New rental laws for residential tenancies have started in NSW. They limit how often the rent can be increased, require a good reason for all evictions and streamline pet approvals.
The new rental laws are in the Residential Tenancies Amendment Act 2024, which NSW Parliament passed on 24 October 2024.
This is an analysis:
Limit on how often rent can be increased
Rent increases are limited to one rent increase every 12 months. This applies to all leases signed from 31 October 2024. Rent increases are not capped. The law remains that rent increases must not be excessive.
Up until now, a landlord could increase rent several times in a 12 month period using either a series of short-term leases or having rent increases apply automatically in a fixed term lease for 12 months.
A good reason is required for a landlord to end a lease
When the landlord serves a termination notice to end a lease (i.e. an eviction notice), the notice must give a good reason (i.e. a good ground). The new law means that no-grounds evictions are no longer legal. Notice periods continue to apply.
The changes apply to termination notices served from a date to be fixed in the first half of 2025. They will all apply to current and new leases. The reason given for the delay is that supporting regulations need to be developed and to give landlords, tenants and managing agents time to prepare.
Up until now, the notice period for a landlord to end a fixed term lease is at least 30 days, expiring on or after the date the lease term ends. After the fixed term ends, the lease becomes a periodic lease. The notice period is longer for a periodic lease – it is at least 90 days.
Under the new laws, the notice period is lengthened for fixed term leases: from 30 days to either 60 days or 90 days. These are the new rules for termination dates:
- for a periodic agreement (the term has ended)— the termination date must be at least 90 days after the notice is given, or
- for a short fixed term agreement (a lease term of 6 months or less)—
- the termination date must be on or after the end of the agreement, and
- at least 60 days after the notice is given, or
- for another fixed term agreement (a lease term of more than 6 months)—
- the termination date must be on or after the end of the agreement, and
- at least 90 days after the notice is given.
Up until now, the only termination notices that required reasons were a notice given for the sale of the property or to end a caretaking arrangement.
The new laws do not change the landlord’s right to end a lease for these reasons. The requirements are:
- If a Contract for the Sale of a property has been entered into which requires vacant possession to be given, then the notice period can be reduced to 30 days (instead of 60 or 90 days) but the fixed term must have ended.
- The tenancy is part of an employee or caretaker residential tenancy agreement that has ended.
Under the new laws, there are an additional eight grounds available to a landlord to end a lease. They are:
- The property is to be offered for sale with vacant possession.
- The property will no longer be used as rented residential premises for at least 12 months.
- The landlord or a member of their family will live in the property for at least six months.
- The property will undergo significant renovation or repair that requires the property to be vacant and the works are planned to commence within two months.
- The property will be demolished and the works are planned to commence within two months.
- The property is purpose‑built student accommodation and the renter is no longer a student.
- The renter is no longer eligible for a subsidised affordable accommodation program or for transitional housing.
- The property is part of a key worker housing program and is needed to house a key worker.
Notes:
- The descriptions (above) are as displayed on the NSW Fair Trading website Changes to rental laws
- Supporting documents or information will be required.
- It will be an offence if the grounds are not genuine.
- If a ground specifies an exclusion period during which a new residential tenancy agreement may not be entered after the termination date, it will be an offence to enter into a new lease during that period. For renovations, the exclusion period is 4 weeks, for demolitions, it is 6 months, and for no longer being used as residential premises, it is 12 months.
- Tenants can choose to move out before the termination date. If so, the tenant pays rent until the day they move out. If moving out before a fixed term lease ends, the tenant must give 14 days notice before moving out.
Commentary upon the new termination laws by the Minister for Fair Trading
These are extracts from the Second Reading Speech in State Parliament:
The new grounds recognise that landlords may wish to use a property for a different purpose for a period of time, prepare it for sale, renovate the property or house a family member. The Government recognises that these are all legitimate reasons for a landlord to end a tenancy.
Some of the grounds have specific requirements built into them to ensure that tenants are not being evicted unnecessarily. For example, if a landlord is terminating on the basis that the property will undergo renovation or repair works, the works must be planned to commence within two months of the termination. This will prevent tenants being evicted for a renovation that may be planned to commence in 12 months time.
Further, this ground cannot be used when the landlord is subject to an order from Fair Trading or the tribunal to fix damage or disrepair caused by a breach of the landlord's obligation to maintain the premises in a reasonable state of repair. This will prevent a landlord from deliberately allowing a property to fall into disrepair and then evicting the renter.
Exclusion periods will apply for each termination ground. This is a period after the termination within which the property cannot be re-let on the tenancy market. Penalties will apply for a breach. The aim of the exclusion period is to deter misuse of the termination grounds. For example, the exclusion period will prevent a landlord from simply terminating a tenancy under the guise of moving into the property themselves only to put it back on the rental market soon after. The exclusion periods are different for each ground and reflect the period for which the property would not be expected to be back on the tenancy market if the termination for that ground was genuine. For example, if the termination is on the basis that the property is being prepared for sale, it will not be able to be re-let for six months.
Termination for breach of lease by giving 14 days notice will continue unchanged. Landlords will still be able to end a tenancy if a tenant does not pay their rent, seriously damages the property, uses the premises for an illegal activity, or seriously or persistently threatens or abuses the landlord, their agent or contractors.
Pet approvals to be streamlined
A tenant will be able to make a pet request (an application for consent). There will be a prescribed form of application for consent and for refusal.
If the landlord does not refuse within 21 days, then the pet request will be treated as automatically approved.
Valid reasons are specified for refusal, which are:
- There would be too many animals at the property.
- The property is unsuitable for the animal because of the fencing, or lack of open space, or because it would harm the animal’s welfare.
- The animal is likely to cause more damage than the bond could repair.
- The landlord lives at the property.
- The animal would break other laws, local council rules, strata or community scheme by-laws, or a residential community rule.
- The renter did not agree to a reasonable condition for keeping the animal.
Note that an increase in bond or rent will not be a reasonable condition. But a condition which requires an animal to be kept outside may be reasonable for an outdoors animal, and conditions that at the end of the tenancy the carpet be professionally cleaned and the property be fumigated may be reasonable.
These changes will apply from a date to be set in the first half of 2025.
Payment of rent
Property owners and agents will be required to offer a way to pay rent that is electronic and without additional fees. Renters will be able to choose a bank transfer method or payment via the Commonwealth Government’s Centrepay.
If both the renter and landlord agree, the renter can choose to pay rent using other options.
These changes will apply from a date to be set in the first half of 2025.
Fees for background checks are not payable by tenants
No fees are to be charged to tenants for background checks even if they go on to enter into a residential tenancy agreement. ‘Background checks’ are searches on a residential tenancy database. This applies from 31 October 2024.
What must a tenant pay? The only fees or payments a tenant can be asked to make are a holding fee, rent, a rental bond and an amount to cover any fee payable for registration of a tenancy agreement.
Comment
The new laws are in response to a tight rental market. As the Minister said:
We know this rental market is the toughest that renters have seen for decades, with demand for housing far exceeding supply. Vacancy rates across New South Wales are between 1.5 per cent and 1.7 per cent, which is much lower than the 3 per cent vacancy rate considered to provide a healthy, balanced rental market.
The law limiting rent increases to every 12 months brings NSW into line with the other States.
The new laws wisely avoid calls made to cap rent increases. Contrast the law in Victoria which cap rent increases to $20 or a fixed increase of 2% or an increase in the Consumer Price Index every 12 months. See the Consumer Affairs Victoria website Rent increases