RTA in Focus: Prescribed material facts

26 February 2020

Drug activity, strata repairs and external combustible cladding have been added to the list of prescribed material facts a landlord or their agent are required to disclose to potential tenants.

It’s fair to say that a lot of people don’t want to live in a home where something unpleasant has occurred. For example, if a murder or violent crime has been committed at a property, there are many people who would object to making it their home. Ongoing occurrences like excessively noisy neighbours can also be off-putting.

Perhaps it would make no difference to you, but for countless prospective tenants with cultural, religious or superstitious beliefs, it can.

“This is what makes the issue of ‘material fact’ so difficult,” Michelle McLean, Senior Property Manager at Leah Jay and Chair of the REINSW Property Management Chapter Committee, said. “What’s an important consideration for one person may be completely irrelevant to someone else.

“Added to this is that we can only disclose what we know. If our landlords don’t tell us, we’re not in a position to disclose relevant information to the tenants.”

All property managers need to understand the law when it comes to material facts. Importantly, you need to know how your disclosure obligations will change with the commencement of the residential tenancy reforms on 23 March 2020.

What’s the current situation?

Section 26 of the Residential Tenancies Act 2010 (NSW) sets out that a landlord or their agent must not knowingly conceal a prescribed material fact to induce a tenant to enter into a residential tenancy agreement.

Currently, the Residential Tenancies Regulation 2010 (NSW) prescribes the following as material facts:

• Flood and bushfire – Where the property has been subject to flooding or bushfire in the preceding five years.

• Health and safety risks – Where the property is subject to significant health or safety risks that are not apparent to a reasonable person on inspection of the premises (for example, the presence of lead paint).

• Asbestos – Where the property is listed on the loose-fill asbestos insulation register.

• Violent crime – Where the property has been the scene of a serious violent crime within the preceding five years.

• Waste – Where council waste services will be provided to the tenant on a different basis to other residential properties in the area (for example, where the tenant will be required to pay for council bins or domestic waste services).

• Parking – Where, because of zoning or other laws relating to the development of the land, the tenant will not be able to obtain a residential parking permit in an area where only paid parking is available (for example, where a condition of a development consent is that the permit will not be made available for a particular strata apartment).

• Driveways and walkways – Where there is a driveway or walkway on the property that other people are legally entitled to share with the tenant.

What’s changing on 23 March 2020?

On and from 23 March 2020, a number of additional material facts will now require disclosure if the landlord or their agent is aware of them.

Clause 8 of the Residential Tenancies Regulation 2019 (NSW) sets out that, in addition to the material facts set out above, the following must also be disclosed by a landlord or their agent as material facts:

• Drugs – Where the property has been used for the purposes of the manufacture or cultivation of a prohibited drug or prohibited plant within the last two years.

• Strata repairs – Where rectification work or major repairs are scheduled (including the replacement of roofing, guttering or fences) to be carried out to common property during the fixed term of the residential tenancy agreement.

• Cladding – Where a fire safety order or building product rectification order has been issued (or there is a notice of intention to issue either order) regarding external combustible cladding, or where a development application or complying development certificate application has been lodged for rectification regarding external combustible cladding.

The amendments in practice

Michelle welcomed the additions to the list of prescribed material facts to be disclosed.

“Anything that provides greater clarity for property managers is a good thing,” she said. “And, in turn, when we’re talking to our landlords, we can point to the fact that it’s the law for them to disclose certain things.

“Perhaps the biggest issue property managers face when it comes to material facts is that we don’t know what we don’t know. We can only disclose the things we know about and there are landlords who are not forthcoming about certain things relating to their property.”

Michelle gave the example of taking over the management of a property that was previously used as a meth lab.

“Yes, all the remediation and cleaning work may have been done by the previous property manager, but what if the landlord doesn’t tell you what’s happened previously?” she asked. “It’s definitely a material fact requiring disclosure, but how are you supposed to know if the landlord keeps it under wraps?

“At the end of the day, you can only disclose what you know.

“That’s why it’s necessary to ensure your landlords understand the importance of disclosing material facts. If they don’t disclose something to you, then you can’t disclose it to the tenant. If the tenant then later finds out, they can walk away with only 14 days’ notice.”

Beyond the list prescribed by clause 8 of the Regulation, Michelle said that it’s best practice for a property manager to disclose as much as possible.

“I believe it’s always better to over-disclose rather than under-disclose,” she explained. “It’s in everyone’s interests. It’s that simple.”

Useful links

• Residential Tenancies Act 2010 (NSW)
• Residential Tenancies Amendment (Review) Act 2018 (NSW)
• Residential Tenancies Regulation 2019 (NSW)

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