VCAT – a flawed, fractured system

There is little doubt from anyone working within the residential tenancies sector that the current system of administering the governing legislation is deeply flawed and most likely on the verge of a complete breakdown.

The system is in imminent danger of collapse, and this isn’t just my own view – this has been expressed to me by people within the system, even those working within it are frustrated with the archaic nature of its administration.

There are massive delays within the system, hearings are months behind and decisions are inconsistent with law.

Even before the Omnibus legislation from April last year, there was a consumerist stance being demonstrated by a number of the members of the judicial panel, and with the advent of covid and the emergency legislation protecting the tenant this became an entrenched position. Very few tenants who claimed hardship were actually questioned by the presiding member where in contrast, the property owner’s financial position was subject to sometimes overly zealous scrutiny, and very, very few Orders were made with a balance to them; in short, tenants were flouting the system and being allowed to avoid responsibility for their obligations for rent with no thought of being held to account.

There is a backlog of hearings from March 2020 yet we have not seen any drive to attract new panel members to VCAT.

Enter the new legislation on 29th March this year and the situation has deteriorated.

The information that I have available – and this is in the public realm so I’m not claiming any special insights here – shows that there are literally thousands of matters which are jammed in the system.

VCAT itself has noted that they have a “severe” staff shortage, and that the current method of hearing matters by phone takes more time than the in-person method used prior to covid.

Yet there is disinterest in recruiting new members – why?

An online search shows only 2 VCAT positions being advertised, neither of which are for panel members.

To try to ease the burden on an overwhelmed system, there is a list of priorities when assessing a case for a hearing date, there always has been and this should definitely remain, but at some point commercial reality needs to be applied. The cost to the private housing sector is enormous because the government seems to have a view that private landlords have seemingly bottomless pits of capital and are well positioned financially to wear ongoing loss of income from non-performing tenants.

The hard truth is that they are not; the vast majority of private landlords own a single rental property and rely on the income derived to at least partly pay the expenses in its upkeep. And contrary to public pronouncements, the Act is not being applied in an even, balanced manner so the private landlord is left at considerable risk.

A lease is a contract, and this confers obligations on both sides, chief of these from a tenant’s perspective is the payment of rent. As an industry, we’re advised that it takes at least 10 weeks from the time of application to have a rent arrears matter heard – this clock doesn’t start running at the time the tenant stops paying, there is a lag of a minimum of 4 weeks due to the notice requirements of the Act before an application can be lodged, so the landlord is already significantly out of pocket before even getting on the list for a hearing. You can see how the costs start to mount up rapidly.

If the matter being applied for is for the retention of the bond for damage or outstanding rent after the tenant has vacated the property, then your wait list is likely to be 6 months; if it’s for compensation alone well, this wait time is likely to be a year – and yes, you did read that correctly.

VCAT needs an overhaul in terms of its listing procedure, the number of members qualified and available to conduct hearings, and the way in which matters are decided – regardless of the provision where members can exercise discretion in the application of the law, there is either a lack of education on the Act, or clear bias in favour of tenants where they are put onto meaningless payment plans, where rental amounts are now being forgiven, or where damage and cleanliness issues are dismissed as being “just part of owning a rental property”; more and more often I am hearing of matters where the property manager or owner gets little chance to present or to have their evidence considered but the tenant is shown great latitude with their utterances and facts not in dispute are ignored; this is completely against common sense and the legislation – the members seem to have been instructed to ignore the Act and give the tenant more chances to avoid their obligations.

We cannot allow this situation to continue. Victoria is already seen as having draconian residential tenancy laws and is viewed as a far less appealing state in which to own rental property – the report in last months Australian Financial Review showed during the first 8 months of 2021 around 9000 rental properties had either been sold or were on the market in the western suburbs of Melbourne, and the most commonly applied for termination notice at VCAT (other than for rent arrears) is for reasons of sale of the property.

If that’s not ringing alarm bells in government then the system of private and public rental housing in this state is in real trouble – the strain that an exit from rental property of this magnitude is going to place on affordability and on the public housing sector is going to be immense as private rentals become harder to source and pay the increasing rents for in coming years.

All parties need and deserve a balanced, just system where the panel members are educated properly in the workings of the Act, where decisions are consistent across all members, in tune with the legislation, and workable and doable by both sides, a system where there is an expectation of a fair, sensible outcome.

I propose that there is an immediate review of the system done by external consultants with a view to streamlining the method of listing hearings, the qualifications of members, implementing a process of hearings where the rights and evidence of both sides are given equal due, and the manner in which Orders are made and enforced – for once this has to be a balanced review with the needs and voices of both the landlord and tenant representative bodies being given equal weight; there are many more wise heads in industry, and I mean on both sides of the equation, than there are in government. The findings of the review need to be implemented by government without delay.

This needs to happen now – before the current system falls apart to the point of people acting of their own volition through frustration with a broken, biased means of interpreting the laws.

And before I get pilloried by special interest groups – I rent…