.

Clause 52.

Mr TEAGUE: I might just briefly address clause 52 and, in so doing, clause 53 as well. I thank the minister for the opportunity for the briefing in relation to the operation of those measures and I guess to recognise that those, together with the other measures in the bill to provide for the capacity to terminate in relation to this clause and to take other steps that are found elsewhere in the bill, including with respect to changing locks and so forth, they are welcome measures. I recognise that to some extent they are going to chart unknown territory in terms of the circumstances in which that might occur. It might just be a hope that it will have the desired effect of improving the circumstances that might be faced by a person in those circumstances.

Again, as I addressed briefly in my second reading contribution, I indicate that those are welcome changes and, to the extent that the circumstances continue to evolve, we will monitor closely how those provisions are relied upon over the time ahead.

The CHAIR: Is that just a comment and there is no answer required?

Mr TEAGUE: No. The minister might like to reply, but there is no need.

The CHAIR: So that is clauses 52 and 53. Are you happy to progress with those two? You indicated earlier that you were going to talk to clauses 52 and 53.

Mr TEAGUE: Yes, I did; I know.

The CHAIR: I was just taking you at your word.

Mr TEAGUE: I appreciate that—clause 52 at least. I might just have one further word in relation to clause 53. I am done with clause 52.

The CHAIR: I was hoping you were going to say you were done with clause 53 as well, but I was being hopeful.

Mr TEAGUE: It will not be long.

Clause passed.

Clause 53.

Mr TEAGUE: I think more particularly I was referring there to new sections 66A and 66B in terms of rights to change locks and security devices. In relation to the combination of provisions in sections 85D, 89A and 90B, I raise the question as to whether or not a fund in the nature of the Retail Tenancies Fund might be a means by which to provide a form of recourse in circumstances, for example, where a perpetrator is not on the lease or is not otherwise able to be identified and brought to attention for compliance purposes.

I would be interested, just for the record, to test the question about the possibility of establishing a fund and, again, as has been previously referred, the question of whether or not losses that are incurred in those circumstances are relevantly insurable losses. That is the question, even if it might be on notice.

The Hon. A. MICHAELS: The advice that I have is that we are not looking to use the Residential Tenancies Fund to pay out that compensation, but my advice is that where a perpetrator who has the consent of the tenant to be living on that property causes damage, that would generally be covered under the landlord's insurance.

Clause passed.

Clause 54 passed.

Clause 55.

Mr TEAGUE: Clause 55 inserts a new section 91A. This is really a question going to the proper interpretation of section 91A. Section 91A establishes the prohibition, and that is prohibiting the landlord from letting the premises to a person in residential circumstances before the end of six months after the date on which notice was given, and there is a big penalty that applies in circumstances of a breach. Then it goes on to say that the tribunal can foreshorten that period.

Again, we are relying on grounds that are prescribed by regulation as they are set out in the words of section 91A(1), so I would be interested in whether or not there is a description of what those grounds are going to be. We have seen an indication that that includes the landlord's intent to live in the premises, for example. Renovation is another one that has been cited. They look like they are the two keys ones, but if there is anything more specific that you might be able to identify.

The relevant period of six months then contemplates that that is a period that is going to allow for relatively substantial renovation, for example, and will ensure that there is not a coming back into residency of the landlord for a week or two and then using it as a slip mechanism to reset the circumstances. So you understand where that is coming from.

The recourse to SACAT to foreshorten the period is, on the face of it, a question for the tribunal to determine, but one is left to perhaps presume that that is a bona fide assessment so that if, for example, the reason is renovation and the renovation might be anticipated to take some substantial portion of the six months and is done much more quickly, then SACAT might regard that as grounds for shortening the period. That is the landscape as I understand it.

The prescriptive regulations are perhaps the core of the question. In circumstances where works, for example, are required and there is no question of the bona fides of those works, but they will actually be done or it can be anticipated they will be done in a much shorter period than six months, it might be conceded that the works are inconsistent with occupation—let's say it is the renovation of the one and only bathroom or the replacement of the kitchen—to what extent on the one hand might that actually be the shortest form of reset of a tenancy? Secondly, as a practical matter, how readily is it anticipated that a landlord would have access to SACAT in order to bring forward that period of six months?

The Hon. A. MICHAELS: Essentially 91A is a deterrent; I think you understand the purpose of that. We are really making sure that a landlord gives a prescribed reason, like they want to move into the property or they want a child to move into the property or there is a renovation, in order to have some level of deterrent for using that reason for illegitimate purposes. Whether that might not actually be the case, that is really the effect of that clause. If it is in the nature of a renovation that might be relatively quick, there is always the prospect of negotiating with the tenant for having the property.

I know many people probably have their kitchens renovated while they are still tenants, and that can happen. But if it is the intention to terminate and do that work and it is a short period of time, it would be for the landlord to go to SACAT for those hearings, I understand, if it is a fairly short period of time. So that is something the landlord could certainly build in to their intention, if they know it is a short period of time and go to SACAT if they need to.

Mr TEAGUE: And really, without banging on about it, I understand the point about its being a deterrent period—six months—and much like some of the introduced parameters it will dictate the way that parties behave. But I just wonder, this might be a really practical set of circumstances. Bearing in mind we have dealt with fixed terms over a long period of time now, and a landlord might organise themselves more or less entirely good faith arrangements. A landlord might arrange their plans so that they are ready to kick off with desired minor renovations to coincide with the end of the fixed term. They will take that opportunity.

In the current environment they would do that without needing to have any fuss because they would just say, 'Alright, I am not planning on renewing this tenancy. I want to improve this bit and this bit and this bit and then go back to the market and I will see what presents itself.' In the new world, the subject of the bill, the landlord is needing to rely on a prescribed ground in order to bring the tenancy to an end at the end of the fixed term.

Let's say the landlord has the same mindset. They are orderly, they want to go to the end of the fixed term—no surprises to the tenant—and now 60 days worth of notice to the tenant of that intent, leaving aside the fact that the landlord is freshly in jeopardy then of the seven-day departure and that might work itself out potentially if that means, 'Alright, I will bring the renovations forward to the seven days if I can organise the subbies and all that sort of thing.'

Is it not predictable that there will be any number of renovations and any number of those sorts of activities that would meet the requirement that it would be logical to draw upon as a practical means of relying on using the end of the fixed term as a punctuation point to have an end to the tenancy? In those circumstances, is it not predictable that landlords will actually increasingly want to organise themselves about getting pronto in front of SACAT so that they can present the bona fides and say, 'No doubt about it. It was a short renovation but it was incompatible with occupation. It is completed and now I would like to be free of my six-month penalty thanks very much.'

Is there any sense in which SACAT—and we have considered the word 'disproportionate' in circumstances of rent increase—is concerned with the proportion of time, or the relative materiality of the renovation, or really is it just potentially one of those de facto levers that might end up being used if there is actually a desire on the part of a landlord to bring an end to the tenancy at the end of the fixed term?

The Hon. A. MICHAELS: The commissioner notes that with the price of renovations at the moment, it is an expensive way to get rid of a tenant. I think it would lose its deterrent factor if we start going down that path. I think most homeowners would be able to undertake renovations and arrange their life to use a second bathroom or make other arrangements.

If you are a homeowner, you do that when you renovate your house. You do not move out every year to undertake renovations. So I think people will adjust to this, and I think if it is anything less than six months, a landlord will take a commonsense approach and talk to their tenant about it. If there is a need to terminate that tenancy, then that is exactly why we have that ability to go to SACAT, prove their bona fides and be able to go back and rent it.

Mr TEAGUE: I might be repeating or reminding about that question about what those regulations will include. Have I summarised it accurately or are there others that might be in contemplation?

The Hon. A. MICHAELS: We will go and consult on those, but it is largely the ones that we have indicated of taking over the property to live in themselves, or major renovations.

Clause passed.

Remaining clauses (56 to 95) passed.

Schedule 1.

Mr TEAGUE: This is a point against me potentially, but it might be one that is worth elucidating again. This is the amendment to section 69 of the Real Property Act and that qualification to indefeasibility that is the subject of the amendment. My current reading of the clause is that it extends as a qualification to indefeasibility those interests of a tenant the subject of a residential tenancy duration at present not more than one year, that will be extended to not more than three years.

My understanding of the effect of that is that for a tenancy period not greater than three years, the tenant will not be required to take a step to formalise the protection of their interest in the property because it will be an automatic qualification on indefeasibility of the title of the owner, and that that will augur towards three-year terms being just as likely as one-year terms are now for the same reason, and that three years is determined as a good balance point around what is routinely going to be recognised as a qualification without further steps. I guess the first question is whether I have appropriately summarised that.

Secondly, why three years and not five or 10 years or some other number? Thirdly, in circumstances where the overall policy objective of the bill is to augur towards long-term rental, and presuming that the ambition might be that the tenancies are greater than three years in any single fixed-term contract, will this not tend towards three years becoming the outer limit of a fixed-term contract? Are there any other factors that have been borne in mind in that context?

The Hon. A. MICHAELS: The member for Heysen's summation I think is quite a good one of the intent of that provision. Again, this was something raised with us by the Real Estate Institute and requested by them. Getting to the three years was considered, I guess, a good balance. In terms of whether the three years becomes a standard—we have talked about six years becoming the standard because of the maximum liability provisions in the bill—I guess that is for landlords to decide as to what they are comfortable with and what interests they are trying to protect and what they want to do with that.

As I understand it, examples provided by REISA are, at the moment, leases over 12 months have a tendency for tenants to lodge a caveat. I have not seen that in practice, but that is what has been advised to me, so we want to extend that out. They have asked for that. We have landed on three years as a good balance. But your understanding of it is correct.

Schedule passed.

Long title.

Mr TEAGUE: I just take the chance to make that overall observation again, I suppose, of the substantial changes that are the subject of the bill, particularly in terms of the really very comprehensive moving away from the notion of a fixed-term residential tenancy of really any duration. That is a really very consequential shift. It is one that has been deliberately placed at the core of these changes, and I have made the observations in a variety of contexts throughout the course of the debate on the bill.

Again, just to highlight how important that is, we have noted that the act will still provide for what are said to be essential terms of a residential tenancy agreement, and core to those is the term, as it always has been. I just make it very clear that we might in the future be better moving to characterising the fixed term more in terms of a punctuation point for further negotiation or, otherwise, setting out some sort of sense of the expected primary duration of the tenancy as some expression of the intent of the landlord and tenant at the outset. There have been numerous observations about the clash involved there with basic principles of freedom of contract, despite the context in which the act has treated fixed-term contracts in the past. So that is one very substantial departure.

In the course of my observations in the second reading I was keen to deal, on the one hand, with the particular contractual provisions that will now be incorporated in this way into each and every residential tenancy agreement by virtue of the contents of the act, and the consequences for the market incentives to invest, and availability of rental, and so on, in the broader picture on the other, which is necessarily a matter for some speculation and uncertainty. Concerns have been raised about the extent to which the shifting of the dial in this respect, to really leave substantial decisions about the extent and duration of a tenancy in the hands of a tenant, and how that will augur in terms of the nature of the rental market over the period ahead, are things that will necessarily remain to be seen in important ways.

A commonsense observation that occurred to me in thinking about where this might leave the rental market is one that was also made by the institute in terms of predicting what landlords might do—landlords particularly who are wanting to control when and how and where their premises are let. The anticipation of a shift to letting for short-term accommodation purposes—Airbnb, and so on—as a result of these reforms being introduced I think is something that will need to be monitored closely, and we have seen, obviously, this debate occurring in circumstances where there is pressure on for the debate about capping of rents and other forms of intervention into what has been very much a private and contractually based market over a long period of time. So I just note those rather fundamental changes that are part and parcel of the overall reform.

I reiterate again that there are substantial parts—some of them were not addressed in any particular detail in the course of the debate—that are reflecting considerable work and are welcome, but those matters that have been addressed in some detail in the course of the committee are particular matters of controversy. I certainly will look to the government to keep a close eye on the health of the market generally and be willing to continue the reform process so as to ensure a healthy and productive residential tenancy market into the future, including any necessary future amendments. I thank the Chair and the minister for the opportunity in the course of the committee.

Long title passed.

Bill reported without amendment.

Third Reading

The Hon. A. MICHAELS (Enfield—Minister for Small and Family Business, Minister for Consumer and Business Affairs, Minister for Arts) (21:14): I move:

That this bill be now read a third time.

Bill read a third time and passed.

At 21:15 the house adjourned until Thursday 16 November 2023 at 11:00.