Sweeping changes to Renter rights (previously known as Tenant), the vacating process and lease agreements in Victoria are intensifying compliance pressure on residential property investors.
The state’s new Residential Tenancies Act, now being enforced by the Andrews Government, has highlighted the critical importance of maintaining a “buffer” between the Residential Rental Provider (previously known as Landlord), and the Renter, by using a professional property manager.
That’s because investors who rent out properties face potential extra costs if they fail to properly navigate their way through the Residential Tenancies Act (RTA).
The terminology for residential tenancies has been updated under the new RTA.
Tenants are now known as Renters under Victorian law. Meanwhile, landlords are now known as Residential Rental Providers (RRPs). Tenancy agreements (aka Lease agreements) are now known as Rental Agreements.
The complex legal and “minimum standard” changes have made Victoria’s rental laws more pro-renter than they were previously, but the new act is just one of a number of issues making renting out properties more challenging.
There is also a growing contingent of Renters who have been emboldened to demand their rights due to their renting experience during the COVID-19 lockdowns. As a result, it’s become much easier for unwary Rental Providers to be embroiled in legal trouble or to face a potential loss of rental income.
Nelson Alexander’s Head of Property Management Martin Sizer says widespread publicity about the changes has heightened the value of having a buffer between the Renter and the Rental Provider.
“Detailed information about this new legislation has been all over the media,” he says.
“Savvy Renters are going to read the legislation. More than ever before, Renters will be prepared to speak up and be vocal about their rights.”
Mr Sizer says Rental Providers who choose to self-manage their rental properties will be under increased pressure, with many likely to be dealing with demands for action from their Renters.
“Now more than ever, an experienced property manager adds value to managing an investment property,” he notes.
There are more than 120 individual changes to rental laws contained in the act, including the setting of minimum standards for facilities in a rental property, which previously were not covered by the law.
Rental Providers are now required to ensure that the rental property complies with Prescribed Rental Minimum Standards. The prescribed minimum standards include basic, yet critical requirements relating to amenity, safety and privacy.
The law governing locks and keys has been subjected to major change.
The RTA specifies that all external doors to the rented premises which are not able to be secured with a functioning deadlock, other than any screen door attached to an external door, must be fitted with a locking device that is operated by a key from outside. These locks must also be able to be unlocked from the inside with or without a key.
In addition, all external windows in the rented premises which are capable of opening must have a functioning latch to secure the window against external entry.
The Rental Provider must also provide, free of charge, a set of keys or another security device (for example, smart key access to an apartment building’s car park) to each Renter listed on the Rental Agreement.
Window coverings also come in for their first-ever specifications in Victoria. Each window in a room at the rented premises that is likely to be used as a bedroom or as a living area is now required to be fitted with a curtain or blind that can be opened and closed by the Renter.
Similarly, each room in the rented premises must be free from mould and damp caused by or related to the building structure. As well, a fixed energy-efficient heater (with a 2 star or above energy rating) in good working order is to be installed in the main living area.
Property investors face compliance tasks in more general areas, too. For example, the Rental Provider must not unlawfully discriminate against another person by refusing an application on the basis of an attribute set out in the Equal Opportunity Act 2010.
Under the RTA, bonds cannot exceed one month’s rent unless the rent exceeds $900 per week. Added to this, Renters have been handed new rights to modify rental homes by painting walls, adding picture hooks and the like.
Nelson Alexander’s 16-office network manages more than 16,500 individual properties on behalf of Rental Provider. In recent weeks, the company has assisted dozens of Rental Providers to arrange for electrical and gas compliance checks of their properties.
“This is part of the new legislation,” Mr Sizer says. “Every two years mandatory tests need to be carried out, and a compliance certificate must be issued.
“There are other, bigger issues in this legislation that could affect property owners.
“Rent arrears is one. It is not as easy as it once was to take a tenant to VCAT (Victoria’s Civil and Administrative Tribunal) because they are not paying their rent, and get the tribunal to issue a notice to vacate. There is now a system in place where within a 12-month period a Renter can be issued a notice to vacate, but if the Renter then makes a part payment or resumes regular rent payments that cancels out the notice to vacate.”
Mr Sizer stresses that the complexities in managing a tenancy are now of a magnitude that Rental Providers require an expert manager to understand all the processes involved.
He says Rental Providers learnt to appreciate the “positives” of handling tenancy arrangements through an expert manager during the COVID lockdowns.
“The experienced property managers at Nelson Alexander were able to negotiate with Renters and set up payment plans to ensure some income flowed to Rental Providers,” he says.
“Because of our size and the volume of Renters that we deal with, we are learning about the nuances and full scope of the legislation faster than anyone else. We have large teams of property managers and other staff working closely together.
“The new legislation is a lot to digest and it does, arguably, give many more rights to Renters.”
There are numerous reasons to engage the services of a property manager. For one thing, property managers are able to quickly organise a repair and address maintenance issues. Managers have long lists of trusted tradespeople they can call into action 24/7.
Likewise, market knowledge of weekly rents, suburb yields and vacancy rates are all part of the skill-set of an experienced property manager. This data allows managers to give advice about suitable rents and is very useful when the time comes for a rent review.
If you would like to discuss your property management needs in detail, please contact any Nelson Alexander office.