Biggest overhaul ever for Victoria's rental landscape

They’ve been described as the “biggest reforms to renting in Victoria’s history” and form a key plank of the State Government’s political platform.

While they are likely to be lapped up by pet owners who rent a property, they have tightened the leash on landlords.

The Residential Tenancies Amendment Bill 2018 passed through parliament in September but a public consultation period is open now and runs until 18 December 2019.

Some of the 132 changes to the rental act have already been implemented, with the remainder taking effect from July 2020.

The reforms were driven by the Labor Government of Daniel Andrews with the intention of improving the rights of renters and correcting a perceived imbalance towards landlords.

“These new laws are the biggest reforms to renting in Victoria’s history and are about ensuring everyone who rents has a safe and secure home to call their own,” Victoria’s Minister for Consumer Affairs, Marlene Kairouz, said.

Among the more prominent changes are limitations on the regularity of rent increases and bond obligations, rules enforcing basic safety measures in properties, a ban on rental bidding and, in a bonus for pet owners, landlords will now need an official order from the Victorian Civil and Administrative Tribunal (VCAT) in order to refuse a tenant the right to own a pet.

A balancing Act

With such a far-reaching and thorough revision of an Act that had been unchanged for decades, there are inevitable discussions around the balance of the outcome between renters and property owners.

“It’s a massive set of changes and in my view some are fair, yet others are not,” said Cate Bakos, President of the Real Estate Buyers Agents Association of Australia (REBAA), Australia’s leading professional body for buyer’s agents.

Ms. Bakos identified the rules around landlords terminating a rental agreement as among the most contentious. Where previously a rental provider could issue a 120-day notice to vacate without providing a reason, the rental provider (landlord) must now use a valid reason to issue a notice to vacate to a renter. They cannot issue a ‘no specified reason’ notice to vacate.

“The key change that will impact landlords is the no-fault notice period.”

“Traditionally a landlord could issue a notice to vacate on a 120-day basis outside of a fixed lease but the new proposed law will eradicate that option for landlords and they will be restricted to the following reasons only: renovation; selling; moving into the property themselves; or, taking action at VCAT if the tenant is in breach.”

“The effective management of the asset for the landlord has been overlooked somewhat, so that if a tenant now is problematic in regularly paying the rent late or causing distress for a landlord, the rental provider will find it almost impossible to evict them,” Ms. Bakos said.

“Like any business relationship, it’s not fair if one party can exit but the other is bound.”

Keeping up with the times

Others saw the Act revisions as an overdue opportunity to modernise laws and regulations that affect the 1.5 million people living in more than 607,000 rental properties in Victoria, which represents almost a third of all properties.

Laura Scott, Senior Property Manager at aussieproperty.com, said the new reforms have their pros and cons for renters and rental providers, but felt that if managed effectively there should not be too many troublesome issues.

“The Victorian Residential Tenancies Act reforms, which were last looked at in 1997, have been designed to keep renter's rights in step with modern demands and cultural trends,” she said.

“Renters have been granted more freedom to make the house they live in a home, while landlord rights are still protected under the legislation but have been changed to make the leasing process more transparent for all parties.

“This will only impact landlords if the new processes are not followed and if they do not understand the new reforms.”

Ms. Scott urged landlords concerned about any possible implications to ensure they enlisted the services of a property manager that understood the reforms.

“There is going to be no room for error, and property managers are going to need to be on the ball more than ever, so ensuring you trust your property manager is going to be the best step you can make.”

President of the Real Estate Institute of Victoria (REIV), Leah Calnan, backed up those sentiments, saying the pressures on property managers to get it right were more onerous than ever.

“Your property manager really becomes a strategy manager now, especially when it comes to securing quality tenants,” she said.

“With the rules shifting towards the tenant in terms of notice periods and late rent payments, property managers need to get it right the first time.

“The amount of rent received is not the only factor in deciding a tenant, and with these new rules, the emphasis on getting the right tenant has never been stronger.”

Show me the money

A rental provider (or agent) can no longer advertise or offer premises for a price range or invite bidding between prospective renters. The rental provider can still place a sign at or near the premises for rent, advertising the property for rent without stating an amount of rent for the premises.

Although rental providers and agents are prohibited from soliciting or inviting offers of rent higher than the advertised price, if a prospective renter makes an unprompted offer of rent higher than the advertised price, the rental provider is permitted to accept the higher amount.

“This (rental bidding) wasn’t a particularly prominent practice, but it does serve to strengthen the emphasis on quality tenants over those who are simply willing to pay more,” said Ms. Calnan.

The revised Act stipulates that the rental provider must not increase the rent within 12 months when previously it could be raised after six months. This reform is in effect for rental agreements that started after 19 June 2019. From 1 July 2020, this change will also apply to rent increases in rooming houses and caravan parks, and in residential park site agreements.

Ms. Bakos of REBAA didn’t believe these changes were necessary.

“The limitation (to adjusting rents from six-monthly to yearly) is silly in my view.”

“Rents don’t always move up, so it could disadvantage a tenant if the rents can’t be reset to reflect market rental conditions.

“In locations where rents do climb suddenly, it can be distressing for a tenant who endures a $40 per week rental hike as opposed to a stepped $20 per week hike every six months,” she said.

Enforcement of laws that were sometimes subjective in their interpretation was also an issue, she said.

“I’m fearful that these changes will lead to a bottleneck at VCAT, massive delays for tribunal hearing dates, upset and distress for landlords and tenants collectively, and more shades of grey for property managers,” Ms. Bakos said.

“It could also dissuade investors from selecting property as an asset class, as the rules are now so in favour of the tenant.”

The reforms were drafted following extensive community feedback during the Victorian Government’s Fairer Safer Housing consultation to review the Residential Tenancies Act 1997.

More than 4,800 public comments were received from a wide range of people and organisations.

For more information on this consultation, visit the Fairer Safer Housing page on the Engage Victoria website.