The Cook government introduced legislation into the parliament this week that seeks to make sweeping changes to the Residential Tenancies Act that favour tenants. Assuming these changes pass into law the following key changes will impact residential tenancies:
- Tenants will be allowed to keep pets and the property owner will only be able to refuse in certain circumstances.
- Tenants will be able to make minor modifications to the property without permission from the owner.
- Rent increases are limited to once annually.
- The process of bond disposals can be commenced by either tenant or landlord.
- Disputes will mostly be heard by the Commissioner of Consumer Protection rather than the Magistrate’s Court.
- Rent bidding will be banned.
Overall, the changes are moderate and align with tenancies laws in other states and territories. Importantly, the changes stop short of prohibiting ‘without grounds terminations’, a silly phrase used to describe circumstances where a tenant requests a further lease term after the end of a fixed term and the landlord refuses without giving a reason.
REIWA conducted a survey into this particular element of the tenancy laws with an astonishing 61 percent of the 6,000-odd landlords surveyed saying they’d ‘consider selling’ the property if ‘without grounds terminations’ were prohibited. Given a fixed term lease has a clear end date, neither party should anticipate that an additional lease or reversion to a ‘periodic lease’ is assured. You don’t have to give a reason to end a fixed term agreement in any other circumstance, even a marriage!
At a time where supply of rental homes are at crisis point across Australia, new laws that actively undermine the encouragement of supply risks further disincentivising the main cohort of property investors; unsophisticated, family investors the majority of whom own one additional property other than their home.
Hopefully, investors consider the incoming changes reasonable and will continue to add to the rental pool by investing in residential real estate. Given family investors provide 9 in every 10 rentals in WA, we cannot afford to discourage them.
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May 3, 2024
Rent Bidding
As recently reported in these pages, the West Australian parliament passed into law changes to the Residential Tenancies Act designed to further protect the interest of tenants. Some of the changes bring WA into line with other states where substantial changes have altered tenant-landlord relationships and, in some cases, have deterred investment and pushed up rents. Many of the changes will be relatively benign, such as rent increases limited to no more than every twelve months (currently it is a minimum of six months). None of the laws encourage investors to further supply rental stock by improving protections for landlords from tenants that breach the lease agreement and / or wilfully damage the property. One of the changes will be to make it illegal for a landlord (or their property manager) to encourage a tenant to offer more rent to secure a lease. Known as ‘rent bidding’, in a tight rental market it is common for tenants to offer more than the advertised rent for a property. It’s important to note that the ban will not prevent a tenant from offering more rent than advertised. In other states, rent bidding is already banned, but the outcome of the ban has failed to afford any additional benefit for tenants. In the current market, most properties receive multiple applications to rent with many tenants prepared to offer more than the asking rent to secure the property. Under the current arrangement, tenants will typically seek guidance from the leasing agent as to what constitutes market rental value and without specifying the details of competing applications, tenants are able to secure a lease by offering a modest amount above the asking rent. With a ban on rent bidding, tenants will be ‘flying blind’. The leasing agent will have to be silent on proffering any advice as to the level of competition, or where the market sees value. What has occurred in other states is tenants are offering substantially more than the asking rent because the leasing manager is unable to guide them where fair market rent might lie. I am told desperate tenants in NSW will offer 20% above asking rent where a 5% increase would have been sufficient. Already, property managers are advertising asking rents with a “From” in front. This makes it more difficult for tenants to determine fair market rent, especially once rental bidding is formally banned. Mostly, landlords are seeking quality tenants at a reasonable rent. Many will choose the best tenant over one offering the highest rent. Property managers have a duty to their landlord to secure the best possible lease outcome for their client and the rent achieved is but one component. Banning rent bidding will do nothing to further the plight of tenants already dealing with a highly competitive, stressful market of limited supply and rising rents. Governments should spend their time thinking about how they can get more rental supply into the market by actively encouraging property investors. Everything else treats the symptom not the cause and rents will continue to rise.
Mar 27, 2024
Love Thy Neighbour
In our secular society, Easter has lost some of its religious importance, but for Christians, it is the most important religious festival of the year. Christian values of love and forgiveness, whilst sometimes buried beneath layers of modern life, remain important foundations for a cohesive society. Our media is filled with stories that reveal the worst, rather than the best of us. A recent article I came across covered a boundary fence dispute between two warring neighbours. After about $10,000 in legal costs, neither side seemed any closer to a resolution with each party claiming the moral and legal high ground. Not much Easter spirit on display here. The exact detail of the boundary fence dispute is not revealed, but it is a shame that such a dispute has escalated to cost thousands of dollars and, more importantly, ruined a neighbourly relationship. Real estate agents are able to recount many stories involving neighbourly disputes and some sales occur due to neighbourly disharmony. Many neighbourly disagreements stem not from social disharmony, but from legal ones. The repair, replacement or alignment of boundary fences, Rights of Carriageway, the use of Common Property in Strata Schemes and Easements all carry certain obligations for those affected by them. Solving disputes with such matters is normally quite straight forward because there is either legislation that provides the framework for a solution or common law precedent that defines a prior legal decision. Sections 14 and 15 of the Dividing Fences Act WA 1961, for example provides detailed rules as to who pays for the cost of repairing a dividing boundary fence. Arguments may arise when one neighbour refuses to contribute but the Act provides a process for recovering monies due. Arguably more difficult is boundary alignment issues particularly in areas like Fremantle. I would wager that probably the majority of boundary fences of inner city housing in Fremantle are imperfectly aligned. In some cases, the boundary fence may be out by a significant margin. Such title encroachments can lead to the more complex legal matter of “adverse possession” under specific circumstances and whilst common in real estate vernacular, actual claims for adverse possession are relatively rare. Thankfully, neighbours prefer to live harmoniously and a misaligned boundary that has been in situ for decades in normal circumstances is often better left alone. The ability for neighbours to compromise over normally petty issues goes a long way to providing years of friendly “hellos” and a good supply of lemons from over the side fence.