Rental reform looms, will tenants have too much power?

In Melbourne, the recently passed changes, the Residential Tenancies Amendment Act 2018, looked at issues including:

• Capped bonds for rent less than double the median weekly rent;
• Capped rent pricing at once every 12 months;
• Preventing landlords unreasonably refusing pets; and
• Preventing landlords unreasonably refusing minor modifications to properties.

Meanwhile, NSW recently announced reforms to its tenancy laws in the Residential Tenancies Amendment (Review) Bill 2018, and is initially looking at:

• Tenants making minor alterations in properties;
• A new minimum standard for properties;
• Tenants allowed to get rectification orders from Fair Trading for repairs;
• Capping rent increases for periodic leases to once a year; and
• Victims of domestic violence to break a lease without incurring a penalty.

Even as recently as last week, the Queensland government has also announced to change its tenancy laws. While there is no draft bill, Ms Palaszczuk’s announcement made clear she intended to consider changes to:

• Minor modifications;
• Pet ownership; and
• Inspections and repairs.

Concerns from investors

With the announcement of these changes, Smart Property Investment readers have voiced their concerns.

When the Victorian ‘Rent Fair’ reforms passed the Victorian parliament, one reader - Rick - feared the reforms would turn off prospective investors from entering the market.

“As I see it the tenants are calling for landlords to retreat from the rental property industry,” Rick said.

“I would have thought it would have been better to seek reforms that would encourage greater numbers of rental property thus giving the tenants more opportunity to find a place to rent.”

Another, Jean, believes the reforms are "a joke" and that tenants already have too much power over the properties they live in. 

“It’s hard enough to get a bad tenant out of your house and this law makes it harder; I will certainly be offloading my rental property, it’s not worth the bother,” they commented.

“And by the way if tenants start putting holes in the wall for pictures, who pays to fill and repaint the walls[?]

“[This] is crazy, obviously from the good doers idiots of society with no experience in the reality of being a landlord.”

One reader, Mary, also believes landlords losing ground could result in more investors leaving the market, which could potentially disrupt the supply and demand dynamic.   

“If landlords don’t have grounds then less people will want to invest in rental properties. This in turn means less rentals available, making the housing shortage even worse. How’s that for a 'trump card'," she said. 

Where does the power lie?

While there are some investors who view this action to be giving too much power to tenants, there are those who see these actions as balancing out tenant powers across every state and territory.

Peter Koulizos, chairman of the Property Investment Professionals of Australia, lives in South Australia and claims he claims he lives with the tightest tenancy laws in the entire country

He said tenants in states with rental reforms are not getting too much power, but are changing to meet a new standard of living.

“At the moment, NSW and Victoria are updating their tenancy laws to meet a different market,” Mr Koulizos said to Smart Property Investment.

“In years gone by, you rented while you waited to buy. Whereas now, renting might be a lifetime option. So, if it’s going to be a lifetime option, laws have to change to reflect that.”

He also saw the need for an improved standard of living, as mentioned in the NSW rental reforms, as a “great thing”.

“You’ve got to ask yourself, ‘Would you live in this place’? And most people, if there [were] electrical issues, or plumbing issues, or security issues, they’d probably go and look somewhere else,” he said.

“Personally, I think it’s a great thing that there is a base level of standard in regards to building and construction of rental properties.”

Mr Koulizos was also in support in allowing tenants to make minor modifications to properties, but was also of the view they had to “make good” at the end of their tenancy.

“If they’ve decided to put up a row of paintings up on one wall and put in nails or something, then when they leave, they need to make good [on] that damage,” he said.

“It’s like when you’re selling a property, if you decide to take something with you and it leaves a gap in the wall or some marks, then you’ve got to fix it up.”

The push for pets

One aspect of the reforms that is slowly gaining traction is the legislated acceptance of pets in properties. Victoria’s reform clearly states that pets cannot be unreasonably refused by landlords and Mick de Brenni, minister for housing and public works, raised the question of “How can we make it easier for landlords and tenants to agree on having a pet?” during the announcement of intention to reform Queensland’s tenancy laws.

The push for pets in tenancies has been slow yet steady, but it is a push that petcare business Rufus & Coco and CEO Anneke van den Broek fully supports.

“It's just weird that in Australia, for a nation of 63 per cent of Australians have a pet, and we're quite an outdoor nation that only 5 per cent of properties actually advertise as allowing to have a pet,” Ms Van Den Broek said to Smart Property Investment.

At the time of the interview, Victoria’s rental reforms were the only state where tenants having pets were enshrined in legislation, which Ms Van Den Broek said was the only state to do so.

“We are hoping it sets a precedent for other states, she said.

“WA has actually has had a ruling where people with a pet can actually can pay an additional bond, but no other state has actually had that as part of their legislation.”

Just like Mr Koulizos mentioned on the topic of minor modifications for tenants to “make good”, Ms Van Den Broek raised the point that landlords are not powerless when it comes to allowing pets as investors can place conditions in their tenancy.

This means tenants are still required to keep the property clean during and at the end of the tenancy, which can include fumigation and professional carpet cleaning.

She added investors who accept tenants with pets also are likely to save money during the course of their tenancy and increase their chances of a tenant staying for a longer term.

“Happy tenants make happy landlords, you know the fact that people with pets stay longer, so they're going to get less terms, so longer tenancy, lower vacancy rate and they're going to need to spend less money on advertising their property,” she said.