RE: Changes to the Residential Tenancy Act 1997 – How it Affects YOU.
As you may (or may not) know, the Residential Tenancy Act 1997 has had 132 amendments, which come into effect from 29th March 2021. These amendments were due to come into effect last year, but due to the Covid 19 Pandemic, they were delayed.
With over 130 reforms in place (with some pertaining specifically to other categories other than domestic dwellings, flats, units, and apartments) it will be very challenging for both landlords and property managers to firstly understand and secondly administer – unfortunately for some landlords, it will also be costly. As your agent, it is our duty to advise you of these changes and trust we can work together in implementing them. Some of the changes are plain common sense, however some changes will take some getting used to and thus we will attempt to summarise as best as possible the obligations imposed on renting out a property. Following is a list of some of the changes:-
- The terminology of landlord, tenant and lease agreement are being changed to Residential Rental Provider (RRP), Renter, and Residential Rental Agreement respectively.
- Breaches of the Act will incur increased penalties.
- RRP’s and agents may be added to a non-compliance register if they fail in their duties towards a renter.
- When applying for a property there are certain requirements that cannot be asked and a specific information statement will be provided to renters outlining the obligations of discrimination as per the Equal Opportunity Act 2010 at the application stage, and further includes whether or not the renter has had bond claimed against them from another property, or whether there have been disputes, a bank statement containing daily transactions will not be able to be sought.
NOTE: There are transitional arrangements for leases and tenancies entered into prior to 29th March 2021 which continue, however a change of tenancy thereafter will trigger the start to have new requirements in place.
- RRP’s and agents will be prohibited from inducing someone to enter an agreement by supplying misleading or deceptive conduct.
- RRP’s will now be required to disclose information as to whether there will be a proposal to sell the property, or whether the RRP has any mortgagee (bank) action against them to repossess the property.
- RRP need to disclose details of an embedded electricity network (particularly in apartments), whether to their knowledge, there has been a homicide in the premises in the last 5 years, whether an RRP has received a repair notice for mould/dampness related to the building structure in the last 3 years, whether a property has been used for cultivation or trafficking of drugs in the last 5 years, as well as the presence of asbestos, or whether there are any disputes with anybody, or whether the property is affected by any notice or order from any government department or council, due to building defects or safety concerns such as structural issues or combustible cladding (combustible cladding more specific to apartments).
- Owners corporation rules need to be supplied as well as any appliance supplied to at least have a 3 star energy efficient rating.
- Safety checks of electricity and gas appliances need to be conducted every two years from a qualified person and must be supplied to a renter (although for existing agreements prior to 29th March 2021 there will be a transition period of 2 years unless there is a change of renter in which case it will need to be undertaken immediately as mentioned earlier).
- Same applies to smoke alarms (every year) and if applicable pool safety barriers and fire fighting water tanks, in bushfire prone areas. These issues may be treated as urgent repairs if not supplied to a renter or a renter may terminate the lease prior to moving in. Furthermore, in relation to electrical safety, all power outlets and lighting circuits need to be upgraded to specific standards by 29th March 2023 which include circuit breakers and safety switches.
- Safety checks of electricity & gas appliances and smoke alarms needs to be disclosed to renters with certificates supplied from qualified tradesman, proving that works have been undertaken by a qualified person.
Minimum rental standards will now need to be in place and we believe majority of these are most likely in place now and may not have too large an effect but to summarise they are:-
- all external doors must have deadlocks (unless secured by a security door or entrance, or if the door is not capable of holding a deadlock in which case the lock must be capable of a key lock from outside)
- council supplied vermin proof bins
- functioning toilet, bathroom facility must be connected to a reasonable supply of hot and cold water and must have a wash basin, shower or tub. Shower head must be 3-star rating unless it cannot be achieved.
- Kitchen must have a sink in good working order, connected to a reasonable supply of hot and cold water, as well as a cooktop, oven in good working order, and a kitchen bench.
- A laundry must be present and be connected to a reasonable supply of hot and cold water.
- The premises must also be structurally sound and weatherproof and each room in the premises must be free from mould and damp caused by the building structure.
- Importantly from 29th March 2023, all electrical wiring must be connected to circuit breakers and contain a safety switch (concern here for older properties houses and flats). Mains powers supply boards/switches may need to be upgraded – which could also lead to other maintenance issues.
- All external windows that open must be able to have a functioning lock or latch to secure windows from external entry and if not already in place, from 29th March 2022 all bedrooms and living rooms must have window coverings.
- In respect of lighting, all interior rooms and hallways must have access to natural or artificial lighting. Ventilation must be provided to habitable rooms, shower, toilet, laundry.
- Heating requirements of at least a 2-star rating must be in place in the main living area in a dwelling as well as in apartments or flats but there may be some exceptions here such as owner’s corporation rules or the cost to install would far exceed a standard installation. Panel type heaters that are fixed to walls may be acceptable provided they are energy efficient however portable units are not.
- It will no longer be acceptable to think that the renter is paying a lower rent to compensate for the condition of the property as the property needs to be in good repair, fit and suitable condition for occupation despite its age and character. If a property does not comply with minimum standards the renter can terminate the agreement before moving in or if they move in can request an urgent repair to comply.
Rental agreements and condition reports will be significantly changed and any comments/remarks made on the condition report by the renter will be treated as a notice of repair when returned by the renter.
Renters will now be able to make modifications without the RRP’s consent as well as modifications the RRP cannot unreasonably withhold such as: picture hooks on walls, LED globes, water efficient shower heads, security lights and cameras with exceptions, installation of child safety gates and locks, cords and anchors, installation of non permanent window film, door bell, replacement of curtains provided old ones kept, draught proofing, flyscreens, vegetable garden, painting.
- Keeping of pets (already in place) need to have consent within 14 days of the request. Should it be denied by the RRP, the RRP to apply to VCAT for a decision.
- The overhaul of the rental agreement mentioned earlier will incorporate verbal non written agreements that VCAT can enforce as binding, whether an agreement is not signed by the RRP or agent and the renter makes rental payments, VCAT will determine there to be an agreement, and any additional detrimental terms such as the renter to undertake certain obligations such as paying an owners insurance excess, delegating safety related maintenance, cost of VCAT applications, requiring use of third party supplier, will be prohibited.
- Bonds will be limited to one month’s rent (unless rent is $901 or more per week).
- Professional cleaning at the expiry of the tenancy is prohibited unless in circumstances where it was done prior to entry and this is outlined to the renter at the start with proof or where it needs to be brought back to the same condition as prior to the start of the tenancy.
- A set of keys and entry device is now to be given to each renter on the agreement.
- A renter will be able to claim compensation if the property is not clean or being available as required at entry date.
- Properties must now be advertised at a fixed price and must not induce bidding (unless the renter wants to pay more themselves) and rent increases are limited to once in a 12 month period and need to have a method of how the increase is calculated.
- There will be new processes for claims on bonds which may also be initiated by the renter direct through RTBA.
- Breach of duty notices given either by the renter or RRP against each other can be determined at VCAT for either compliance or compensation payable. A renter must advise a RRP of damage or breakdown of facilities in the property as soon as possible and must not deactivate or interfere with any safety related devices.
- When deciding on disputes between RRP’s and renters, VCAT will take into account guidelines issued by government for maintenance, cleanliness, meaning of damage and fair wear and tear, depreciation etc.
- Definition of urgent repairs has been extended to include cooling appliances, pest infestation, and as mentioned earlier, non-compliance of minimum standards, mould caused by the building structure. The limit for a renter to authorise urgent repairs has been increased to $2500 inc. gst and the renter can seek reimbursement of payment from the RRP within 7 days.
We are still waiting to hear from the Government the time frame for an urgent repair to be undertaken. In respect of non-urgent repairs (once submitted by a renter), they must be carried out within 14 days from date of notification – failure which the renter may apply direct to VCAT for action. VCAT may also order that rent be paid to the Rent Special Account and order the repairs be undertaken (which is also in play currently although currently a renter would require a report from Consumer Affairs). Should the RRP not comply with the VCAT order, the renter may apply for the rent that they have paid to the Rent Special Account be repaid to them in full as compensation for having to wait. A RRP may rely on financial hardship but will need to prove within certain circumstances (this appears to be quite restrictive). We also believe there may be issues when an owner’s corporation is involved particularly with common areas and seeking approval for works to be done.
- Liability for providing services to a renter such as electricity, gas, water, sewerage, telephone, national broadband as well as a supply of services not separately metered, have been extended to include receiving an excessive utility charge attributable to a hidden fault such as a leaking water pipe. A RRP may be liable for the excess amount for what is usually charged but the onus is on the renter to advise as soon as possible, and that there is proof it was not as a result of negligence caused by the renter as well as other considerations being taken into account if it proceeds to a VCAT hearing.
The rights of entry have changed substantially from the current 24 hours’ notice to a much broader and time consuming effort:-
- For general (routine) inspections or valuation, notice has increased to 7 days. Throughout all entries to rented properties the RRP will be liable for all loss and damage that may occur during an inspection (caution here).
- If a property is to be sold, a 14 days’ notice of intention to sell, needs to be given to the renter before entry is proposed and the notice must be in the form issued by Consumer Affairs which is still to be finalised.
- To take photos and to prepare for advertising a RRP will be required to give 7 days’ notice, (making a reasonable to attempt to agree with the renter) and the renter may object to the use/taking of photos etc.
- During a sales campaign, inspections can only take place twice a week for up to one hour each time and each inspection time needs to be compensated to the renter at the rate of half day’s rent or $30 whichever is greater (typically if the rent is $420 per week or lower then $30 per inspection must be allowed as compensation).
Notice of inspections are 14 days in advance but we believe we may be able to reach agreement earlier than this, depending on the situation and the renter. In the event of a renter vacating the property and in preparedness of reletting, inspections may be carried out within 21 days prior to renter vacating on 48 hours’ notice and again, twice a week. Naturally in the event of family violence orders there will be opportunities for the renter to object to some actions. The current 24 hours’ notice for entry is still available under certain circumstances.
- Termination of tenancies is now restricted to certain areas such as selling, RRP moving back to property, repairs, demolition, renter causing damage, renter using seriously threatening behaviour or endangering activity, premises to be used for business, but in all circumstances, evidence will be required at VCAT to terminate.
- The no specified reason to vacate of 120 days is no longer available.
- Unpaid rent of 14 days or more is still valid however if the renter pays this will be considered as one strike and no further action taken.
- A renter can have up to 5 notices/strikes to vacate for non-payment of rent/rent arrears in a 12 month period at which time, and even if they pay in time, no further action is taken other than each time would be treated as a strike. On the 5th strike, an application to terminate can be made to VCAT irrespective if the renter pays the rent. If it does proceed to VCAT, VCAT can make an order for possession or place the tenant on a payment plan. After the expiration of 12 months the 5 strikes rule starts again.
- In the first fixed term agreement, if a RRP is NOT satisfied with the behaviour of a tenant and would like to evict them, the only effective means that are similar to the ‘old’ unspecified reason is to issue an end of fixed term agreement 3 months before the end of the term on a 12 months lease (or 2 months’ notice on a 6 month lease). This will not apply if an RRP enters into a subsequent fixed term agreement with the renter. Effectively meaning a RRP has only one chance to terminate the tenancy if they are unsatisfied with tenant’s performance etc. Thereafter, a RRP can only issue a vacate notice under the allowed specified reasons etc.
- Renters have also the discretion to giving 14 days return notice of vacating under these circumstances or any notice issued by the RRP. Renters can also break leases under allowed circumstances by giving 14 days’ notice without penalty.
During the Covid19 period at VCAT hearings we learned of a new phrase ‘Reasonable and Proportionate’. When applying for termination and possession orders during Covid we learned the principles used by VCAT in determining whether to terminate a lease agreement is whether it was ‘Reasonable and Proportionate’. We found we were continually jumping over obstacles that were placed in front of us by VCAT. When determining the fate of a tenant, VCAT will be using these principles to see whether the RRP or renter would be placed in a far more detrimental position than the other, if a termination order was granted. In certain cases, we have availed the assistance of owners themselves at VCAT to plead they would be in a far more undesirable position than what the renter would be, if they continued with the lease. VCAT Members will be the determining force to adjudicate on matters and will be guided by specific guidelines.
- After vacating, any goods left behind will now be simplified and streamlined (although waiting on further details) but what we understand goods of value need to be stored for 14 days (and can be extended) and notice must be given to the renter. Personal documents to be stored for 90 days. Previously, Consumer Affairs were able to give an opinion of value which we could rely on and if under a certain value would be able to be disposed of immediately. We are currently waiting on further information from the Government on this, but we can possibly see problems.
- RRP’s may need to hire and pay independent valuers to give opinions of value of goods left behind to protect them but costs would be involved for the valuation etc.
- RRP’s can claim for costs equivalent to the daily rent for each day of storage but will probably find the renter is already in arrears so with a month’s rent for bond these will be further costs incurred by the RRP. Specific items such as urns containing human remains, specialised medical devices and equipment and medicines, as well as medals and trophies must be stored.
There are some other reforms which we hope we do not have to deal with on a daily basis, as well as reforms to rooming houses, caravan parks etc
In summary, unfortunately we need to embrace these amendments as they are now law so it is in everyone’s best interest to move forward together in partnership and trust that in 12 month’s time when the dust settles, we will all be in a position of clarity and hopefully rental prices increase. We trust this guide is helpful and look forward to our continued relationship with you.
Further information about the changes can be found at the following website:-
Finally, to assist you, we recommend the use of the services of DETECTOR INSPECTOR to undertake the gas, electrical and smoke alarms safety checks as required. We also encourage you to ensure that, amongst other things, the minimum standards of your property as well as the structural soundness of it – issues of asbestos and combustible cladding (if any), should be investigated by a qualified contractor. We also strongly recommend you have LANDLORD INSURANCE.
Note, the above is a brief summary of the changes and is paramount that you bring your property up to the minimum standard. Should you have any questions, please feel free to contact us on (03) 9689 6011.
DISCLAIMER: This document is a brief overview of the recent changes made to the Residential Tenancies Act and should not be relied upon in part or as a whole. Trimson Partners Pty Ltd, it’s directors and employees will not accept any liability for the contents of this document.