As of 29 March, 2021, significant changes to the Residential Tenancies Act (RTA) shall occur. Understanding these changes will help you continue to maximise the return from your rental property investment. We spoke with Carolyn Purnell-Webb, LLB, MBA and head of our Property Management Division, about these reforms. First of all, the Victorian State Government has modernised its terminology – from “landlord” to “residential rental provider” (RRP) and “tenant” to “renter” and “lease” to “rental agreement” – a change that will help further facilitate a symbiotic relationship between both parties. There are 132 additional changes to the Act, most of which are reforms that are designed to achieve the Government’s objective of “safer, better housing.” We believe that most, if not all, of our investors already meet most of the required standards in order to retain good renters and maximise returns. Most of these changes can be summed up within the following specific categories.
Leasing & Tenancy Applications
There will be new restrictions in place regarding the information we can request from tenancy applicants. This is very new as previous tenancy legislation barely touched on this part of the leasing process. Plainly and simply, this measure has been introduced to avoid unfair and unlawful discrimination against tenancy applicants. Reinforcing human rights that exist under anti-discrimination legislation will take the form of a prescribed notice in all tenancy applications. This notice will inform the applicant of their rights in relation to protected attributes under the Equal Opportunity Act 2010. In a bid to protect applicants’ privacy and prevent unfair judgement, an RRP or an agent will be unable to ask a tenancy applicant about their bond history or disputes in past rental properties or ask for unredacted bank statements. An RRP or agent can, however, ask referees about prior tenancies and suitable measures for assessing applicants and this is easily counter-measured with strong tenancy application criteria and checks. In addition, there are several disclosures that an RRP or agent is required to make, including embedded electricity networks and some specific matters pertaining to the property history and safety that could negatively impact the renter’s quiet enjoyment of the property and/or prevent the renter from taking occupancy of reasonably clean premises from the agreed start date. A breach of some of these provisions could result in a penalty of almost $10,000 (maximum).
Property Modifications Permitted By Renter
Modifications permitted to premises by a renter without consent include, but are not limited to, installing picture hooks, shelving, child safety gates, safety anchors, alarms, letterbox locks, window coverings, fencing, security lights and/or cameras, and energy-efficient items (eg LED light globes and water-efficient showerheads). Renters will be able to make certain modifications without consent, but with a “make-good” provision. It’s important to note that consent will still be necessary for any type of structural modification, with the legislation excluding a right to make installations to exposed brick or concrete walls (presumably because of possible complications with “making good”). Some other modifications by the renter do require consent, which may not be “reasonably refused” by the RRP or agent, for items such as hard-wired alarms, installations to exposed brick or concrete walls, draught-proofing, installing vegetable or herb gardens, painting of the premises, installing a letterbox, adding flyscreens and modifying external gates. Some of these installations must be performed by a suitably qualified tradesperson. The RRP continues to possess the right to request a change to the modification, and the renter is responsible to repair any resulting damage.
Minimum Property Standards
The prescribed “minimum property standards” provide clarity to what has never been thoroughly defined in past tenancy legislation. Property condition and maintenance updates address the simple assurance that the rental property is maintained in good repair, reasonably fit for occupation, and incorporates a schedule of “minimum standards”, which emphasise occupant safety, comfort, and overall energy efficiency. It is important to note that a renter will be able to terminate an agreement prior to taking possession if a property does not meet these “minimum standards” and the RRP could be subjected to a fine of almost $10,000.
A summary of the “minimum standards” within the RTA regulations can be viewed by clicking here.
Air-cooling has made its way onto the list of emergency repairs, as have faults in safety devices. A new seven-day-reimbursement-to-renter rule applies where the renter has paid for the emergency repairs.
Termination of Tenancy
A notice to vacate will continue to be permitted for legitimate reasons, such as change of use/demolition, property sale, the RRP or immediate family member moving into the property, the renter causing damage with intent and/or recklessness, the renter threatening and/or endangering the RRP, an agent, a neighbour or a contractor. A notice to vacate for “end of fixed term” will only be permitted within the initial tenancy agreement (not renewals) and a “no specified reason” notice to vacate will be prohibited.
Final Inspections & Bond Claims
Moving forward, renters will be able to initiate a claim for a bond refund. Any individual bond claim by the renter will instigate a notification to the RRP or the agent to provide them with the opportunity to dispute the claim. Failure to respond within strict timeframes will result in the bond being refunded as per the renter’s request. It is noteworthy that there is no maximum bond where the weekly rent exceeds $900.
As a general rule, property damage compensation may be ensured via detailed entry condition reports and photographs and prompt exit inspections. Another innovation in the reforms is that an RRP or agent is required to provide the renter with a reasonable opportunity to attend a final exit inspection, which must be conducted within ten days (within 24 hours would be deemed “best practice”) and documented in a full written report.
Penalties & Timing
The impending modifications of the RTA have to do with penalties and timing, with certain fines for breaching the new reforms more than doubling. For example, if an RRP serves a renter notice to vacate on the grounds that they plan to demolish or move in, and then fail to do so, the RRP may face a penalty of up to $24,783 for releasing the property within six months of giving notice. Regarding timing of the newly unfurled RTA, certain components only apply to those tenancy agreements entered into on or after 29 March, 2021.
This new legislation contributes to the increasing awareness and support extended to victims of family violence and provides fairly immediate and certain protections for matters relating to a tenancy relationship.
These changes will ensure a stronger and mutually beneficial relationship between renters and RRPs, which will, in turn, result in maximum and sustained investment return. Renters that feel safe and comfortable, with their rights respected, are more likely to stay for a longer term, which equates to less vacancy, lower re-letting costs and reduced wear and tear.
Kay & Burton Property Management will be with you every step of the way. Consult your property manager to assist in understanding and clarifying these new requirements or, if you currently have a property that is not managed by Kay & Burton, feel welcome to make contact with our office to discuss these changes in relation to your own property, with no obligation, via 03 9820 1111 or firstname.lastname@example.org.