More than 130 rental law changes came into effect in March 2021. This means a ton of minimum standards (everything from structural soundness to required door locks) and potential additional costs need to be considered to ensure your rental property is compliant with the law.
With reforms previously delayed because of COVID-19 emergency measures, investors and tenants are now learning of changes to rental laws to “expand the rights and responsibilities of renters and rental providers (landlords) and make renting in Victoria fairer and safer.”
The changes cover the whole life cycle of a rental agreement, so understanding key points of the updated law helps you shape up for agreement renewals and prepare for visits from potential renters, especially in terms of the documentation they should have ready.
How will rental law changes affect you?
According to a recent article from ABC, some Tenants Victoria and REIV analysts have stated that the changes to rental law favour tenants over property owners, so as a landlord it’s important that you understand what these changes mean for your investments.
These changes indicate that minimum standards now apply for new rental agreements, and the landlord is responsible for ensuring they are met. Previously, the only requirement was that rental properties needed to be habitable, but that left renters in the dark about what “livable” actually means.
The new rental changes involve 14 categories covering things like door locks, rubbish bins, mould, electrical safety, hot and cold water, heating, windows and lighting. If these minimum standards aren’t met, the tenant can terminate a rental agreement before they move in.
These changes will potentially raise rent prices because you as the property owner have the option to pass on the extra costs of compliance to tenants.
Given this update, you may opt to change your real estate investment strategy to more short-term buy and hold selling instead of long-term rentals, in order to better recoup the additional costs of conforming to the new laws.
What are the major changes to rental laws?
Below is a brief overview of the changes that affect rental providers and would-be renters.
It’s crucial to stay informed on the updated regulations so you don’t run counter to new laws and can maintain the rapport you’ve built with your renters, plus attract new renters since borders have reopened and you’ve got potential international student renters due to come in.
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Before renting
Prior to accepting tenants, the major changes to rental law fall under two major categories:
- Disclosures
- Property features
Both cover agreements made after 29 March 2021, started before 29 March 2021 and rolled over into periodic agreements made after this date.
The first disclosure change required is to advertise a rental property at a fixed price, meaning lease advertisements can no longer show a price range.
Your listing must show the final rate because rental providers (the term for landlord as per the law reform) are banned from inviting offers of rent higher than the advertised price.
Additionally, you need to disclose to the renter whether the property is on the market for sale or is being repossessed, or if you are not the owner of the property.
For property features you need to address ahead of the agreement, rental providers have a duty to ensure their property meets the 14 categories of rental minimum standards.
The property features matter and covers security, ventilation, laundry facilities, rubbish bins, electrical safety, hot and cold water, heating, windows and lighting. These need to be available, functional and up to date.
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While renting
When you’ve signed an agreement with a renter, the changes refer to what renters will expect you to provide and what renters will request for approval.
Rental providers need to provide each renter with a free set of keys or security devices. Renters can request to have these replaced in case of loss, provided they report it to you. You are allowed to charge only a reasonable fee for additional or replacement keys or devices.
Additionally, you’re expected to pay for the costs that exceed your renter’s ordinary usage, if they receive an excessive utility bill related to a hidden fault (e.g. a leaking water pipe).
In case you need to increase rates, for fixed-term agreements rent increases are only allowed if the rental agreement specifies its amount or method.
More time between collection and notices to vacate is provided for in the new rental laws. In case a renter delays settling their bill, if they pay back overdue rent within 14 days, any notice to vacate you issued for that overdue rent is invalidated.
This rule only applies for the first four times it happens over 12 months, but you may give the notice to vacate and apply to VCAT for a possession order if your renter fails to make a payment for the fifth time in the same 12-month period.
You’re likely to receive requests for approval of a pet, as renters are allowed to keep pets at a rental property with the written consent of the rental provider. You’d need reasonable grounds to decline an application for a pet, and any of these fur baby disputes will be taken to VCAT.
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After renting
Changes to the rental law clarify what rental providers need to tell tenants as they terminate or finish their leases, and specify the amount of time they need to provide notices to vacate and the required condition of the property when the renter leaves.
To end a tenant’s lease, you need to provide a valid reason such as sale, change of use or demolition of the rental property, or you moving back into the rental property.
New regulation bans “no specified reason” as an answer for a provider-led termination of the lease, only if this is before the end of their fixed term.
If you’re requesting your renter to leave at the end of the fixed term, then you don’t need to provide a reason. This only applies to the first fixed term of a rental agreement, and doesn’t extend to long-term agreements of more than five years.
In case your renter terminates a fixed-term rental agreement before the end date, you can apply to VCAT for compensation. The amount payable will be determined based on the loss you incurred and any hardship suffered by the renter.
For the required condition of the property when the fixed term has ended, review your rental agreement. You can only require professional cleaning if your agreement states it is needed to return the property to the condition it was in at the start of the term, taking into account fair wear and tear.
These are only some of the changes that will affect you, but additional details on every rental law update are available through the Consumer Affairs department portal.
The rental law reforms involve the lifespan of a rental agreement, so it can be overwhelming to keep up with them all. With patience and attention to detail, you can get your investment property to standard, as well as update rental agreements without any trouble.
If you need more guidance on what needs to be done for your investment property, please give us a call and we’d be happy to support you.