What you need to know about the announced new pending legislation
More people are renting than ever before, with around 33 per cent of the NSW population renting, an increase of 17.6 per cent since 2016.
With the cost of living and tight rental market, the NSW Government is intending to introduce new legislation designed to enhance tenant rights and security.
To help you make informed decisions, here’s what you need to know and consider:
Understanding the legislation
- No Fault Eviction Ban
The No Fault Eviction Ban effectively limits landlords from evicting tenants without a specific reason. Under the proposed reforms, homeowners will now need a reason to end a tenancy for both periodic and fixed term leases.
These will include commonsense and reasonable reasons such as:
- The existing rules where the renter is at fault, because of a breach of lease, damage to the property, or non-payment of rent.
- Where the property is being sold or offered for sale with vacant possession.
- Where significant repairs or renovations make inhabiting the property too difficult or it will be demolished. If a homeowner seeks to renovate or repair a home, it cannot be relisted for a period of at least 4 weeks.
- If the property will no longer be used as a rental home, i.e a change of use.
- Where the owner or their family intend to move into the property.
- If the renter is no longer eligible for an affordable housing program or if the property is purpose-built student accommodation and the renter is no longer a student.
If the homeowner wishes to end a lease, evidence must be provided with a termination notice, with penalties payable by homeowners providing non-genuine reasons.
For those on fixed term agreements of less than 6 months, the termination notice period to tenants will be increased from 30 days to 60 days. For fixed term agreements of more than 6 months, the termination notice period will be increased from 60 days to 90 days.
There will be no change to notice periods for those on periodic agreements.
The new reforms are set to begin early next year, subject to consultation. More details about the legislation here.
- Portable bonds scheme
This scheme will allow tenants to transfer their rental bonds to a new property within the same rental market, making it easier for them to move without the upfront financial strain of paying a new bond while awaiting the return of their previous one.
It aims to be a financial relief measure to makes it easier for renters when moving by allowing eligible tenants to digitally transfer their existing bond to their new rental home.
Development will involve an upgrade of the existing rental bonds system and work is expected to be completed in 2025. More details here.
- Ban on charging renters for background checks
Currently, some online rental property application apps encourage renters to pay between $25 – $30 to cover the cost of their own background checks, on top of providing detailed information to the leasing agent. (For the record, we manage all our own applications and do not use a third party app.)
These ‘optional’ charges often come with the promise that they’ll increase an applicant’s chances of securing a home. Under these changes, the only payments renters can be charged when applying will be those specifically listed:
- The deposit
- The rental bond
- Rent for the property
- Any fee for registration of a lease longer than 3 years.
Landlords will continue to have the right to check or make reports to third party tenancy databases, in line with the strict rules already in place.
This is expected to come into play early next year. More details here.
Impact on property investors
This new legislation will impact both the tenant and the property investor in different ways:
- No Fault Eviction Ban
With the No Fault Eviction Ban in place, tenants may feel more secure in their rental arrangements. This may lead to longer tenancies, less turnover, reduced vacancy rates, and lower costs associated with finding new tenants.
However, the flip side is that property owners may find it challenging to reclaim their properties should personal circumstances change.
Many real estate bodies have expressed concern that the ban will deter investors from entering the market, and indeed, some investors may feel they need to sell before the ban comes into place next year.
“The cruel irony for tenants is that every time you make residential property a less attractive investment, the more you drive investors away, and the less homes there are to rent,” said Tim McKibbin, CEO of the Real Estate Institute of NSW (REINSW).
However, CoreLogic head of research Eliza Owen thinks these fears may be unfounded. She believes that “the supply of rental property is largely influenced by access to finance and capital growth return”.
“In Western Australia, where ‘no grounds’ evictions remain firmly in place, investor activity over the past few years has been rising strongly, and the state is attracting a higher share of investment loans. The number of new investment loans secured for WA investment properties in May was up 53 per cent year-on-year,” she said.
She noted that the frenzy of new investor activity in Western Australia “hasn’t been enough to boost rental supply to the extent that it is making life easier for renters now,” observing that “rents rose faster in WA in the past year than any other state or territory”.
- Portable Bonds Scheme
Some argue the Scheme may encourage more people to rent, as it reduces the financial barriers associated with moving between rental properties. They argue this could lead to a more competitive rental market with increased demand for rental properties, benefiting landlords with the potential for rising rental prices.
However, we’re not sure at this stage how this scheme will work if, for instance there is a dispute and the bond money is needed to repair/clean the property the tenant is vacating.
- Ban on charging renters for background checks
Landlords can still perform the necessary background checks, but they will need to pay for it; this is often a tax-deductible expense for landlords.
We don’t use third party apps in our tenant application process.
Once we have an application, either direct through our own online application portal, or as a paper application for those who are not computer savvy, we do background checks (rentals references, employment references, personal references, etc) and we also check them on the Tenancies Information Centre of Australia (TICA) database.
What should investment property owners do?
While all these changes offer significant benefits for tenants, property investors must be ready to navigate a more complex landscape where flexibility, tenant stability, and longer-term planning become increasingly important.
We always recommend you consult with your financial advisor and property experts to understand the changes and how they may affect your individual circumstances.
As the government continues to assess the effects of these regulations on the rental market, property investors must stay informed, understand the impact and be ready to adapt strategies accordingly.
This is where we come in.
We do more than manage property.
Our aim is to ensure you have all the information you need to help you make informed decisions about your asset.
As members of REINSW, we are also part of the voice lobbying government, and raise issues and concerns affecting property owners on your behalf.
We do all the training to ensure your property is legal and your paperwork is in order, and we work hard to ensure your property is leased with reliable and good tenants. We also take the stress out of marketing, managing and running your property, ensuring you get the best from your asset, and your asset is properly cared for.
Contact us now for more information about property management and property investment. Call us on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat to see how our property management services can help. For property management tips check out our Facebook page.