The Landlord's Guide To
Part 2 - Rent
In Part 1 of the Guide, we examined all kinds of repairs
- initial repairs, urgent repairs and general repairs.
Repairs and maintenance cost money. Property outgoings
increase every year. So it is natural that landlords look to
review the rent as and when they can to compensate. This
newsletter looks at rent increases.
Rent increases are based on
Rent increases are in line with market rents, not events
– rents do not increase every time that interest
rates, council rates or land tax increase – as the news
headlines may lead you to believe.
In Australia, market rents for residential properties are
increasing currently, which signals more demand for than
supply of rental properties. This is stimulating property
According to the Australian Bureau of Statistics, the
median rent for households in the 2011 Census was $285 pw,
compared with the 2006 Census figure of $190 pw. This
represents a 50% increase in rents in 5 years.
Landlords need this knowledge to increase rents -
- How and when to increase rent
- How tenants can challenge rent increases
- How tenants can ask for rent reductions
How to increase rent during a
fixed term tenancy
When a lease starts, it is a fixed term tenancy.
Landlords and tenants agree on the rent at the start of
the fixed term tenancy. The starting rent is a fixed
rent and cannot be increased during the fixed term unless a
rent review formula has been included in the lease.
Rent review formulas are often included in fixed term
tenancy of more than 12 months. Normally, the rent review
formula is applied annually. There are three variations - to
increase – 1) by a set $ amount, or 2) by a % amount, or 3)
by the CPI (Consumer Price Index). The landlord must give 60
days’ notice of increase to activate the rent review
Because it is agreed in the lease, rent increases made
according to the rent review formula cannot be challenged by
the tenant as being excessive.
Landlords have a free hand to increase rent during a
fixed term tenancy of 24 months or more without a rent
review formula, but tenants have the right to move out with
21 days’ notice or to challenge the increase as excessive.
How to increase rent during a
A tenancy does not end when the fixed term tenancy ends.
The tenancy continues as a periodic agreement until it is
terminated or until it is replaced by a new fixed term
During a periodic agreement, the landlord and tenant
continue to be legally bound by the terms and conditions of
the lease, but the landlord has a free hand to put up the
The landlord must follow these rules when putting up the
- The landlord gives 60 days’ notice, that is,
2 months’ notice.
- The landlord can use the model form of Notice of
Increase which can be downloaded from the NSW Fair
- The landlord issues the notice to notify the new
rent, and the date from which it is to be payable –
the date is to be at least 60 days after the notice
- The notice must be signed, dated and properly
addressed to the tenant;
- The notice may be delivered by mail, or by hand
to the tenant, or be placed into the letterbox or
faxed. If the notice is mailed, then ordinary mail
may be used and 4 working days are to be added. All
that is necessary is that the landlord proves proper
delivery – it is not necessary to prove that the
tenant received the notice.
- The rent increase can be timed to commence when the
fixed term ends. To do so, the rent increase notice must
be given at least 60 days beforehand.
- The rent increase notice may prompt the tenant into
discussing a renewed fixed term tenancy or into giving
notice to vacate. By entering into a new fixed term
tenancy, a tenant can ‘lock in’ a new rent for the new
- The rent increase amount is up to the landlord, but
may be challenged by the tenant as excessive if it is
not in line with current market rent.
- The landlord cannot take retaliatory action to
terminate a tenancy simply because the tenant challenges
the rent increase.
- The landlord cannot ask for the rental bond to be
‘topped up’ to reflect the rent increase. The landlord
is only able to ‘top up’ the rental bond to reflect 4
weeks current rent, if they enter into a new fixed term
This table illustrates how housing costs -
LHS (including rents, electricity and prices) are increasing
faster than general inflation - increases in the Consumer
Price Index – RHS (All groups) annually in the years ended
30 June 2005 to March 31 2012. Source: Australian Bureau of
choices when receiving a rent increase notice
The tenant has these choices –
- To accept the rent increase, which many
tenants do if it is in line with current market rent; or
- To negotiate with the landlord to have the
rent increase reduced or to have it withdrawn - if the
rent increase is reduced, no new notice is required -
the increase takes effect from the original date set for
the increase to be payable; or
- To challenge the rent increase as being
excessive by applying to the Tribunal within one month
(30 days) after receiving the notice for a determination
of the rent - the time limit is extendable if the tenant
has a good reason; or
- To terminate the lease by giving notice -
which is three weeks (21 days) notice if given during
the periodic agreement, or a fortnights (14 days) notice
if given before the end of the fixed term; and move out.
How tenants can challenge a
rent increase in the Tribunal
The tenant must persuade the Tribunal that the rent
increase is above current market rent for similar properties
in the area. Although the main consideration is market rent,
the tenant may point to other factors, such as –
- the rates and other outgoings have not increased
- the fittings and facilities provided are no longer
- the state of repair has deteriorated through no
fault of the tenant
- the tenant has carried out improvements
- it is too soon since the last rent increase
In Tribunal decision 2012/97, the tenant challenged a
notice to increase the rent by $70 per week from $760 per
week to $830 per week. The rent had not been increased for
some time. The tenant provided evidence of the market rental
of other properties in the area, that the property was
unrenovated with a 1960s style kitchen with linoleum and had
wall paper from the 1970s. The Tribunal found the tenant had
shown that the rent increase was excessive and set the rent
at $800 per week for a 10 month period (the maximum period
the Tribunal can set the rent is 12 months).
This decision illustrates that it is better to carry out
regular rent reviews and to increase the rent by small
amounts, rather than occasionally by a large amount.
Increasing the rent annually is common. During a periodic
agreement, the rent can be increased more often than
annually. During fixed term agreements of two years or more,
the rent cannot be increased more often than every 12 months
under the Tenancy Law.
Are rates, levies and taxes
able to be passed on to a tenant?
No. The Tenancy Law prohibits landlords from passing on
Council Rates, Water Rates (except water usage), Strata
Levies, Landlord’s Insurance, Land Tax – whether as
assessed, or as increased after the lease commenced.
Q: How rent can be reduced?
A: If the landlord fails to repair
Often the rent increase notice is the trigger for a
tenant to complain about the condition of the property. A
tenant may request repairs be carried out in return for
agreeing to the rent increase, and may even apply to the
Tribunal for a rent reduction until the repairs are carried
out. The Tribunal has the unenviable task of sifting
acceptable complaints from exaggerated complaints; and
deciding if any reduction of rent is justified, and if so,
by how much the rent is to be reduced.
Rent reduction claims are capped to a 12 month period and
must be made while the tenancy is current.
These two Tribunal decisions illustrate rent reductions
for failure to repair –
|Failure to repair
The courtyard fence of a town house was damaged and
remained in disrepair; and water had penetrated into
the main bedroom during a storm resulting in the
carpet becoming wet and damaged, and the tenant’s
furniture becoming damaged
reduction of $50 pw until the courtyard fence was
repaired; and $100 pw for the bedroom until the leak
was fixed and the carpet replaced or repaired - from
a rent of $860 pw
Inadequate ventilation resulting in mould which
significantly affected the main bedroom, laundry,
ensuite bathroom, lounge and nursery
reduction of $50 pw for the main bedroom and $100 pw
for the other rooms until remedied
Experienced landlords keep their properties in good
repair to be able to regularly increase rents, which tenants
do not mind paying to continue the tenancy.
The Landlord’s Guide to Renting has been produced by
Cordato Partners Lawyers, as part of its Property Law
practice. It contains a brief outline of the Tenancy Law.
Because it is a general guide, is not intended to be
relied upon for any specific tenancy situation. For those
situations professional advice should be obtained.
If you would like to receive the Guide as a pdf email
attachment rather than as a hard copy, or would like further
hard copies of the Guide to distribute to clients, friends
and relatives -
Contact us by email –
or by phone (02) 8297 5600 (speak to Sally Wade). Our office
is located at Level 5, 49 York Street, Sydney NSW 2000 (near
Also visit our website –
to view the Guide and other property investment information.
If you would like to be removed from the mailing list,