Wallbrink v Hansen & Ors (Residential Endorsements)
[2023] ACAT 54
•15 September 2023
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
WALLBRINK v HANSEN & ORS (Residential Endorsements) [2023] ACAT 54
RE 1/2023
Catchwords: RESIDENTIAL ENDORSEMENTS – application for endorsement of non-standard term – proposed term allowing recoupment for lessor’s installation of solar panels – role of lessor as potential energy seller under National Energy Customer Framework – whether proposed term inconsistent with Residential Tenancies Act – whether inconsistent with standard terms – whether discretion to endorse term enlivened – balance of power between lessor and tenants
Legislation cited: Australian Consumer Law Part 2-3
National Energy Retail Law (ACT) Act 2012 s 6
National Energy Retail Law (South Australia) Act 2011 (SA) Schedule 1, s 88
Residential Tenancies Act 1997 ss 8, 9, 10, 15, Schedule 1, standard terms 42, 43, 44, 46, 48
Utilities Act 2000 s 59
Subordinate
Legislation cited: Utilities (Consumer Protection Code) Determination 2020 Consumer Protection Code, Part 2.3
Texts/Papers cited: Australian Energy Regulator (Retail) Exempt Selling Guideline, Version 6, July 2022
Cases cited:Commissioner for Social Housing v TenantAA202154 [2022] ACAT 57
Griffiths v Worthington-King [2018] ACAT 98
Tribunal:Senior Member M Hyman
Date of Orders: 15 September 2023
Date of Reasons for Decision: 15 September 2023
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) RE 1/2023
BETWEEN:
AUDIE WALLBRINK
Applicant
AND:
CLAIRE HANSEN
First Respondent
AND:
SALLY HANSEN
Second Respondent
AND:
MICHAEL STEVENS
Third Respondent
TRIBUNAL:Senior Member M Hyman
DATE:15 September 2023
ORDER
The Tribunal orders that:
The inconsistent term put forward in the application is endorsed.
The term endorsed in order 1 forms part of the residential tenancy agreement between the lessor and the tenants.
………………………………..
Senior Member M Hyman
REASONS FOR DECISION
Introduction
This decision is about whether the Tribunal should endorse a non-standard term in the residential tenancy agreement between the applicant/lessor (the lessor) and the three respondents/tenants (the tenants).
Under the Residential Tenancies Act 1997 (the RTA) every residential tenancy agreement contains, or is taken to contain, the standard terms found in Schedule 1 to that Act.[1] But the RTA allows a term inconsistent with a standard term to take the place of that standard term if endorsed by the ACAT. The RTA provides a process by which the parties to a tenancy agreement can seek the tribunal’s endorsement. In December 2022, the lessor and the tenants applied to the ACAT for endorsement of a term dealing with electricity supply and consumption, a term which they asserted was inconsistent with standard terms 43(2) and 46. The term related to the way in which electricity supply and consumption would be charged to the tenants following the installation of solar panels on the roof of the premises by the lessor.
[1] Residential Tenancies Act 1997 section 8
The matter came before me for a brief hearing on 31 May 2023. At that hearing, the tenants failed to appear; I brought to the attention of the lessor some of the material relating to the obligations laid on energy retailers through the National Energy Customer Framework. In the absence of the tenants, I was unable to form a view on whether the application had been made with the full consent of the tenants, and I adjourned the matter. The hearing resumed on 21 June 2023, with a representative of the lessors and one tenant (Mr Stevens, the third respondent) present. I invited submissions from the parties with the intention of making an in-chambers order after receiving any submissions. Having received submissions from the lessor, I have now made an order and with that order I also provide these written reasons.
The material I have available to me includes the tenancy agreement between the parties; an electricity account for the premises from a supplier; the account provided by the lessor to the tenants, based on that account; an earlier account from a different supplier from the period before installation of the solar panels; and other supporting papers.
Issues
The issues to be decided in this matter all concern the proposed additional or replacement term submitted for endorsement by the parties. The issues may be set out as:
(a)whether the proposed term is inconsistent with the RTA, apart from the standard terms in Schedule 1 to the Act;
(b)if not, whether the term is inconsistent with one or more standard terms in Schedule 1;
(c)if so, whether the discretion to endorse an inconsistent term is enlivened;
(d)if so, whether the term was obtained by fraud or undue influence; and
(e)whether the discretion to endorse the term should be exercised.
The legislative context
The provisions of the RTA affecting the endorsement of inconsistent terms are sections 8-10.[2] The three sections are, relevantly, as follows:
[2] The quoted excerpts from the RTA are taken from the version of that Act current at the time the application was lodged, Republication 75
8 Standard Residential Tenancy terms
(1) A residential tenancy agreement—
(a)is taken to contain the standard residential tenancy terms set out in schedule 1—
(i)for a fixed term agreement—as in force on the day the parties enter into the agreement; or
(ii) for a periodic agreement—as in force from time to time;
…
(d)may contain any other term—
(i)that is consistent with the standard residential tenancy terms; or
(ii)that is inconsistent with a standard residential tenancy term if the term has been endorsed by the ACAT under section 10.
9 Inconsistent tenancy terms void
(1) A term of a residential tenancy agreement is void if—
(a)it is inconsistent with a standard residential tenancy term; and
(b)it has not been endorsed by the ACAT under section 10.
(2) A term of a residential tenancy agreement is void if it is inconsistent with this Act (other than a standard residential tenancy term).
10 Endorsement of inconsistent tenancy terms by ACAT
(1) The parties to a residential tenancy agreement may apply in writing to the ACAT for endorsement of a term of the agreement (the inconsistent term) that is inconsistent with a standard residential tenancy term.
(2) If the parties apply for endorsement of the inconsistent term, the ACAT must do 1 of the following:
(a)endorse the inconsistent term;
(b)substitute the equivalent standard residential tenancy term for the inconsistent term.
(3) In making a decision under subsection (2), the ACAT must consider—
(a)the criteria determined under subsection (6); and
(b)whether the inclusion of the inconsistent term in the residential tenancy agreement was obtained by fraud or undue influence.
(4) The ACAT must not endorse a term that is inconsistent with this Act (other than a standard residential tenancy term).
(5) The ACAT must not endorse a term mentioned in section 15 (5) in relation to a tenant unless satisfied that the tenant owes an amount to the housing commissioner.
(6) The Minister may determine criteria for subsection (3) (a).
(7) A determination is a disallowable instrument.
The application before me relates to how the tenants are to be charged for electricity. The standard terms applying to utilities are terms 42-50. Terms 42, 43, 44, 46 and 48 are set out below:[3]
[3] Term 45 is omitted because it relates to unit titles; term 47 because it relates only to the telephone service; and terms 49 and 50 because they relate to reading of meters at the beginning and end of a tenancy
42 The lessor is responsible for the cost of the following:
(a)rates and taxes relating to the premises;
(b)services for which the lessor agrees to be responsible;
(c)services for which there is not a separate metering device so that amounts consumed during the period of the tenancy cannot be accurately decided;
(d)all services up to the time of measurement or reading at the beginning of the tenancy;
(e)all services after reading or measurement at the end of the tenancy providing the tenant has not made any use of the service after the reading.
43 (1) The lessor must pay for any physical installation of services
(eg water, electricity, gas, telephone line).
(2)The tenant is responsible for the connection of all services that will be supplied in the tenant’s name.
44 The lessor must pay the annual supply charge associated with the supply of water or sewerage.
…
46 The tenant is responsible for all charges associated with the consumption of services supplied to the premises, including electricity, gas, water and telephone.
…
48 (1) The lessor is responsible for undertaking or arranging all
readings or measurement of services, other than those that are connected in the name of the tenant.
(2)The lessor must provide the tenant with an opportunity to verify readings and measurements.
The term for which endorsement is sought by the parties (the proposed term) is as follows:
The property has a solar panel system installed that generates electricity and a feed-in tariff is paid by the electricity service provider to the owner of the property.
1. The tenant agrees not to connect the electricity account in their name and that they will be invoiced by Hayman Partners for electricity supply and consumption charges under the terms of this tenancy.
2. The tenants acknowledge that they are not eligible for the feed-in tariff or rebates and that they must pay the supply and consumption charges shown on the account when it is received.
3. Should the tenants change or modify the connection details for the electricity services they acknowledged that they may be liable to compensate the owner for any loss, including lost feed-in tariff or rebates.
Consideration
Some preliminary issues
The past practice of the ACAT in dealing with applications for endorsement of terms inconsistent with the standard terms was that most such applications were dealt with on the papers, and that written decisions were very rarely published. As a result, there was not the usual body of written decisions exploring the principles governing decision-making under section 10 of the RTA. There are some exceptions: Commissioner for Social Housing v Tenant AA202154 (Tenant 202154), an appeal decision setting out a number of fundamental principles relating to the endorsement process;[4] and Griffiths v Washington-King (Griffiths), an appeal decision dealing in part with a term relating to a solar feed-in tariff,[5] in some respects similar to the current matter.[6]
[4] [2022] ACAT 57 at [205]-[209]
[5] [2018] ACAT 98
[6] Griffiths arose not from an application for endorsement of a potentially inconsistent term, but rather from an application by tenants asserting that an additional term was void because it was inconsistent with a standard term and had not been endorsed
The principles in Tenant 202154 are, to a degree, influenced by the kind of application made to the Tribunal in that case, specifically that the applicant was the Commissioner for Public Housing, and that the potentially inconsistent term related to the termination of a tenancy; the present application involves a private lessor and concerns a very different kind of term. For that reason, in the principles from that case set out below, paragraphs (b) and (d) are not relevant to the present matter:
(a) The ‘inconsistency’ with the standard terms contemplated by sections 8(d)(ii), 9(1) and 10 of the RT Act is limited to direct inconsistency. The standard terms do not ‘cover the field’.
(b) The additional term is inconsistent with standard term 94, because it detracts from the tenant’s right to be given 26 weeks’ notice of a ‘no cause’ termination.
(c) The ‘inconsistency’ with the RT Act contemplated by sections 9(2) and 10(4) includes direct inconsistency and, in some respects, indirect inconsistency.
(d) The additional term is inconsistent with section 36 of the RT Act, insofar as it enables a tenancy to be terminated by the tenant moving out in accordance with a notice to vacate given under the additional term.
(e) The matters in section 10(1) of the RT Act must be established before the discretion under section 10(2) to endorse, or not endorse, is available to be exercised.
(f) The decision under section 10(2) to endorse an additional term or to substitute the prescribed term is a discretionary decision.
(g) The discretion under section 10(2) is not unfettered. It must be exercised rationally, and by reference to:
(i)the determined criteria (if any);
(ii)whether ‘the agreement to the additional term was obtained by undue influence or fraud’; and
(iii)any other relevant factor.
(h) The terms ‘undue influence’ and ‘fraud’ should be given their ordinary English meaning, which may be informed by jurisprudence in relation to those concepts. Satisfying (or not satisfying) these definitions is not determinative of the outcome of an endorsement application.
(i) There is no closed list of other ‘relevant factors’ for the exercise of discretion, some factors that may be relevant include:
(i)whether the term is sensibly drafted so as to be clear and unambiguous, specific in the obligations it imposes, able to be complied with and capable of enforcement;
(ii)the meaning and operation of the term, objectively;
(iii)whether the parties subjectively understand the objective meaning and operation of the term;
(iv)the extent to which the additional term departs from the balance of rights contained in the standard terms and the reasons of the parties for seeking to depart from that balance;
(v)the importance of freedom of contract;
(vi)the market reality within which the negotiation occurs;
(vii)the extent to which endorsement of the additional term may conflict with the statutory intentions of the RT Act, one such being that the standard terms would be the default and there would not be a separate set of terms for social or public housing.
(j) Procedurally, it is open to the tribunal to deal with an endorsement application as an application for orders by consent, to be decided without a hearing as contemplated by section 55 of the ACAT Act. It is incumbent upon the tribunal to take this approach where appropriate, as this meets the tribunal’s imperatives of quickness and efficiency (section 6 and 7 ACAT Act).
(k) If the apparent circumstances of an endorsement application raise questions about the jurisdictional facts in section 10(1), or the matters in sections 10(3) or 10(4), it is not appropriate to determine the endorsement application without a hearing. The Tribunal must inquire further to satisfy itself that it has jurisdiction or that the proposed clause can and should be endorsed. That inquiry must be undertaken by a hearing in which the parties are afforded procedural fairness, whether that hearing is conducted in person, by telephone or video-link, or on the papers.
(l) In determining an application for endorsement, the tribunal may inform itself as it considers appropriate. The tribunal is bound to use the information so acquired in accordance with natural justice, principles of rational decision-making and any other legal requirements.[7]
[7] Commissioner for Social Housing v Tenant AA202154 [2022] ACAT 57 at [208]
An issue relevant to the present matter concerns the lessor’s potential role as an energy seller or retailer under the proposed term. The lessor receives an account from an electricity provider with a reduced total resulting from the application of the feed-in tariff; after paying that amount, the lessor then charges the tenants an amount which is the provider’s electricity account without the benefit of the feed‑in tariff. This appears to have the effect of making the lessor an energy seller.[8] Energy sellers and retailers are subject to extensive obligations under the National Energy Customer Framework (NECF), including the kind of contracts they can enter into with customers and the provision of other measures for consumer protection. The operation of relevant aspects of the NECF is set out in detail in Griffiths.[9] An energy retailer may be able to escape some or all of these obligations through being deemed, or applying to become, an exempt seller. I note that the sale of energy is prohibited except where the seller holds a retailer authorisation or is an exempt seller.[10]
[8] I note that a lessor is regarded as an energy seller even where the lessor simply passes on the charges to the tenant without any change: Australian Energy Regulator (Retail) Exempt Selling Guideline, page 5
[9] Griffiths v Washington-King [2018] ACAT 98 at [15]-[31]
[10] National Energy Retail Law (South Australia) Act 2011 (SA) Sch 1, section 88; given effect by National Energy Retail Law (ACT) Act 2012 section 6
The ACAT is the energy ombudsman for the ACT.[11] Accordingly, at the hearing I brought to the parties’ attention the existence of the rules surrounding the role of energy sellers, and it is for them, and especially for the lessor, to determine whether they should take action in response.
[11] The National Energy Retail Law (ACT) Act 2012 gives effect to the National Energy Retail Law (South Australia) Act 2011 (SA); Part 4 of Schedule 1 of the latter Act deals with the energy ombudsman role and functions in participating jurisdictions. The SA Act defines “energy ombudsman” to mean a body prescribed by the National Regulations as an energy ombudsman. Section 5(f) of the National Energy Retail Regulations (SA) sets the ACAT as the energy ombudsman for the ACT
Consideration of the application in the present matter proceeds by asking first whether the proposed term meets the inconsistency tests in section 9 of the RTA: first the test of consistency with the RTA itself (since an inconsistency there would be immediately fatal to the application); and then the test of consistency with the standard terms. If the term is not inconsistent with either, it would not need endorsement; if it is not inconsistent with the RTA itself but inconsistent with one or more standard terms, the next question is whether the discretion in section 10 of the RTA to endorse the term is enlivened. If so, the question then is whether that discretion should be exercised. Section 10(3)(a) requires that criteria determined under subsection 10(6) must be considered in the decision-making process; as noted in Tenant 202154, no criteria are currently in place under that provision.
Is the proposed term inconsistent with the RTA?
Section 9(2) of the RTA provides that a term inconsistent with that Act, not including the standard terms, is void. The RTA itself is silent on the provision of services by utilities or payment for those services. One possible implied reference arises from section 15 of the RTA, which limits consideration for occupation of premises to rent and a bond. But payment for utilities is not payment for the right to occupy premises, but rather payment for external services provided to the premises. It therefore does not make up part of the consideration for occupation of the premises. I see no basis for a conclusion that the proposed term is inconsistent with the RTA.
Is the proposed term inconsistent with one or more standard terms?
Section 9(1) of the RTA provides that a term is void if it is inconsistent with a standard term and has not been endorsed by the ACAT under section 10. The application nominates the proposed term as inconsistent with terms 43(2) and 46.
Looking at the terms relating to utilities as a group – terms 42-50 – it is striking that many of them use the term “responsible”, which appears in terms 42 (in the introductory words to the term and again in paragraph (b)), 43(2), 45, 46, 48(1), 49 and 50(2). In most cases it seems clear that the intended sense of ‘responsible’ is of financial responsibility, that is, the word is used to designate whether lessor or tenant bears the cost or pays the rendered account (as in terms 42, 45, 46, 49 and 50(2)). In terms 43(2) and 48(1), however, the sense seems to be an organisational responsibility – for connecting the service in 43(2) and for arranging readings and measurements in 48(1).
In the present matter, the lessor has nominated the proposed term as inconsistent with terms 43(2) and 46. I am not persuaded that there is an inconsistency in either case.
Term 43(2) makes the tenant responsible for connection of services supplied in the tenant’s name. In this instance the proposed term requires the tenants not to connect electricity in their names, and the electricity account provided by the lessor in this matter is in the lessor’s name. That being the case, there is no obligation laid on the tenants with regard to connecting electricity and no inconsistency arises.
Term 46 states that the tenant is responsible for all charges for the consumption of services. The proposed term has the lessor responsible for paying the electricity account, including consumption charges, and it is perhaps arguable that that arrangement creates an inconsistency with the standard term. But the charges are then recovered from the tenant, and it is therefore the tenant who is responsible for the electricity charges that are levied, in that it is ultimately the tenant who bears those costs.
I note that in Griffiths the Tribunal concluded that, in respect of the non-standard term there considered – a term broadly similar to the term in the present matter – there was no inconsistency with standard term 46. The reasoning was that the charge levied by the electricity provider for the supply and consumption of electricity and the amount credited for the supply of electricity from the rooftop solar collectors to the provider were two separate charges, which were then offset against each other to reach an amount owed (or in credit). That leaves the tenant bearing the supply and consumption costs and the lessor being paid for electricity generated. With respect, I agree with that reasoning, and have arrived at the same outcome.
Neither of the nominated inconsistencies withstands examination, in my view. But there is a potential inconsistency with standard term 42, and specifically with standard term 42(b), which, with the introductory words to the term, reads as follows:
The lessor is responsible for the cost of the following: (b) services for which the lessor agrees to be responsible;
In the absence of the introductory words, it would have been possible to debate what is covered by the reference to “responsible” in paragraph (b); but with those words it is plain that the sense is simply that one of the things that a lessor must pay for is whatever they agree to pay for. And it is equally plain that the sense of the introductory words is that, for the matters listed, it is the lessor, rather than the tenant, who is to bear the cost (i.e. the term would not be met if the cost were shared). In this instance, under the proposed term it is the lessor who pays the electricity account, but that amount is recovered from the tenant, plus the amount paid by the electricity provider for the feed-in tariff. That is contrary to the model implied by paragraph 42(b); in my view, under the proposed term the lessor, by having the account in their own name, and paying the account as presented, has taken responsibility for the service, but is not “responsible for the cost”, as that cost is recovered from the tenant. My conclusion is that the proposed term is inconsistent with standard term 42(b).
Accordingly, I find that the proposed term is inconsistent with standard term 42(b), but is not inconsistent with standard terms 43(2) and 46.
Is the discretion to endorse the proposed term enlivened?
Tenant 202154 makes it clear that the conditions that enliven the discretion in section 10 of the RTA are to be carefully considered. The elements making up section 10(1) of the RTA are set out in that decision as follows:
(a) the parties
(b) to a residential tenancy agreement
(c) apply in writing for endorsement
(d) of a term of the agreement
(e) that term being inconsistent with a standard term.[12]
[12] Commissioner for Social Housing v Tenant AA202154 [2022] ACAT 57 at [57]
In the present matter, I have before me an application seeking endorsement of a potentially inconsistent term, signed by the lessor and the three co-tenants, accompanied by a copy of a residential tenancy agreement between lessor and co‑tenants. I have found that the proposed term is indeed inconsistent with a standard term. On the face of it, therefore, the requirements set out above are met and the discretion is enlivened. But some caution is required in respect of the open and willing engagement of the parties. In Tenant 202154 the Tribunal noted that:
Section 10(1) provides that an application for endorsement is brought by both lessor and tenant – that is, it must be a joint application. If the tribunal is not satisfied that both parties knowingly and intentionally make the application for endorsement, it should not proceed but should dismiss the application.[13]
[13] Commissioner for Social Housing v Tenant AA202154 [2022] ACAT 57 at [61]
The requirement to ensure that the tenants, in particular, have participated in the application willingly is underlined by section 10(3)(b), which requires the ACAT to consider whether the term has come forward through fraud or undue influence. There is, however, a marked difference between the matters before the tribunal in Tenant 202154 and the present application. There, the lessor was providing subsidised housing to tenants who might otherwise find themselves homeless, and there was a significant power imbalance that might easily have encouraged tenants to accept whatever proposal was made to them. In the application presently before me, there is no evidence that pressure has been brought to bear on the tenants. But only one co-tenant appeared, and although he seemed untroubled by the drafting of the proposed term, he did not express any enthusiasm about it. Similarly, although he indicated that he was speaking for all the co-tenants, I did not have any authority before me for him to represent them. I am left to infer that all tenants are freely and willingly participating in the application.
Taking the above into consideration, I find that, despite the limited participation in the hearing by the tenants, the discretion to endorse the proposed term is enlivened.
Might the proposed term have been obtained by fraud or undue influence?
I have no evidence that would suggest that fraud or undue influence has contributed to the application.
Should the proposed term be endorsed?
At the hearing it appeared plain that Mr Stevens, the co-tenant, regarded the proposed term as a reasonable way for the lessor to gain the benefit from having invested in solar panels. The lessor later provided material showing that the benefits from the feed-in tariff were applied to paying down the loan used to pay for the solar panels.
It is indeed reasonable that a lessor who invests in solar panels for rented premises should receive a financial benefit for doing so; it is difficult to see that, otherwise, a lessor has any incentive for investment of that kind, meaning that rented premises cannot contribute to the wider benefits of rooftop solar energy. Nevertheless, the proposed term as drafted raises two issues that are of concern.
The first issue appears in paragraphs 1 and 2 of the proposed term. Paragraph 1 says that the tenants will be invoiced by Hayman Partners for supply and consumption; paragraph 2 says that the tenants must pay for supply and consumption. The concern arises because of the inclusion of “supply” in those statements. The standard terms make it plain that consumption of services is to be paid for by the tenants (standard term 46), except where the lessor takes responsibility for the charges (standard term 42(b)). The lessor is responsible for installation of services (standard term 43(1)), except where the tenant is the one taking responsibility for the installation or connection (standard term 43(2)). That suggests that the charges for services can be divided into what might be regarded as ‘capital’ in nature (i.e. installation or connection) and ‘operational’ (consumption), with the lessor responsible for capital charges and the tenant for operational charges, unless the other party in each case voluntarily takes responsibility.
Where does the above scheme leave supply charges? Perhaps some guidance can be obtained from standard term 44, which provides that the lessor must pay the annual supply charge for water and sewerage. On the one hand, this could be used as a model for a distinction between supply and consumption for all utilities; on the other, I might conclude that the model for water and sewerage is not intended to apply to other utilities – by application of the maxim expressio unius est exclusio alterius, which states that if one thing is specifically provided for, others are impliedly excluded from that provision. In the present context, I do not think either argument is helpful. In the first place, if the rule that the lessor was to be responsible for supply charges were intended to be universal, why would the standard terms not have so specified? And the expressio maxim, always to be applied with caution, is no help here, in my view. Water and sewerage differ from the other utilities in a few ways: the service embraces two utilities rather than one; for one of the utilities (sewerage) no consumption charge is levied, and the supply charge may therefore be thought of as including a notional charge for consumption of sewerage services; and there is a monopoly supplier, so that no freedom to negotiate with alternative suppliers enters into the picture. These differences raise doubt in my mind whether water and sewerage are intended to be regarded as essentially of the same kind as the other utilities.
The conclusion I draw is that, while it has been found necessary to specify how the water and sewerage supply charge should be met, it has not been found necessary for the other utilities. It follows that how the charge is to be met is potentially a matter for negotiation between lessor and tenant. Ms Harper of Hayman Partners, acting for the lessor, stated at the hearing that it was the usual practice for the entirety of each electricity account – that is, both supply and consumption – to be paid by the tenants of a property, regardless of installation of rooftop solar. If I accept that evidence, then the inclusion of “supply” in paragraphs 1 and 2 of the proposed term is simply a continuation of existing practice. That was the opinion of the Tribunal in Griffiths.
The ACAT is generally unlikely to know how electricity bills are passed to and paid by tenants, as they are not usually in evidence, and most residential tenancy agreements are silent on the issue. Occasionally, a private lessor will set the rent for premises at a rate that includes some or all utilities, but otherwise the documentation that accompanies an application, or is provided for a hearing, will not disclose how electricity and other utilities are handled between lessor and tenant, beyond what is specified in the standard terms. The terms are silent on the point, and this is a matter best left to the negotiation of the parties to each tenancy agreement, unless at some point the matter is settled through legislative change.
The second area of concern is that paragraph 3 of the proposed term takes away some of the freedom of tenants to negotiate with electricity providers for the best price. I have the impression that there has been a good deal of public attention to the increase in electricity process in recent months, and one of the solutions that consumers are encouraged to take up is to find or negotiate a supply contract that provides the best outcome for their particular circumstances. For a private consumer occupying their own premises, with rooftop solar, the best solution may well be the plan that offers the best feed-in tariff. For a lessor with rooftop solar on rented premises, the feed-in tariff is the only factor that is relevant, if the proposed term were to apply. The wording of paragraph 3 may then limit the capacity of the tenants to find any better option.
At the hearing, Ms Harper said that in practice all the lessor wanted was to be consulted before the tenants took up some different supply arrangement from the one already negotiated. But that is not what paragraph 3 of the proposed term says. Mr Stevens said that when the tenants had been shown the full electricity account, the feed-in tariff information had been obscured. Not knowing the feed‑in tariff negotiated by the lessor would clearly make it difficult for the tenants to know whether a plan offered to them by an electricity provider would be likely to be acceptable to the lessor. It also raises questions about whether the lessor is acting consistently with standard term 48(2), which requires that the lessor provide tenants with an opportunity to verify “readings and measurements” (the feed-in tariff is not itself a “reading”, but the information on the electricity account showing the amount of rooftop solar-generated power is, I think).
As discussed in Tenant 202154, sections 8-10 of the RTA, allowing lessors and tenants to negotiate terms that differ from the standard terms, is a recognition of the freedom of the parties to contract as they see fit, provided they obtain the ACAT’s endorsement where negotiated terms are inconsistent with the standard terms. The law of contract allows parties to negotiate their own terms for a bargain struck between them; but in many consumer areas there are constraints on the freedom to contract.[14] In the context of residential tenancy agreements, it is the RTA, and especially the standard terms in Schedule 1 to that Act, that provide these constraints.
[14] See, for example, Part 2-3 of the Australian Consumer Law, or Part 2.3 of the Consumer Protection Code made by the Utilities (Consumer Protection Code) Determination 2020 under section 59 of the Utilities Act 2000
It follows that some caution needs to be exercised in approving inconsistent terms under section 10 of the RTA to ensure that the protection provided by the standard terms, especially the protection afforded the tenant, is not unduly eroded or compromised. That subject is also discussed in Tenant 202154. The requirement that the application under section 10 of the RTA be joint between lessor and tenant, and that the ACAT consider, under section 10(3)(b), the possibility of the application being secured by fraud or undue influence, underlines the intent that the inconsistent term represents a bargain freely struck between lessor and tenant.
The lessor has put forward arguments in support of endorsement, but they are of little weight. The income from the feed-in tariff may be deployed to pay off the solar panels but that is of no relevance; the relevant question is how the money is raised through the proposed term, not the use to which it is put (and in any case the lessor could apply the funds to a different purpose at any time). Similarly, the lessor has provided documents that show that the tenants have not been financially disadvantaged by the lessor’s investment in solar energy, by comparing the charges they were paying in 2021 and 2023. But the amount the tenants are paying for electricity does not derive from the proposed term; and again, there is nothing to stop the lessor from striking a different bargain with an electricity provider at any time.
Conclusion
Despite these considerations, my conclusion is that the proposed term does not appear to impose a significantly unfair outcome on the tenants, although it may limit their capacity to negotiate a more reasonable price for electricity. I have no reason to think that the tenants have entered into the application unwillingly or that undue pressure has been brought to bear by the lessor. The term is adequately drafted, readily comprehensible, and capable of enforcement. It is a reasonable way for the lessor to recover the costs of investing in the solar panels. Taking all the above matters into account, I endorse the proposed term. It forms part of the residential tenancy agreement.
It is apparent that there is a high level of interest in rooftop solar energy in Australia generally, and in the ACT in particular. But at present, lessors may be doubtful whether the standard terms allow them to recover their costs if they install solar power in rented premises. There may therefore be benefit in amending or adding to the standard terms so as to provide a clear path forward for lessors who wish to consider installing rooftop solar. Some thought might also be given to how tenants could be left with some means of seeking a favourable electricity price from providers where their lessor has taken up an opportunity of that kind.
………………………………..
Senior Member M Hyman
| Date(s) of hearing: | 21 June 2023 |
| Applicant: | In person with N Harper, Hayman Partners |
| Respondent: | M Stevens on behalf of all respondents |
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