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REINSW has proposed a model for longer fixed term tenancies in response to recommended changes as part of the Residential Tenancies Act 2010 statutory review.

The submission was prepared in consultation with REINSW's Property Management Chapter committee.

What are the proposed changes to long-term tenancies?

NSW Fair Trading put together its statutory review of the Residential Tenancies Act 2010 in June 2016. Currently the act defines long-term tenancies as periods of 20 years or more. 

In a bid to encourage longer fixed term tenancies, recommendation 16 of the review, has suggested amending section 20 to reduce this to five years.

REINSW's proposed model for longer fixed term tenancies

REINSW envisages that the proposed five-year prescribed agreement would have no impact on the current standard form residential tenancy agreement and would be a stand-alone agreement.

However it says a bigger incentive for landlords to enter into a five year lease would be to remove the registration obligation and the requirement to pay registration fees. 

As a result REINSW recommends that section 53 of the Real Property Act 1900 (NSW) (RPA Act) is amended to require registration of a lease if it has a term of more than five years, as opposed to three years. 

REINSW CEO Tim McKibbin said: “If landlords are not required to pay registration fees for registering a five-year lease, then they will be encouraged to use these longer-term leases.”

If the recommendation above is not implemented, REINSW proposes that residential leases with a term exceeding five years should be exempt from the registration requirement that currently exists in section 53 of the RPA Act.

Tim McKibbin added: “Another motivation for landlords to use five-year leases would be to enable them to stipulate terms and conditions that are prohibited or not included in the current standard form residential tenancy agreement.”

REINSW recommends a prescribed, but not mandatory, five-year lease which includes terms incentivising landlords to use that lease as opposed to the standard form residential tenancy agreement.

These terms should include, but would not be limited to:

• the tenant being responsible for making certain repairs (for example, to door handles or damage from the use of hot plates on stoves)
• the tenant being responsible for repairing damage from minor alterations (for instance, drilling into walls, tiles, etc)
• a bond top-up option
• the inclusion of a break fee provision whereby the break fee is a higher amount than that in the standard form residential tenancy agreement because the balance of the term is likely to be longer
• obligations on the tenant to reimburse the landlord for any call out fees where the tenant fails to provide access to the premises for safety inspections (e.g. smoke alarms)
• obligations on the tenant to advise the landlord immediately if there is an issue with a safety matter on the premises (e.g. smoke alarms, pool fences or window locks)
• obligations on the tenant not to interfere with safety installations on the premises (e.g. smoke alarms, pool fences or window locks)
• the insertion of an additional term prohibiting smoking
• the inclusion of a provision to deal with the prevention of mould by the tenant
• the inclusion of a provision that the tenant is to pay for any pest control required after the first 90 days of the commencement of the tenant
• the option available under the previous residential tenancies legislation whereby the landlord and tenant could agree on the timing and responsibility for payment of carpet cleaning
• the ability for the landlord to require a higher bond in respect of furnished premises or where pets are kept on the premises
• the inclusion of a provision that the tenant will have the carpet professionally cleaned and have the property fumigated in leases where the keeping of pets is permitted (currently the lease requires the tenant to either professionally clean the carpet or fumigate if pets are permitted, however, REINSW believes it should offer both)
• the optional ability to provide for servicing of residential premises (e.g. cleaning)
• the insertion of a holding over clause in the operative provisions of the agreement rather than in the motes where it currently sits.

For more information, please read the submission here.