The Proptech Association Australia made the following submission in response to the NSW Draft Residential Tenancies Amendment Bill 2024.
To access a copy of the Public Consultation Draft, click here
Trina Jones
Rental Services Commissioner
23 September 2024
Comments on Public Consultation Draft of
Residential Tenancies Amendment Bill 2024
From: Proptech Association of Australia
RE: S1[3] – Section 23 Limits on amounts payable by tenant before agreement
Proposed wording of the draft bill:
It is stated that the intention of this amendment is to clarify limits on the amounts payable by a prospective tenant before a residential agreement is entered into apply even if the prospective tenant does not apply for tenancy of the residential premises or does not enter into a residential tenancy agreement for the premises.
We are deeply concerned that the drafting above seeks to prevent any kind of product, service or innovation be created for renters for purchase that either supports their application or provides them with information to support, unless that product or service is offered at no charge.
This approach effectively forbids the development of solutions for renters, and closes off a valuable emerging sector that provides renters with choice and services that they experience with other comparable consumer experiences, notably insurance, registrations and financial services.
The outcome of this amendment will hurt renters especially those most vulnerable. Data from proptech suppliers reveal just 1 in 10 renters choose to purchase a report through the application journey. Claims of coercion are unsubstantiated with 9 out of 10 choosing not to purchase.
Allowing Renters to purchase Background Checks can strengthen their application, especially:
- Migrants can demonstrate their visa right to work in Australia
- Interstate movers can demonstrate they are not on the NTD
- Self-employed can demonstrate their company Directorship
- First time renters with little or no rental history
Such use of prepurchased background checks creates a more level playing field at the consideration stage.
Additional data shows that where property managers or landlords do NOT offer additional service solutions to renters, a significant proportion of renters decide to pay for convenience with 30% of Rentpay.com.au’s clients are direct (ie: not via a property manager).
While the intention is to clamp down on claimed unnecessary purchase of Background Checks, or gouging additional fees from tenants, and prevent their inappropriate promotion, Australian Consumer Law provides adequate protection here.
Proptech Association Australia however does agree on the value of modifying the proposed regulations to ban Background Checks to instead enable renters:
- have the choice to submit an application freely without incurring a Background Check cost;
- have the choice to purchase a Background Check;
- to not be excluded due to non purchase of a Background Check;
- Background Checks are banned from inclusion in any scoring or automated decision making; and
- that a third party rental application provider must enable reusability and accept a current Background Check report if and when presented by, and at no further cost to, an Applicant.
We further point out that the obligation that renter innovation can only be supplied at no cost to renters stifles competition, shuts down a fledgling industry that has challenged larger players and will simply entrench the duopoly position of major portals who have the budgets to deliver technology to the renter sector
RE: S 1[5] – Section 35 – Manner of paying rent
Proposed wording of the Draft Bill:
Omit section 35(2). Insert instead—
(2) A landlord or landlord’s agent must enable a tenant to pay the rent—
(a) by CentrePay operated by the Commonwealth, and
(b) by an electronic payment transfer method that—
(i) allows the rent to be paid by the tenant directly into an account at an authorised deposit-taking institution nominated by the landlord or landlord’s agent, and
(ii) is free for the tenant to use, other than bank fees or other account fees usually payable for the tenant’s transactions.
It is stated that the intention of this amendment is to require the landlord or landlord’s agent to allow rent to be paid in certain convenient ways that do not incur additional charges. This does not prevent a landlord or landlord’s agent from offering additional ways to pay the rend.
Our comments are below
- Centrepay
We support this concept.
Our only comment is that it is going to take a few months for agencies to work through the Centrepay biller authorisation process. This won’t be a quick process and work should be done on a sensible timeline, and perhaps to work with Centrepay to prepare for the number of applications they will receive.
- Electronic bank transfer method
We understand this change is intended to remedy issues with the existing ‘free option’ provision where some agencies and landlords have nominated a ‘free option’ that is not consistent with the intent of the Act. The classic examples are the nomination of a bank cheque or cash as the free option.
We support the concept of remedying this issue.
However, there is, in our view, a flaw in the wording that significantly undermines the intent of the change as we understand it. This exposes anyone who follows the guidelines to significant cyber risk and has the potential to expose the entire trust accounting system to risk by requiring trust bank account numbers to be provided to directly to tenants.
Here are 2 examples to give some context:
Example 1: The agency nominates DEFT and its direct debit payment channel, then the tenant does not pay “directly into an account … nominated by the landlord or the landlord’s agent.” In this example the agent does not specify the account, it specifies the system to be used. DEFT will certainly not publish the DEFT its account details for security and operational reasons. All payment gateways have this issue. These payment gateways account for well over half of all rent payments.
Example 2: The agency nominates BPay. Again, there is no “account … nominated by the agent”, only certain reference numbers. There is not an “account nominated by the agent”, there is a biller ID and customer/invoice ID and it is, in practice, a system nominated by the agent.
In our view the proposed wording has two issues: the word “direct” and the concept of an “account nominated by the …. agent.”
The word “direct” is problematic because of the terms ‘direct debit’ and ‘direct credit’, that are part of the ‘direct entry’ payments infrastructure. Those concepts are in the process of being phased out by the Australian banking and payment system and will be replaced with various NPP models like PayID and PayTo. If ‘direct’ is meant to cover the direct entry channels, then the reference will increasingly become antiquated and block new innovation. If it is not, then it is a source of confusion.
We suggest that terms like ‘settle into’ is more appropriate language and will cause less confusion and survive payments industry innovation.
The phrase “account nominated by the … agent” is also confusing because in many of the payment methods that are generally accepted by all stakeholders as good models for free payment methods – e.g., BPay, direct debit and the emerging PayID – no account is ‘nominated’. In those channels, the underlying target account bank details (BSB and Account Number) are not published.
For many operational and security reasons, companies do not, and should not, be publishing account details widely. Banks strongly advise against doing that and insurance policies like Cyber risk coverage are increasingly connected to this practice.
Lastly, BPay does not have accounts, but IDs. PayID has phone numbers and email addresses, not just accounts.
We are concerned that as currently drafted, the clause puts at risk payment methods used by well over 90% of renters and agencies would be eliminated, which is presumably not the intent. Assuming they are free to the renter, the following channels would arguably not be available as free options: BPay, all forms of direct debit, EFTPOS, Australia Post BillPay, NPP payments (PayID and PayTo), and debit cards. It would also stop any further innovation in new payment methodologies like PayID and PayTo.
Our assumption is that this is not the intent of the proposed changes.
We suggest the following wording, which would support what we understand to be the intent and also go some way to helping to create clarity.
by an electronic payment method that—
(i) allows the rent to be paid by the tenant using a payment channel or system nominated by the landlord or landlord’s agent,
(ii) settles into an authorised deposit-taking institution, and,
(iii) is free for the tenant to use, other than bank fees or other account fees usually payable for the tenant’s transactions.
Schedule 1 [10] – Removes provisions that allowed for no-grounds termination of a residential tenancy agreement by a landlord.
We understand that the intention of this amendment is to prevent landlords from inappropriately ending leases with tenants without providing a valid reason and support wholeheartedly any amendments that will deliver greater ‘agency’ and control for tenants to be protected from change during a contracted lease period. These amendments however do not achieve this goal.
We are genuinely confused by the language of a ‘no grounds termination’ in the amendment. A fixed lease is by its nature fixed. At the end of the lease, a new contract must be negotiated through the agreement of both parties. Notice periods – 90 days on behalf of landlords and 21 days for tenants – already exist to advise if either party is willing or not to enter into a new contract.
The amendment infers that a decision to rent a property by a landlord in NSW obligates that property to always be part of rental stock unless the landlord can show good cause for wanting to utilise their asset for their own purposes.
To describe the decision by a landlord to want to remove their property from the rental market and decide not to be a party to a new lease at the end of a valid contract as a ‘no-grounds termination’ is an amendment drafted to support a media headline.
The detailed paperwork required to manage the process will be laborious and costly for landlords.
Our concerns around the amendment include:
- It removes the rights of landlords to make decisions about their privately owned assets
- It imposes cost of compliance onto landlords with additional legal fees for statutory declarations or contract drafting.
- The timeframe for action for renovation or building work is completely unreasonable in the current construction environment.
- In order to meet the deadlines outlined in the amendment, landlords will be forced to interrupt the amenity of tenants during their lease period to measure and plan for building work.
Supporting Documentation
Proptech Association Australia was specifically requested to provide advice on the types of supporting documentation to accompany a termination notice. The supporting documentation request outlined different documentation that might apply for various termination grounds.
Again we would iterate that the decision of one party to decline entering into a new contract with another is not a termination. It is the natural conclusion of a business or service relationship.
It should be noted that at a time when the NSW Government is looking to significantly reduce the obligation of tenants to provide documentation to landlords, and to reduce the exposure of tenant data to cyber risk, the suggested documentation proposals are administratively onerous, costly, out of alignment with current construction, planning, council approval processes and the current time that industry data tells us property owners take to make a decision to sell and then ready a property for sale.
They also raise the issue of how the information – which includes identification of family members, planning details, asset value and personal wealth – will be provided to tenants. We remind the government that emailing PDFs is currently one of the riskiest ways to share detailed personal information as outlined above. Tenants would also need to be provided with strict guidelines on how such information is to be stored or disposed of once no longer required.
The alternative, if such a measure must go ahead, would be to allow a property manager to generate a standardised and approved form within existing real estate forms and/or CRM and property management systems that becomes binding on parties once signed. A simplified form could then be sent and signed using digital signature technology and/or existing property management and renter apps.