Subtenancy Letting

(Question, 14 February 2018, Legislative Assembly, NSW Parliament)

Happy Valentine's Day, Madam Speaker. I direct my question to the Minister for Innovation and Better Regulation. Happy Valentine's Day to the Minister. How will the Minister protect subtenants who have an informal agreement with the head tenant and are, therefore, not covered by a lease or occupancy agreement from eviction without notice, unreturned bonds and repeated rent increases?

Minister for Innovation and Better Regulation: Madam Speaker, I also wish you a Happy Valentine's Day. It is the second busiest day for the fair trading Minister, running a close second to dealing with killer toys. I am receiving love advice from the counter terrorism Minister. It is like getting ethical advice from Eddie Obeid. It is not too important a day not to be concerned about the issue of subtenants. I thank the member for Sydney for his question and note his ongoing commitment to his constituents, many of whom are tenants. Subtenants are most often found in share houses and are generally covered by the Residential Tenancies Act 2010. They usually have exclusive use of a bedroom and the shared use of common areas and facilities such as the bathroom and kitchen. However, most share household arrangements in rental properties in New South Wales are established on an informal basis, where the head tenant does not formally sublet the premises to other occupants. Instead, the tenant and the share housemate enter into an informal arrangement, often an oral contract, and the Residential Tenancies Act does not apply.

The Act provides comprehensive rights and obligations for tenants, that is, people who have entered into a residential tenancy agreement with a private landlord. Section 10 of the Act makes it clear that only parties to a residential lease are covered by the Act. Among other things, this enables landlords to know with whom they are entering into a binding legal contract or a lease. In order for a tenant to sublet the premises, they need to enter into a formal contract, or residential tenancy agreement, with the person who will occupy part or the whole of the premises. Under the Act, the head tenant in this situation then becomes the landlord in relation to the subtenant. Both parties then have the same rights and obligations as the head tenant has in relation to their landlord, who is usually the property owner.

The previous 1987 Act was not entirely clear about the tenancy status of occupants of share housing. It was up to the tribunal to decide whether the informal arrangement constituted a residential tenancy agreement and, therefore, whether the tribunal had jurisdiction to hear the dispute. Submissions to the review that led to the 2010 Act called for resolution of this uncertainty. Section 10 of the 2010 Act places the issue beyond doubt. An occupant is only a subtenant if they have leased part or the whole of the premises from a head tenant. The tribunal's jurisdiction is now absolutely clear. In early 2017, Fair Trading consulted tenants' advocates, academics, landlords, agents and the share house website Flatmates.com.

Following consultation, the extent of the problems experienced by share house occupants was still unclear. Many of the Act's provisions, such as the obligation to carry out repairs and maintenance, are not appropriately applied to head tenants of share households. They are not property owners but, rather, are tenants themselves and do not have control over such matters. Importantly, many head tenants and share house occupants do not want the regulatory framework of the Act imposed on their informal living arrangements. Accordingly, the New South Wales Government does not propose to reform section 10 of the Act at this stage. Instead, Fair Trading will continue to monitor the issue as this special section of the marketplace develops over the coming years. Fair Trading will also review the information it provides to occupants of share housing about their rights and how to resolve disputes with their head tenant and fellow occupants. The network of 18 Tenants' Advice and Advocacy Services across New South Wales will continue to provide free advice to all occupants of rental properties about their rights and options for resolving disputes. The services are funded from the interest earned on tenants' bond money.