8 changes to the Residential Tenancies Act every landlord needs to know about
Landlords take note. A raft of recently announced changes to the Residential Tenancies Act are slated to take effect in November.
But wait, haven’t you already read about these changes? No. There have been two sets of changes in recent years. Last year, the snappily titled Residential Tenancies Amendment Act Changes 2017 came into effect. You can refresh your memory on what those involved by reading our article on the subject.
Now we’re looking at a whole new set of changes, imaginatively called the Residential Tenancies Amendment Bill 2018 (No 2). Yes, we know.
Originally scheduled to come into effect in March 2020, the government recently announced that they would be implemented in November 2019 instead. Just in time for Christmas! The changes include:
- making it easier for tenants to keep pets
- making it easier for tenants to make modifications to rental properties
- limiting rental increases to a prescribed amount unless you have approval from the ACT Administrative and Civil Tribunal (ACAT)
- amending provisions dealing with domestic violence and personal protection orders,
- amending the fees payable by the tenant when they break a fixed term tenancy agreement
We chatted to Dave Skow, General Manager of Property Management at Independent, about what the changes mean for you.
Before you raise the rent, there are two new limitations to be aware of.
Firstly, you can’t increase the rent by more than the prescribed amount without permission from ACAT.
What is the prescribed amount? It’s 10% greater than the rents component of the housing group of the Consumer Price Index for Canberra. In simpler terms, you can only increase rent by the rate of inflation in Canberra rentals, plus 10%. If the CPI is 4.2%, you can increase the rent by a maximum of 4.62%.
“What this means is that it’s vital for owners to raise the rent incrementally every year,” says Dave. “If you keep the rent the same for four years you can’t then decide that you need to raise it substantially to match the market. Small annual raises will keep your rent within market norms without going over the prescribed amount.”
You can increase it by more than that if the tenant agrees, or if ACAT agrees that it's reasonable considering all the factors involved. They’ll take into account the rental rates for comparable properties, whether you've done substantial renovations, the services provided to the tenant and your outgoings.
If that’s still confusing, don't panic! Your property manager will be able to do the maths for you.
In fact, Independent proactively reviews your lease terms and recommends a rental increase when it comes time to renew.
“We contact owners two months before the expiration of any lease, or annually if they’re on a periodic lease,” says Dave. “We do a thorough comparative market analysis and make recommendations about raising the rent. If standard rents in the area have gone up a lot, we will let owners know if they may be able to justify a higher increase.”
Secondly, your tenant must be given eight weeks notice of any rental increase. The notice must meet legislative requirements. Your property manager will ensure that the notice they send on your behalf meets these requirements.
Before the changes, tenants could only keep pets with permission from the landlord. Now the onus of decision making has changed. The starting position is that your tenant is allowed to keep a pet unless you can show reasonable objection. To do so, you’ll have to apply to ACAT.
“We very rarely see problems with pets,” Dave says. “A good tenant is usually a good pet owner. They take pride in their home and look after it whether they own an animal or not."
Don't worry. There are plenty of things you can do to make sure your property doesn’t host a pony or accommodate an aviary. Reasons to refuse include:
- That the premises are unsuitable for the pet
- That unreasonable damage would result
- That the pet/s would be a threat to public health
- That you would suffer financial hardship
- That keeping the pet is contrary to ACT law
You can also impose conditions on your tenant including cleaning and maintenance requirements and limits on the number of pets allowed.
And as Dave points out, if things do go wrong, most landlord insurance policies will cover pet damage in any case. If you’re not sure, ask your property manager to review your cover.
If you have a tenant with a disability, they may make modifications to your property that make life easier for them in that regard. They’ll need a written recommendation from a health practitioner to do so. Modifications include physical changes as well as alterations that improve safety, security and energy efficiency or offer better access to telecommunications.
The tenant must pay for the modifications. You may not refuse consent for the change unless you apply to ACAT and satisfy them that:
- You will suffer hardship
- The modification is contrary to existing law
- The modification will require changes to common areas in a strata development
- The modification will result in additional maintenance costs for you
Tenants now also have the right to make minor modifications to a property, such as hanging a picture or painting a wall, if the property can be easily restored to its pre-leased state prior to vacating the property. The tenant must pay for the modification unless otherwise agreed with you.
You can only refuse consent if it is reasonable in the circumstances. The considerations are the same as for disability modifications.
“They still need to bring the property back to its original condition, less wear and tear, at the end of the lease. That’s why it’s important to have a really thorough initial inspection so you have a record of your property’s original condition. Routine inspections should also be detailed.”
Independent uses Inspection Express, a next level software system that allows property managers to document the property’s condition in great detail. This helps to ensure that your property is returned to its original condition at the end of the lease.
Domestic violence and personal protection
Tenants may apply to ACAT for a ‘no cause’ termination of the lease, to either leave the property or have a new lease issued in cases of domestic violence and personal protection orders. Where ACAT issues such a notice, ACAT may decide that the tenant will not be charged any advertising or letting fees, or other penalties.
No cause termination
If a tenant is given a no cause termination of their tenancy, the tenant can now vacate by giving three weeks’ notice, rather than waiting until the last two weeks of the term. If the tenant gives notice in the last two weeks of the term, they are still required to give four days’ notice.
If you are intending to give your tenant a no cause termination notice, it’s important to bear the above in mind. Talk to your property manager ahead of time so that they can help you with your financial planning.
Break lease fees
If your tenant breaks their fixed term lease, you can only charge fees in line with the actual loss you sustain. If you find a new tenant quickly, the amount will be reduced by the amount that is offset by the new tenant. You may be able to recover some of the advertising and letting fees, but it will depend on the situation.
If your tenant does break their lease early, you also have an obligation to find a new tenant as quickly as is reasonable. Talk to your property manager about how they can help.
If ACAT endorses either:
- a clause in your tenancy agreement which is inconsistent with standard tenancy terms
- conditions relating to the keeping of a pet or pets
You must advertise those conditions when marketing your property for rent.
If you don’t have an ACAT ruling you don't need to worry about this change. If you do, your property manager will take them into account when developing your marketing strategy.
Bottom line? Giving your tenants a little more freedom to feel comfortable at home might be a win-win. Dave agrees.
“In the long term, the key objective for an owner is to keep good tenants. Less vacancies mean less wear and tear on your property and more money in your pocket. If your tenants make the home a little bit more homely for them, they’ll be happier and stay longer.”
If you have any questions about the upcoming changes, get in touch with your property manager. It’s their job to understand the legislation and help you stay across your obligations as a landlord.
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