How to negotiate a tenancy agreement
When you rent your property to someone, you are agreeing to provide them with a place to live. In return, they are agreeing to provide you with income.
Of course, it’s a little more complicated than that. You also need to agree on the amount of rent, the length of time they’re allowed to live there, whether they can keep a pet, what happens if they want to move or if you want to sell and even more.
Most of these things are included in the ACT Residential Tenancy Agreement, which:
- Sets out the details of the tenancy, including the names of the parties, rental amount and how long the agreement is for.
- Sets out the terms and conditions of the tenancy for both parties, including the rights and responsibilities of both tenants and landlords.
However, sometimes either you or your tenant might want to add an additional term into the agreement.
Common additional terms to the standard tenancy agreement
- Adding a new tenant or removing an old one
- Approving a pet
- Approving modifications
- Setting out maintenance responsibilities
- Excluding access to part of the property from the agreement
- Set rental increases in long-term agreements
So, what’s the best way to go about it?
Tim Westphal, Team Leader at Independent, has helped numerous landlords and tenants negotiate an agreement that suits everyone.
Where possible, negotiate at the beginning
“The first thing to know is, it’s a lot easier to negotiate a tenancy agreement at the start than partway through,” says Tim. “If the lease already exists, both parties have to agree to change it, and there’s not a lot of incentive for whoever isn’t suggesting the change. If you approach it at the start, it becomes part of the original bargain.”
Usually, additional terms are added by landlords. “The most common terms we see are around maintenance, areas of the property that can’t be used, and rental rises,” Tim says.
“Maintenance might be a swimming pool or large garden, and you agree with the tenant that they’ll do the upkeep in return for a slight reduction in rent, for example. Sometimes there might be a large shed or a back room that the landlord wants to keep out of bounds because they’re using it for storage, so that’s written into the agreement.”
Go through the proper processes
Sometimes, though, circumstances change during the tenancy term. For tenants, the most common one is the desire to move in a partner. Assuming they don’t raise any red flags, you might be happy to agree — but there’ll be some extra paperwork.
“Let’s say there are three tenants sharing a house,” Tim explains. “One of them wants their partner to move in. You can’t just amend the agreement—the new addition would need to fill out an application form, and then a new agreement needs to be created with all four names on it.”
Make negotiations easier by explaining the ‘why’
Generally speaking, negotiations are made easier when both parties understand the ‘why’. They’re made even easier when both parties benefit from the changes.
As an example, you can’t raise the rent during a fixed term. However, if both parties agree, you can add it as an additional term.
“You mostly see this with long leases which might last two or three years,” says Tim. “By adding in a term that the rent will go up by a set amount every twelve months, you aren’t missing out on the rent increases that you’d get if you rented out the property for shorter periods and the tenant gets the added security of having a long lease. It’s a win-win so tenants are usually happy to agree.”
Additional terms should always be in writing
With so much at stake, you’d expect a tenancy agreement to be clearly set out in writing. But did you know that there’s no law dictating that it is?
“The law doesn't actually require a written agreement,” explains Tim. “It can be a verbal agreement as long as it sticks to the standard terms set out by the ACT government. Anything outside of those standard terms needs to be in writing, though. If there’s a dispute, the Tribunal won’t be sympathetic to an argument that you verbally agreed to.”
Get an ACAT endorsement for peace of mind
Leases are covered by the Residential Tenancies Act 1997. This law says that a term that is inconsistent with a standard residential tenancy term is void unless it has been endorsed in writing by the ACT Civil and Administrative Tribunal (ACAT). Terms that aren’t inconsistent don’t need an endorsement.
“For example, a term listing the furniture that is included in the agreement doesn’t conflict with any standard term, so you don’t need an endorsement. If you want to exclude part of the property because you’re using the shed for storage, that does conflict with the standard term allowing the tenant exclusive possession of the premises. In that case, an endorsement is required.”
Having said that, ACAT won’t endorse terms that are manifestly unfair to one party, illegal, or conflict with your obligations under other laws.
As with everything, the law on residential tenancies can be complex. If you’re not sure whether you can legally add or change a term in your residential tenancy agreement, chat to your property manager first. They’re experienced with a range of leases and if a term isn’t legal they can often suggest another solution you haven’t thought of.
If you’re current looking for a property manager, check out our services page or drop us a line using the contact form below.
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