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Dear Fellow Property Investor,
Late last year the Andrews Government passed the Residential Tenancies Act (RTA). The new Act is the most comprehensive change to residential tenancies in 20 years.
The new legislation will ensure that every rental property meets basic standards. Some of these new measures, which will come into effect on 29th March 2021 and are part of the more than 130 rental reforms the Labor Government is introducing to Residential Tenancies to strengthen renters’ rights, better protect vulnerable renters and enable people to turn the house they rent into their home.
Why?
There are going to be more renters!
Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.
Renting will be a long term way of life for most Australians.
The government isn’t providing accommodation for these people. That’s up to you and me as property investors.
1. Terminology
The terminology for residential tenancies has been updated, and the following key terms have changed:
Renters – currently called Tenants
Rental Providers – currently called Landlords
Rental Agreements – currently called tenancy agreements or lease agreements
2. Prescribed Rental Minimum Standards
Rental Providers will be required to ensure that the rental property complies with Prescribed Rental Minimum Standards.
The prescribed minimum standards include basic, yet critical, requirements relating to amenity, safety, and privacy.
Such as but not limited to:
Locks / Keys
i. All external doors to the rented premises which are not able to be secured with a functioning deadlock, other than any screen door attached to an external door, must be fitted with a locking device that a) Is operated by a key from the outside; and b) May be unlocked from the inside with or without a key.
ii. All external windows in the rented premises capable of opening must have a functioning latch to secure the window against external entry.
iii. The residential rental provider must provide, free of charge, a set of keys or another security device (e.g., access to an apartment building’s car park) to each renter listed on the residential rental agreement.
Window coverings
Each window in a room at the rented premises that is likely to be used as a bedroom or a living area must be fitted with a curtain or blind that can be opened and closed by the renter.
Mould & Dampness
Each room in the rented premises must be free from mould and damp caused by or related to the building structure.
Heating
A fixed energy-efficient heater (with a 2 star or above energy rating) in good working order is to be installed in the rented premises’ main living area.
Electrical Safety
All power outlets and lighting circuits in the rented premises are to be connected to a switchboard type circuit breaker that complies with AS/NZS 3000 electrical standards.
The rental provider is required to ensure that the rented property meets the minimum rental standards.
The rental provider must not unlawfully discriminate against another person by refusing an application based on an attribute set out in the Equal Opportunity Act 2010.
Before entering into a residential rental agreement, the Rental Provider must disclose specific information, including:
a) any ongoing proposal to sell the property
b) any ongoing mortgagee action to possess the property
c) that the Rental Provider has the legal right to let the property
d) details of any embedded electricity network
e) any other prescribed information concerning the rented premises (as per section 30D (e) of the new RTA legislation).
3. Bonds
Bonds cannot exceed one month’s rent unless the rent exceeds $900 per week.
4. Modifications by Renters in rental properties
Modifications that can be made without the Rental Providers consent will include:
Installation of picture hooks, screws, wall mounts, shelves
Installation of LED light globes that do not require new light fittings
Installation of removable safety measures (sensor lights, cameras, alarms) if they do not need to be hardwired into the property, and if they do not interfere with the privacy of neighbours.
Modifications for which the Rental Provider must not unreasonably refuse consent include
Painting of the rented premises
Securing external gates
Installation of child safety gates or wall anchors to secure items of furniture on exposed brick or concrete walls
Installation of flyscreens on doors or windows
Installation of a vegetable garden, installation of a secure letterbox
5. Electrical and gas safety compliance checks
Rental Providers will be required to complete electrical and gas safety compliance checks every two years by a licensed or registered electrician and/or plumber and provide the renter with details of the most recent safety check-in writing upon request.
6. Urgent Repairs
The limit for urgent repairs will increase from $1,800 to $2,500 inc GST. Can now include air conditioning, safety devices, pest infestations or mould.
7. Rent Increases
New amendments have already come into force with rent increases being limited to once every 12 months.
The issuing of rent increases will resume when the COVID-19 legislation amendments are repealed at the end of March 2021.
All rent increase notices will have to supply the method and/or reason (E.g., Market Increase, Consumer Price Index, Comparable Properties) for the increase to be justified.
8. Ending a Tenancy
Rental Providers will only be able to issue an ‘end of fixed term’ notice to vacate at the end of the first term of a rental agreement.
Rental Providers may be able to end the residential rental agreement earlier than the termination date via a notice to vacate, if the notice is given for one of the following reasons:
- Repairs or renovations
- Demolition
- Change of use of premises
- Occupation by the rental provider or their family
- The premises are to be sold
- The premises are required for a public purpose
- The renter no longer meets the eligibility criteria
9. Rental Providers must give a reason to end a rental agreement
The ‘no specified reason’ (120 days) notice to vacate for periodic residential rental agreements has been abolished.
What Does It Mean For Landlords?
- New costs introduced through these changes are likely to result in higher rents
- New costs may force mum and dad investors to exit this asset class putting further pressure on rental availability and affordability
- Quality Property Manager is now more important than ever
- Property Managers rapport with a tenant is PARAMOUNT
- Low management numbers per Property Manager is critical – more properties under management result in inferior tenant vetting, fewer, if any periodic inspections, less likelihood of rent increases, less communication with both tenants and landlords
- Remember 71% of property investors own just one residential investment property – Why?