October 2018 Newsletter

TENANCY LAWS IN NSW GET MAJOR SHAKE UP

It’s been described as the biggest shake up of rental laws in more than two decades, with the NSW government recently announcing long-awaited amendments to the Residential Tenancies Act. Better Regulation Minister, Matt Kean labelled them “sweeping reforms for tenants’ rights”.

The new laws are along the lines of those already implemented by the Victorian government. The NSW changes follow two years of intense lobbying to amend the Act, and consultation with renters and industry groups, since the Census figures of 2016 highlighted that one third of NSW residents were renters – a figure that continues to grow. A raft of recommendations were made to help strike a better balance between the interests of tenants and landlords.

In a snapshot, the changes include:

  • Limiting rental increases for periodic leases to once a year
  • Setting fees for breaking a fixed-term lease. Under the new laws, tenants who break leases pay a sliding scale of compensation: four weeks rent if broken in the first quarter of the lease, up to only one weeks rent in the final quarter.
  • No penalties for domestic violence victims who break a lease.
  • Introducing minimum standards like basic access to electricity and gas, structural soundness in buildings, adequate lighting and ventilation, and adequate outlets for lighting, heating and appliances.
  • Landlords can have access to premises without the tenants consent to take photos or visual recordings of the interior to advertise the property for sale once in a 28-day period, as long as reasonable notice is given and must not include tenants’ possessions in photos or footage.
  • Landlords will not be able to unreasonably refuse minor alterations such as picture hooks.
  • Landlords cannot give a termination notice to a tenant solely because of their failure to pay rent, water, electricity, gas or oil charges unless the charge have not been paid for at least 14 days.
  • The ability for tenants to get rectification orders from Fair Trading for repair

“Under these common-sense changes, renting families will be able to make minor alterations, such as installing a picture hook to hang their family photos, and will benefit from a new set of minimum standards to ensure properties are in a liveable condition,” Mr Kean said. “I believe we’ve struck the right balance with this reform, and I’m proud to be leading change that benefits the people of NSW.”

Peter Koulizos, chairman of the Property Investment Professionals of Australia, told Smart Property Investment that while he could see the reforms as a good thing for tenants, they should not be surprised if rents rise in order to cover the benefits.

Whilst reforms are a good safety net for tenants, properties will have to meet a certain minimum standard to be eligible for renting if rents can only be increased once a year.  Depending on what set fee is for breaking a fixed term lease, tenants may have to pay higher rents.

“From a social responsibility point of view, the ability for domestic violence victims to break a lease penalty is a good thing. I can’t imagine it’s going to happen that often, but if it does, landlords are human as well, we understand that these things happen from time to time.”

Associate Professor Wendy Stone from the Centre for Urban Transitions at Swinburne University told Domain that “The NSW reforms take a good step … but really fall down around no-ground evictions”.

“It really doesn’t provide a mechanism for change.”

Dr Stone and other property industry members said reforms would be undermined without the final piece of the puzzle – scrapping the landlord’s right to kick out a tenant for no reason, outside of a fixed-term lease.

The president of the Real Estate Institute of New South Wales, Leanne Pilkington, said she was concerned about the impact changes would have on landlords who already feel there is a heavy weighting in the tenants’ favour, at the NSW Civil and Administrative Tribunal (NCAT) and through current legislation.

VACANCY RATES ON THE RISE

The latest figures from the Real Estate Institute of New South Wales shows that metropolitan Sydney vacancy rates were up 0.2 percentage points to 3.0 per cent. According to the August REINSW Vacancy Rate Survey, vacancy rates in Middle and Outer Sydney are both at 3.1 per cent, an increase of 2.0 percentage points and 4.0 percentage points respectively. In Inner Sydney, vacancy rates rose 2.0 percentage points to 2.9 per cent.

In the past six months we have seen the completion of large number of major projects involving hundreds of apartments that have had a large investor content, and more are scheduled for completion over the next 12 to 18 months. As a result, there is an oversupply in certain areas and the market will need some time to absorb this. The rental market terms are currently favouring tenants. However, there is a contraction in the new development area and are therefore anticipate this will be a short-term issue.

Charles+Stuart will be working with our clients on strategies to ensure income security and longevity through this time.

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