The Residential Tenancies Act 2010 (Act), recently passed in the NSW parliament represents the first fundamental overhaul of residential tenancy law in New South Wales for over 20 years and follows detailed consultation with industry groups. It contains changes to existing tenancy law that will affect both landlords and tenants.

Developers and land owners who are currently “holding” potential development sites with a residential component or renting completed units in a slow market, should consider the impact of the amendments on these tenancies and their sales and/or development timetables.

Background

The Minister for Fair Trading has stated that the aim of the Act was to modernise and reform the existing tenancy laws and has indicated that the new laws are a response in part to the increased prevalence of shared households and lifetime tenants.

Key Aspects

Some of the key aspects of the Act are:

Rent and other payments

Under section 34, a landlord must accept payment of unpaid rent by a tenant if the landlord has given a termination notice on the ground of failure to pay rent and the tenant has not vacated the residential premises. The proposal is designed to guarantee continuation of a tenancy where a tenant has fallen behind in the payment of rent and subsequently pays the unpaid rent or complies with an agreed repayment plan. The Minister has stated that this is designed to help genuine tenants who encounter temporary financial difficulties.

Under section 39, a tenant must pay the water usage charges for the premises, but only if (amongst other conditions) the premises contain water efficiency measures prescribed by the regulations. There is a 12 month transitional period for existing landlords to have any works carried out.

Proposed Sale of residential premises

Section 53 provides that a landlord must give the tenant written notice of the landlord’s intention to sell premises not later than 14 days before the premises are first made available for inspection by prospective purchasers.

Under section 86 a landlord may give a termination notice (except in respect of a date that is before the expiry of a fixed term agreement) on the ground that the landlord has entered into a contract for the sale of the premises under which the landlord is required to give vacant possession. The termination notice must specify a termination date that is not earlier than 30 days after the day on which the notice is given.

Alterations and additions to residential premises

Section 66 provides that a landlord must not unreasonably withhold consent to a fixture, or to an alteration, addition or renovation that is of a minor nature. If the landlord fails to consent, the Consumer, Trader and Tenancy Tribunal is then, if requested by the tenant, able to make an order that the tenant may install a fixture or make a renovation, alteration or addition to the premises. In determining whether a landlord’s failure to consent is reasonable, consideration is given (but is not limited to) the following factors:

  • if the work involves structural changes
  • if the work involves work that would not be reasonably capable of rectification, repair or removal
  • if the work involves internal or external painting of the residential premises
  • if the work is prohibited under any other law, or
  • if the work is not consistent with the nature of the property.

Changes of tenant and landlord

Under section 75, the landlord may withhold consent to a transfer or subletting relating to the whole tenancy (in its absolute discretion), but must not unreasonably withhold consent to a transfer of a tenancy or subletting of the premises if the transfer results only in one or more tenants in addition to an original tenant under the agreement or the partial subletting of the premises.

The landlord is only allowed to withhold consent if it has a reasonable objection. A reasonable objection would be:

  • the number of proposed occupants is more than permitted under the residential tenancy agreement
  • the proposed tenant or subtenant is listed on a residential tenancy database in accordance with the Act, or
  • the landlord is reasonably of the opinion that the transfer or subletting will result in residential premises being overcrowded.

In her speech, the Minister indicated the rationale for this change, being that the government does not believe that, with shared households increasing, it is appropriate that landlords have an absolute and unchallengeable right to decide who their tenants can live with.

Termination by landlord

Under section 85, the notice period for the landlord to give a termination notice of a periodic agreement has been increased from 60 days to 90 days after the notice is given.

Should a landlord give a tenant a termination notice on the grounds that the tenant has failed to pay rent, the Consumer, Trader and Tenancy Tribunal must not make a termination order (provided the tenant has not frequently failed to pay rent owing) if the tenant pays all the rent owing or enters into and fully complies with a repayment plan agreed with the landlord.

Termination by tenant

Under section 97, a tenant may now terminate a periodic tenancy on 21 days’ notice. Under section 100 of the Act, a tenant may give a termination notice for a fixed term agreement on any of the following grounds:

  • that the tenant has been offered, and accepted, accommodation in social housing premises
  • that the tenant has accepted a place in an aged care facility or requires care in such a facility
  • that the landlord has notified the tenant of the landlord’s intention to sell the premises and did not disclose the proposed sale before entering into the residential tenancy agreement, and
  • that a co tenant or occupant or former co tenant or occupant is prohibited by a final apprehended violence order from having access to the premises.
  • Under section 104 the Consumer, Trader and Tenancy Tribunal may on application by a tenant, make a termination order for a fixed term agreement if it is satisfied that the tenant would, in the special circumstances of the case, suffer undue hardship if the residential tenancy agreement were not terminated.

Tenancy database information

Under section 212, a landlord or agent of a landlord must not list personal information about a person on a residential tenancy database unless:

  • the person was named as a tenant in a residential tenancy agreement that was terminated or the person’s co tenancy was terminated
  • the person breached the agreement
  • because of the breach the person owes the landlord an amount that is more than the rental bond for the agreement or the Consumer, Trader and Tenancy Tribunal has made a termination order, and
  • the personal information identifies the nature of the breach and is accurate, complete and unambiguous.

Contracting out of the Act is prohibited and nothing in the legislation limits the operation of the Contracts Review Act 1980.

Balance

While there has been conjecture that the bill (as can be seen from the provisions above) is “pro tenant”, according to the Minister for Fair Trading, there are also provisions that will assist landlords including:

  • Landlords will be able to serve eviction notices directly to the tenant’s letterbox and apply to the Consumer, Trader and Tenancy Tribunal for a hearing at the same time as serving the notice. The Tribunal is given broader powers to overlook minor errors in the content or service of notices.
  • The discretion of the Consumer, Trader and Tenancy Tribunal has been removed in making it certain that the Tribunal must grant an eviction order if the lease has expired and proper notice has been given.
  • Landlords will no longer have to put an advertisement in a newspaper about unclaimed goods or pay to have them moved and stored for 30 days, extra grounds for access to rented premises have been added and the time for landlords and agents to lodge a tenancy bond has been extended.

Tenants will only be able to contest errors in rent increase notices from the past 12 months.

Conclusion

Since the Residential Tenancies Act 2010 contains a number of fundamental changes to the current legislation, both landlords and tenants should be aware of these changes in the:

  • marketing the sale of completed residential units for investment purposes, and
  • entering into any new residential tenancy agreement in New South Wales.