Tougher tenancy rules could lead to less rentals

While the idea of owning an investment property might be an attractive proposition in the current climate of low interest rates, it is not as easy as signing an agreement and collecting the rent.

The Residential Tenancies Act has been overhauled, with changes rolling out from August last year and continuing until at least 2024.

The changes include limiting rent increases to once every 12 months (previously six months), allowing tenants to make minor changes to the property, a requirement for landlords to provide fibre broadband at their own cost if requested, and the suppression of names and identifying details from published Tenancy Tribunal decisions.

Fixed-term tenancy rules have also changed. Any tenancies signed on or after February 11 this year will convert to periodic tenancies at the end of the fixed term unless the parties agree otherwise, the tenant gives 28 days notice, or the landlord gives notice in accordance with the termination grounds for periodic tenancies.

Landlords will also not be able to end a periodic tenancy without cause by providing 90 days’ notice. New termination grounds are available to landlords under a periodic tenancy and the required notice periods will change.

The healthy homes standards, which became law in 2019, have also come in to force. From July 1, all private rentals must comply within 90 days of any new or renewed tenancy, with all private rentals complying by 1 July 2024.

The standards introduce specific and minimum standards for heating, insulation, ventilation, moisture and drainage, and draught stopping in rental properties.

Ray White property management team leader Nicole Banks says the heating rules make sense, but need refining.

“New homes that have a heat pump installed are failing on the grounds that the heating capacity of the heat pump does not meet the heating standard,” she says.

“I also know of a three-bedroomed open plan home with a mezzanine floor that has to install three heat pumps to meet the standards at a cost of $12,000. It doesn’t make sense – what family would run three heat pumps?

“There seems to be an assumption that all owners can afford this sort of expense, but that’s not the case.”

Nicole says the suppression of tenant details in tribunal decisions has also not been thought through.

She gives an example of a tenant who was taken to the tribunal after being issued with three anti-social notices in 90 days – playing loud music, swearing, a domestic incident and verbally assaulting a neighbour. The tenancy was terminated as per the new laws and both the landlord and tenant sought name suppression. As the landlord was successful in their claim, suppression was granted, but the tribunal also granted name suppression to the tenant, so that their ability to secure future rental accommodation was not hindered by the order.

In another case, the adjudicator suppressed the tenant’s identifying details despite the landlord being awarded nearly $3000 for rubbish removal, garden work and several intentional incidences of damage. The damage included holes in walls, bedroom, lounge, dining and hall. The tenant did not attend the hearing but still had their details suppressed.

“This will make it particularly difficult for private landlords who perhaps don’t have the tools to be able to properly investigate a prospective tenant.”

Nicole says changes in fixed term tenancy standards means many homes will no longer be available to rent. She says Omaha is a prime example of where many people rented their holiday homes for most the year, just using it for a few weeks over summer.

“Under the new rules, if the tenants decide they don’t want to move out over summer, they can’t be forced out. The change is to try to protect tenants and give them some security, but the impact will be fewer houses for rent.”