If you are a landlord or have an investment property in NSW you want to rent out, it is important you know about the new residential tenancy laws which take effect on 23rd March 2020. These changes are the biggest changes we’ve seen to the Residential Tenancy Act since it was enacted back in 2010.
The first thing is to get your head around the new laws well in advance. With this in mind we are summarising the most important changes here, and you can also read all about it on the NSW Fair Trading site.
Why are these changes happening?
The new residential tenancy laws in NSW are centred on improving the renting experience, specifically:
- Clarifying the obligations of tenants and landlords
- Increasing the rights and safety of tenants
- Reducing disputes over repairs and maintenance
It’s not just the existing tenancy legislation that is being overhauled, agent reforms will also come into effect in March 2020, with a revamp and tightening of the certification and licensing of the industry – with the aim of fielding better qualified agents in the industry.
What are the changes?
In summary the most important changes to existing tenancy laws in NSW are:
- New smoke alarm obligations for landlords
- Minimum standards to clarify fit for habitation
- Changes of a ‘minor nature’
- Damages and removing modifications
- New mandatory set break fees for fixed term agreements
- More stringent disclosure requirements
- Water efficiency measures
- New rectification order process
Let’s take a look at each in more detail
NSW Residential Tenancy Reforms 2020
Now let’s look at the most important changes to the tenancy laws in more detail.
New smoke alarm obligations for landlords
Smoke alarms and the health and safety of your tenants is a biggie – so you really need to be across these changes to the legislation. They are also significant as they hold you (landlords) more accountable than previously. Under the new legislation, from 23 March 2020 you need to ensure that smoke alarms installed in your rented property must be:
- In working order
- Serviced annually
- Replaced before their 10 year expiry
- Installed with new batteries annually
- Repaired or replaced within 2 business if they are found to be malfunctional or faulty
Risks associated with non compliance are huge, including a fine of $2200.
Additionally you are obliged to reimburse tenants for the costs of a repair or replacement of a smoke alarm, and must sign off on the appropriate working condition of the smoke alarms in the property condition report that is included in the tenancy agreement before the tenant moves in. Any repairs and replacements of hardwired smoke alarms must also be carried out by an authorised electrician.
The only properties that are exempt from these regulations are properties under strata title where the owner’s corporation takes responsibility for the repair and replacement of smoke alarms, which tenants must be made aware of in writing. It is important to note that, while most unit owners automatically think that strata are responsible for individual apartment smoke alarms, this is more often not the case and it is usually the unit owner’s responsibility.
Note: To ensure 100% compliance of all properties under our management we strongly recommend that all our clients engage a reputable provider to take the onus of compliance away from them. At propper we partner with Smoke Alarms Australia, working with them to organise the smoke alarm servicing checks on behalf of landlords. For a very low annual fee you get peace of mind that tenants are safe, all the maintenance checks are handled correctly and there is 100% compliance.
Minimum standards to clarify fit for habitation
The concept of ‘fit for habitation’ is around your rental property having certain standards of cleanliness, facilities and access to basic utilities. The new ‘fit for habitation’ minimum standard now details 7 additional expectations that must be met in this regard, specifically:
- The property must be structurally sound
- The property must have adequate natural or artificial lighting (except in storage rooms or garages)
- The property must have adequate ventilation
- The property must be supplied with electricity or gas, as well as having an adequate number of electricity or gas outlets for lighting, heating and appliances
- The property must have adequate plumbing and drainage
- The property must be connected to a water supply for access to hot/cold water for drinking, washing and cleaning
- The property must contain bathroom facilities, including toilet and washing facilities, which must protect user privacy
If you are a landlord in NSW you will need to make sure your properties meet these minimum fit for habitation standards by 23 March 2020.
Changes of a ‘minor nature’
Under this change if your tenant wants to make minor alterations, fixtures, additions and renovations to your property they still need your written permission – but you cannot ‘unreasonably’ say no if these are any one of the following:
- Securing furniture to a non-tiled wall for safety purposes
- Fitting a childproof latch to an outdoor gate (single dwelling)
- Installing fly screens on windows
- Installing or replacing an internal window covering, such as blinds or curtains
- Installing cord guides to secure blind or curtain cords
- Installing child safety gates inside the property
- Installing window safety devices for child safety
- Installing hand-held shower heads or lever-style taps to assist elderly or disabled occupants
- Installing or replacing hooks, nails or screws for hanging artworks
- Installing a phone line to access the internet
- Planting vegetables, flowers, herbs or shrubs, not more more than 2 meters tall, and without removing existing vegetation or plants
- Installing a wireless removable outdoor security camera
- Applying shatter-resistant film to window or glass doors
- Making modifications that don’t penetrate a surface, or permanently modify a surface, fixture or structure of the property
As a landlord you can specify that a qualified person installs the phone line/internet and any taps or shower heads.
Damages and removing modifications
This adds to the existing legislation, and offers protection to the landlord with regard to any damage that tenants may cause during a tenancy. Tenants are responsible for leaving the property in the same condition as the day they moved in, and must reimburse you if they cause damage. They are also obliged to remove any alterations, additions, fixtures or modifications they have made during a tenancy, unless the landlord agrees otherwise with the tenant.
New mandatory set break fees for fixed term agreements
There is also a new pro rata based system for break fees for terminating leases of three years or less, which will offer landlords less financial protection (note that most residential leases are less than three years). The break fees are calculated on the percentage of the lease term left. The break fees are:
- Four weeks rent if less than 25% of the lease expires
- Three weeks rent if 25% or more but less than 50% of the lease expires
- Two weeks rent if 50% or more but less than 75% of the lease expires
- One week’s rent if 75% or more of the lease expires
More stringent general disclosure requirements
The new legislation also has stricter disclosure obligations for landlords. This means you have to tell prospective tenants about any additional ‘material facts’ or information about the property which could impact their tenancy. In practical terms this could include information about major works or repairs that are scheduled to happen at the property during their lease, or a fire safety order has been issued for the building. The bottom line is that you need to be honest with tenants or they can end a lease by giving 14 days notice for non-disclosure.
If your rental property is in a strata building then you must give your tenant a copy of the strata scheme’s by-laws. You will also need to inform tenants if a strata renewal committee is currently established for the scheme.
Water efficiency measures
Under the new legislation to charge your tenants for water usage your property must have:
- A separate water meter installed
- Water efficient toilets and taps installed
- Regular maintenance carried out and any water leaks repaired promptly
- A compliance check completed each tenancy and all taps and toilets checked for leaks and fixed prior to a new tenancy commencing.
You also cannot charge your tenant more than the usage charge amount on the property’s water bill.
New rectification order process
There is now a less formal approach, that precedes going to Tribunal, to deal with disputes over damage to property. NSW Fair Trading will have new powers to mediate over repairs and maintenance and property damage. You can apply to Fair Trading NSW to investigate whether a tenant has caused or allowed damage to your property, and their orders are legally binding. You must however first try and resolve the issue with your tenant in writing.
Rent increase limitations
You also need to know that the new legislation limits rent increases to once every 12 months, after giving tenants the required 60 days plus postage notice.
Need help meeting these requirements?
As a full-service property management service, propper has comprehensively reviewed and incorporated the legislative changes into our processes, and we understand the impact the changes will have on your investment. This ensures we continue to maximise the returns on your investment and provide a seamless renting experience for you and your tenants. Get in touch today to set up a Landlord Consultation and experience property management done properly!