Australia: New Laws Residential Tenancies

New Laws Covering Residential Tenancies Comes Into Force
Last Updated: 12 May 2011

The Residential Tenancies Act and Regulation both came into force as from 31 January 2011 and apply to all residential tenancies in New South Wales from that date.

Residential Tenancy Agreements (referred to as "leases" in this article) that were already in existence prior to 31 January 2011 remain valid and there is no requirement to replace those existing lease agreements with new ones. It should be noted, however, that if there are any terms in an existing lease that conflict with the new laws, then the new laws will apply (and prevail over that lease agreement).

Starting a tenancy

  1. Before the lease is entered into

    A landlord, or agent, can ask a prospective tenant to pay a "holding fee" of up to one weeks rent, but only after that prospective tenant's tenancy application has been approved.

    Acceptance of a "holding fee" means that the premises must be kept for that prospective tenant for at least seven days and must not be offered to anyone else during this time. If the prospective tenant decides not to go ahead with the tenancy then that prospective tenant forfeits the full amount of the "holding fee", not just a portion of it, as was the case under the old "reservation fee" system.

    Once a "holding fee" has been accepted, the landlord is committed to entering into a lease with that prospective tenant and if the landlord does not do so, for any reason, then the prospective tenant can apply to the Residential Tenancies Tribunal for the matter to be resolved.

    Before a tenant signs a lease the landlord is obliged to disclose a number of things, including:

    • If a sale contract has been prepared in relation to the property;
    • If a financial institution has commenced court action to take possession of the premises; and
    • Material facts about the premises that are relevant to the tenant's decision as to whether or not a tenant would want to live in the premises (such as if the premises have any significant health or safety risks, or if a serious flood, bushfire or violent crime has occurred in the premises in the last five years).

    If a landlord does not know all of the historical material facts then the landlord, or letting agent, are only obliged to disclose what they already know about the property.

  2. Failure to make these disclosures may mean that the tenant can get out of the lease and also seek an order for compensation from the landlord.
  3. Leases

    A landlord, or letting agent, must provide a tenant with a written lease in the standard form at the start of the tenancy and is no longer allowed to charge the tenant a fee for the preparation of the lease. If there is no written lease it is deemed to be a six-month agreement incorporating the terms of the standard form.

    The standard Residential Tenancy Agreement and the premises condition report have been updated and modernised and now prohibit certain lease terms such as compulsory carpet cleaning at the end of the tenancy. A tenant is still obliged to keep the carpet clean, however, and there is an exception where the landlord allows the tenant to have a cat or dog, in which case a carpet cleaning term is allowed to be inserted into the lease.

  4. Rental Bonds

    Under the new legislation, the maximum amount that can be requested as a rental bond is capped at four weeks rent, regardless of whether or not the premises are furnished, and the tenant cannot be asked to "top up" a bond to keep it at 4 weeks rent if the rent goes up during the tenancy.

    Rental bonds must be lodged with the Department of Fair Trading and there are now time limits imposed for payment of the bonds to the Department. Agents have 10 working days from the end of each month to lodge all of the bonds that they have collected in that month and landlords have 10 working days from the date that they receive a bond to lodge it.

    Where both parties agree, a bond can be paid by instalments and the landlord, or agent, will be able to retain the part payments until either the bond is fully paid or 3 months has elapsed, whichever happens first.

During the Tenancy

The new form of standard Residential Tenancy Agreement spells out many of the rights and obligations of both parties, but some of the more important items are as follows:

  1. Rent payments and receipts

    Tenants must be given at least one way to pay their rent that does not attract a fee.

    Tenants will have to pay the landlord's bank charges if a rent cheque or direct debit payment is dishonoured.

    The maximum amount of rent in advance that can be requested from any tenant is two weeks, but tenants can volunteer to pay more if they wish to do so.

    Landlords, or agents, can keep rent ledgers electronically, or in any other format, and tenants can ask for a copy at any time. Such requests must be met within seven days.

  2. Alterations

    Tenants must still get written permission before doing any alterations to the property, but now landlords must not unreasonably refuse requests for a tenant to add a fixture or make a minor change to the property. If there is a dispute over permission, either party can take the matter to the Tribunal to have it resolved.

  3. Protection for domestic violence victims

    A person who has taken out an apprehended violence order and is living in a rented property now has the right to seek the landlord's permission to change the locks and seek to take over the tenancy if their name is not already on the lease, so long as the AVO prohibits the "violent person" from accessing the premises. The landlord, or agent, should be given a copy of the new set of keys within seven days.

  4. Water usage

    Under the old laws, tenants could be charged for water usage where there was a separate water meter, but under the new laws water efficiency measures have been introduced.

    This means that rented premises must be made water efficient if tenants are to pay for their water. Landlords who wish to continue charging their existing tenants for water have until 30 January 2012 to install water efficient measures, but, for new tenancies, they will have to install those measures before starting a new lease if they want to charge their tenants for water usage.

    Another change in the law is that Landlords must seek payment from their tenant within three months of receiving a water bill and tenants will have 21 days to pay their landlord for the water used.

  5. Sub-letting

    Under the changed law, a landlord cannot unreasonably refuse a tenant's request to bring in a new co-tenant or to sub-let part of the premises, such as a granny flat, spare room or parking space.

    A landlord can refuse a sub-letting or co-tenancy request if it would result in overcrowding, if the proposed person is listed on a bad tenant database, if the number of occupants permitted under the lease would be exceeded or for any other good reason. If there is dispute on this, either party may take the matter to the Tribunal to have it resolved.

    Landlords have complete discretion to refuse a request from a tenant to sub-let the whole premises.

  6. Rights of co-tenants

    The new laws recognise the rights of co-tenants for the first time.

    If there is a dispute, a co-tenant may apply to the Tribunal for an order to terminate their own tenancy, the tenancy of another co-tenant, or the tenancy as a whole.

    Once the fixed term period is over, a co-tenant can give 21 days notice if they want to move out and end their contract with the landlord. This will bring an end to their joint legal liability with the other co-tenants for things like future rent and damage to the property. The remaining co-tenants will then have to make fresh arrangements with the landlord about continuing the lease, or not, or bringing in a new co-tenant.

  7. Sale of rented premises

    If rented premises are to be sold, the tenant must be given written notice of the proposed sale at least 14 days before the first inspection is to take place. The selling agent must try to come to an agreement with the tenant about what days and times the premises will be open for inspection. Two inspection periods each week are allowed but more can be agreed on.

    If the agent and the tenant cannot agree on inspection times, the agent, or landlord, still has the right to show the property to potential buyers, even without the tenant's consent, provided that the tenant has been given at least 48 hours notice.

  8. The tenant may ask for a rent reduction during the inspection period in compensation for being inconvenienced, the amount of which would need to be negotiated.

Ending a tenancy

  1. Termination notices

    Under the new Act, a landlord, or agent, must give at least 30 days written notice if they want the tenant to move out when the fixed term period ends. This has increased from 14 days.

    When the fixed term has already ended, the landlord, or agent, must give at least 90 days notice if they want the tenant to move out. This has increased from 60 days.

    The new laws also allow the tenant to move out at any time after receiving notice from the landlord without having to give their own notice and the tenant is only liable to pay rent until they give vacant possession to the landlord, including returning the keys.

    Under the new Act, however, any notice, including termination notices, issued by either party can be hand delivered to the mail box of the other party (or the landlord's agent).

    Another change is that the Tribunal can overlook errors in the content of a termination notice or the way that it has been served if it decides that the person receiving the notice has not been significantly disadvantaged by those errors.

    A tenant is still required to give at least 14 days notice if the fixed term period is due to end and at least 21 days notice if that period has already ended.

  2. Rent arrears evictions

    Being in rent arrears is still a reason for a landlord to evict a tenant.

    The termination notice can now be hand delivered to the tenant's mail box and the application to the Tribunal for a termination order can be made at the same time as the notice is given to the tenant, cutting up to two weeks off the time that it takes to have an application heard.

    The termination notice must spell out for tenants that they have three options :

    1. pay the arrears amount in full
    2. follow a repayment plan that is acceptable to both parties, or
    3. move out by a specified termination date

    If the tenant offers to pay the landlord, or agent, a full payment of rent arrears at any time, it must be accepted, even if this is at the last minute.

  3. If the tenant is repeatedly late in rent payments an application can be made to the Tribunal for a termination order and the Tribunal can make such an order in those circumstances. That order can still be enforced even if the tenant pays the rent arrears.
  4. At the end of a fixed term

    At the end of a fixed term tenancy, if the landlord wants the tenant to move out a termination notice would normally be served on the tenant and, if the tenant doesn't move out by the due date, the landlord, or agent, can apply to the Tribunal for an order to terminate the tenancy.

    Under the old law the Tribunal could use its discretion to allow the tenant to stay in the premises, but, under the new law this discretion has been completely removed. Provided that the landlord, or agent, served a proper termination notice, the Tribunal must order the tenant to vacate the property, unless that notice was retaliatory action by the landlord for the tenant having exercised proper rights under the lease.

  5. Breaking an agreement

    Under the new law there are four specific situations when a tenant can break a fixed term lease without penalty. These are:

    1. if they accept an offer of public housing
    2. if they need to move to a nursing home
    3. if the landlord puts the property up for sale without telling the tenant before the lease was entered into, or
    4. where a co-tenant is the subject of a final AVO barring them from entering the premises.

    In these situations the tenant can give 14 days notice to end the tenancy and is not liable to pay any compensation or other amount to the landlord.

    Under the new law the parties to a lease can agree to have a break fee in the lease which will apply if the tenant breaks the lease before the end of the fixed term period.

    The amount of the break fee is set under the new law:

    • in the first half of the fixed term period it is six weeks rent
    • in the second half of the fixed term period it is four weeks rent

    Upon the death of a tenant the tenancy can be terminated at any time by the tenant's executor, any other legal personal representative, or the landlord. In these situations the estate will only be liable to pay an occupation fee, equal to the rent, until vacant possession is given to the landlord.

  6. Immediate grounds for eviction

    A landlord can go straight to the Tribunal for a termination order, without having to give a termination notice if:

    • a tenant uses the premises for illegal purposes
    • a tenant injures, threatens, abuses, intimidates or harasses the landlord, or their agent, employees or contractors
    • any occupants cause serious damage or injury, or
    • serious damage or injury is caused to neighbouring property
  7. Goods left behind

    Under the new law, rubbish and perishable items left behind after a tenant moves out can be disposed of immediately. For all other goods, including a tenant's personal documents, a landlord is required to make reasonable attempts to notify the former tenant that their goods will be disposed of unless collected within a certain period.

    General goods, such as furniture and clothing, must be kept for at least 14 days. Personal documents, such as photos and bank statements, must be kept for at least 90 days.

    Landlords, and agents, must make a reasonable effort to notify the former tenant about the goods, but the notification can be given in writing, in person or by telephone and the goods can be collected during the notice period.

    The tenant can be charged a storage fee equal to the rent if the goods left behind are sufficient to hinder re-letting of the premises. A maximum of two weeks fee can be charged.

    If the tenant cannot be contacted, or doesn't want the goods left behind, the landlord, or agent, can dispose of the items after the end of the notice period in any appropriate legal manner. Official documents such as passports etc can be returned to the issuing authority.

This article provides a short overview of a quite complex law concerning residential tenancies, and should not be thought to provide the answer to all circumstances. Whenever a lease is entered into, whether you are a landlord or tenant, it is always best to seek legal advice to ensure that you understand your rights and obligations under the new Act and regulations. For further information on residential tenancies, contact the Coleman Greig Property Law team on tel: 02 9635 6422.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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