The ‘KFC test’ and tenant privacy
Following publicity in 2018 that some property managers were using the ‘KFC test’ to vet prospective tenants, landlords’ protection of their tenants’ privacy has come under scrutiny by the Privacy Commissioner. Any unlawful intrusion into your tenants’ private lives can be a costly mistake. If you are a landlord, it is timely to ask yourself, “How can I best protect my property without risking a privacy breach?”
The ‘KFC test’
In a submission made to a Parliamentary Select Committee in July 2018, an Auckland property manager admitted to requesting prospective tenants’ bank statements and referring to the amount of their fast food spend as an indicator of whether the tenants could afford the rent. Dubbed by the media as the ‘KFC test’, the property manager’s actions were criticised by the Assistant Privacy Commissioner as potentially “unfair or unreasonably intrusive”.
Privacy Act 1993
To address practices such as the ‘KFC test’, in May 2019 the Privacy Commissioner released these guidelines that were intended to help landlords in meeting their obligations under the Privacy Act 1993. Following concerns that some aspects are unduly restrictive or confusing, these guidelines are currently under review.
Despite the review, however, the basic legal principles in the Privacy Act 1993 concerning how you can collect and use private information remain. In a rental property context, these principles cover not only information for assessing a tenant’s application to rent your property, but also information once your tenant is renting your property, such as photographs during property inspections.
The principles do not stop you from collecting the information necessary to protect your investment. They do, however, place some restrictions on how much and what type of information you should collect, and how you use that information.
In general, when collecting or using information about your tenants, there are some questions you should ask yourself:
• Has the information been collected for a lawful purpose, for example, assessing a tenant’s application or undertaking a property inspection?
• Is the information the minimum amount of information I need for that lawful purpose?
• Was the information provided to me by my tenant directly or otherwise by a third party with my tenant’s consent?
• Have I ensured that my tenant’s information cannot be accessed by, or disclosed to, third parties without my tenant’s consent?
• Did I take reasonable steps to check the accuracy of any information I received about my tenant?
• Have I only used my tenant’s information for the purpose for which it was collected?
If the answer to any of the above questions is ‘no’, you risk breaching the principles of the Privacy Act 1993. Any breach of those principles can be the subject of an investigation by the Privacy Commissioner and, in the case of serious breaches, can lead to you being ordered to pay compensation to your tenant.
Residential tenancies legislation
Aside from the rules about the use of information about your tenants, your tenants are also entitled to protection of their privacy in your property. This includes their exclusive right to possess and to access your property – subject to a few exceptions.
You can still keep a watching eye on your property as long as you follow the notice requirements in the Residential Tenancies Act 1986.
Broadly, you can enter your property without first giving notice to your tenant in an emergency or if your tenant agrees at the time. In other situations, you must give appropriate notice to your tenant. The length of notice required depends on the reason you need to enter your property. For example, you must give a minimum of 24 hours’ notice to enter your property to carry out necessary repairs and maintenance, and you must give a minimum of 48 hours’ notice to enter your property to carry out an inspection.
Again, your tenant can seek compensation in the Tenancy Tribunal if you enter onto your property without appropriate notice.
Once the Privacy Commissioner’s guidelines for landlords are re-released, clearer information will be available on how you can protect both your property and your tenants’ privacy.
Until then, we can help with any specific questions you might have on how to lawfully vet prospective tenants or avoid infringing on your existing tenants’ privacy. There is also general information about tenants’ privacy rights at the Privacy Commission here and at Tenancy Services here.