Residential Tenancies Act 2010 - management of tenancies
Note: this factsheet incorporates amendments made by the Statute Law (Miscellaneous Provisions) Act (No 2) 2010.
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- A tenant must be permitted to pay rent by at least one means for which the tenant does not incur a cost (other than bank fees or other account fees usually payable for the tenant’s transactions).
- A tenant must pay the rent under a residential tenancy agreement on or before the day set out in the agreement.
- A tenant cannot be required to pay more than 2 weeks rent in advance, but can, if they wish to do so, pay more than 2 weeks in advance. (e.g. a tenant cannot be required to pay rent monthly).
- A landlord must not knowingly appropriate rent paid by the tenant for the purpose of any amount payable by the tenant other than rent (e.g. rent can’t be used to pay water usage). A penalty applies.
- A landlord must accept payment of unpaid rent even if they have tendered a non-payment of rent termination notice and the tenant hasn’t given vacant possession. A penalty applies.
- When rent is paid by cheque, whether in person or by post, the person who receives the payment must make the receipt available for collection by the tenant or post it to the residential premises.
- An agent must keep (in any form) a rent record of rent received under a residential tenancy agreement. An agent must within 7 days of a written request from the tenant, provide a written statement setting out the rent record for a specified period.
- An agent is not required to provide a written statement to the tenant, if the agent has already provided a statement to the tenant for the same period.
Notice of sale
Existing obligations on agents under the Property, Stock and Business Agents Act 2002 (PSBA) to advise property managers when sales agents are appointed are unaffected by the RTA 2010 and must still be complied with.
Obligations on property managers to inform tenants ‘immediately’ of the listing of a property for sale, or the appointment of a sales agent (and their details) are also unchanged by the RTA 2010. Where the requirements of the PSBA have been complied with, tenants will usually be given more than 14 days notice of the first open for inspection.
However, the RTA 2010 introduces further notification requirements in section 53 RTA 2010:
- A landlord must give the tenant written notice of the landlord’s intention to sell the residential premises not later than 14 days before the premises are first made available for inspection by prospective purchasers. This is primarily aimed at self managed properties, but where a property manager has been kept in the dark by their landlord, this section will operate to give the tenant a minimum of 14 days notice of the first open for inspection.
- Failure to give notice under the PSBA or the RTA 2010 might enable a tenant to obtain an order from the CTTT restraining the landlord/agent from conducting the open for inspection.
Note: Don’t confuse these access requirements with the separate provisions relating to obtaining access to premises to show them to prospective tenants at the end of the tenancy. Section 55(2)(e) RTA 2010 provides that access can be obtained without the consent of the tenant, after giving notice to the tenant “… to show the premises to prospective tenants, a reasonable number of times during the period of 14 days preceding the termination of the agreement, if the tenant is given reasonable notice each time …”.
- A landlord or agent acting on the sale of the residential premises must make all reasonable efforts to agree with the tenant the days and times when the residential premises are to be periodically available for inspection by prospective purchasers.
- A tenant must not unreasonably refuse to agree to days and times when the residential premises are to be periodically available for inspection by prospective purchasers.
- A tenant is not required to agree to the residential premises being available for inspection by prospective purchasers more than twice a week. A tenant can, of course, agree to additional inspections. Section 43(3) RTA 2010 also provides that rent can be reduced to offset inconvenience to tenants, but it is not mandatory to do so.
- If agreement cannot be reached under section 53 RTA 2010, then section 55(2) enables an agent to gain access to the premises to show the premises to prospective purchasers “… not more than twice in any period of a week, if the tenant is given not less than 48 hours notice each time ...”
Premises must be compliant – water efficiency measures
To be able to recover water usage charges from a tenant:
Clause 11 of the RTR 2010 prescribes that residential premises will comply with the water efficiency standards contemplated by section 39(1)(b) RTA 2010 if they meet the following standards:
- the premises must be separately metered, or water must be delivered to the premises that aren’t connected to a water supply (section 39(1)(a) RTA 2010)
- the premises must contain the water efficiency measures prescribed by the RTR 2010 (section 39(1)(b) RTA 2010).
This drafting excludes external taps, taps for appliances, bath and shower taps and single hot water taps. There are also no new measures prescribed for water efficient toilets.
- all showerheads on the premises must have a maximum flow rate of 9 litres per minute,
- all internal cold water taps and single mixer taps for kitchen sinks or bathroom hand basins on the premises must have a maximum flow rate of 9 litres per minute,
- there must be no leaking taps on the premises at the commencement of the residential tenancy agreement or when the water efficiency measures are installed, whichever is the later.
Notes on the provisions as currently drafted:
- If you don’t intend to charge the tenant water usage, no changes need to be made
- If modifications are required, the transitional provisions of the RTA 2010 provide that:
- Section 39(1)(b) does not apply in respect of an existing residential tenancy agreement until 12 months after the commencement of that provision. That is, there is a period of 12 months from 31 January 2011 to make changes to existing tenancies. Note: new tenancy agreements signed after 31 January 2011 will be subject to the water efficiency requirements from the date the tenancy agreements are signed.
- The provision about kitchen sinks and bathroom hand basins apply to “internal” taps – no further definition of “internal” is provided.
- The leaking taps provision is not limited to internal taps.
- The showerheads provision would appear to include an external shower, such as a pool shower.
- Toilets are unaffected by these provisions – no changes are required bath and shower taps and mixers are excluded from these provisions.
- Any tap connecting an appliance (e.g. dishwasher, washing machine, hot water service etc. are excluded from these provisions and don’t need to be flow limited
- Single hot water taps (e.g. a kitchen sink tap or hand basin tap (not mixers)) are excluded from these provisions and don’t need to be flow limited
- Garden taps are excluded
- Some instantaneous hot water heaters can operate unreliably under flow limited conditions – they switch off when the flow rate drops below a certain flow level. You should check whether the heaters installed in premises are compatible with low flow taps and showerheads
- All flow restrictors clog over time. You may need to arrange for any devices to be periodically cleaned
- Installation costs will be at the landlord’s expense. Some subsidised installation programs from Sydney Water (Waterfix program) may assist in defraying some of the costs but don’t expect them to necessarily make premises entirely compliant
Recovery of water usage charges – provision of bills
- To be recoverable, a copy of the water bill setting out the usage charge must be provided to the tenant.
- The tenant must be given not less than 21 days to pay it.
- If the landlord does not provide and request payment of a bill by the tenant within 3 months from the date of issue of the bill, that usage will be unrecoverable by the landlord. That is, landlords can no longer provide a number of bills for the first time at the end of the tenancy and demand payment.
- So long as the Landlord gives a copy of a bill and has sought payment within 3 months from the date of issue of the bill, the amount for usage will continue to be recoverable if not paid by the tenant.
- Any rebate received by the Landlord with respect to the tenant’s water usage or an equivalent amount, must be passed on to the tenant.
The RTA 2010 retains the familiar general obligation upon the tenant to leave the residential premises in as nearly as possible the same condition, fair wear and tear excepted (and, if there is a condition report, as set out in the condition report applicable to the premises) as when the agreement was entered into (section 51(3)(b) RTA 2010).
The general rule in the new section 66 RTA 2010 is that there can be no installation of fixtures and no making of renovations, alterations or additions by the tenant without the landlord’s consent. There are no definitions in RTA 2010 of a fixture, renovation, alteration or addition.
There is a major exception to this rule. Section 66(2) 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. The word ‘minor’ is not defined in the RTA 2010.
If a landlord unreasonably withholds consent to a minor change the tenant can go to the CTTT and seek a remedy under s68 RTA 2010. Tenants can get orders from the CTTT permitting the installation or removal of a fixture or for permission to make a minor renovation, alteration or addition to the residential premises.
A landlord’s refusal will be reasonable where the:
Note: None of these 5 points are defined in the RTA 2010, and they are not the only grounds upon which a Landlord’s refusal of consent can be reasonable.
- work involves structural changes
- work involves work that would not be reasonably capable of rectification, repair or removal
- work involves internal or external painting of the residential premises
- work is prohibited under any other law, (e.g. electrical and plumbing work is illegal if done by an unlicensed person)
- work is not consistent with the nature of the property.
Upon receiving a request from a tenant, a property manager should consider:
Fixtures and rectification of works
- Is the work “minor”? If the work is not “minor” the landlord is entitled to withhold consent;
- If the work is minor, would the landlord consent? – if so, not a problem;
- If the landlord would not consent – is the proposed work something which is excluded by the examples listed in section 68(3) RTA 2010 (e.g. structural changes, painting, prohibited under law etc) or would it be open to the CTTT to determine that the refusal would otherwise be ‘reasonable’ under s68(3) RTA 2010?
- All costs for ‘minor’ works are at the cost of the tenant;
- At the end of the tenancy there is still the general obligation in the RTA 2010 for tenants to ‘undo’ any minor works they might have received approval for.
- Tenants can generally remove their own fixtures, at their own cost, before giving vacant possession and have an obligation to do so, but must notify the Landlord of any damage caused by the removal and either repair the damage or compensate the Landlord for the reasonable expenses of repairing the damage. This is a similar obligation to that which existed under the RTA 1987
- A landlord can get an order for the costs of rectifying damage, if the tenant’s repairs were not to a satisfactory standard (there is no definition of ‘satisfactory’ in the RTA 2010), or if the work, if not rectified, is likely to adversely affect (again, no definition of adversely affect) the landlord’s ability to let the property
- A landlord can seek an order for compensation for damage whether or not they consented to the minor works in the first place
- Removal of fixtures by a tenant can be prevented where, for example, the landlord paid for the installation of the fixture or provided a benefit to the tenant equivalent to the cost of the fixture. The landlord can get an order to this effect
- It is interesting to note that one aspect of the RTA 1987 does not appear to have been continued in the RTA 2010. The 1987 Act allowed a tenant to claim compensation for the cost of a fixture the tenant paid for, but which the landlord was not allowing the tenant to remove. A tenant can however, seek an order for permission to remove the fixture under the RTA 2010. This is a better position for owners, as a tenant might otherwise simply try to claim the cost of the fixture (which a landlord may not want) rather than having to remove it and repair any damage.
Transfer of tenancy or sub-letting generally
- To transfer means to assign or transfer an interest in a tenancy from one person to another
- At common law, a person who assigns or transfers a lease is still liable to the landlord, despite the assignment/transfer. This principle does not seem to have been displaced by the RTA 2010. So, if a transferee (new tenant) breaches the tenancy agreement, you may still be able to pursue the original tenant too
- To sublet means to transfer part of an interest in a lease or premises. In a subletting situation, the original tenant retains an interest in the lease and stands between the landlord and the sub-tenant
Transfer and subletting with consent
- A tenant can transfer or sublet with the landlord’s consent
Limitations on transfer and subletting – section 75
- Section 75(1) RTA 2010 – A landlord can unreasonably withhold consent to a transfer or sublet of an entire tenancy or entire premises (e.g. if there is, say, only one tenant, the tenant can’t transfer or sublet the entire tenancy and leave. Similarly, 2 tenants can’t jointly transfer or sublet and leave)
- Section 75(2) RTA 2010 - provides a landlord can reasonably withhold consent to a transfer or sub-lease for a legal reason – such as if no original tenants will remain after a proposed transfer.
Reasons to withhold consent
A landlord is specifically entitled to withhold consent for the reasons listed in section 75(3) RTA 2010, namely:
- The number of occupants exceeds the number permitted by the tenancy agreement (this number on the front page will become an extremely important part of the tenancy agreement) or exceeds any maximum number of occupants under legislation
- The proposed tenant or sub tenant is listed (legally) on a tenancy database
- The landlord reasonably believes the premises would be overcrowded.
Will having only one tenant on the lease (but allowing additional occupants) preclude transfer or subletting?
This new area of transfer and sub-letting without the Landlord’s consent has the potential to deliver some very interesting tribunal decisions as most will result out of interesting factual scenarios. REINSW will watch this area with interest.
- Section 75(2) has the heading “Consent must not be unreasonably withheld for partial transfer” and is drafted in terms which would appear to allow a tenant to make a “… transfer of a tenancy … if the transfer results only in one or more tenants in addition to an original tenant”
- The section envisages the partial transfer or sub-letting of a tenancy and seems to provide that one of two, or three, tenants can transfer “their share” of a tenancy to someone else
- However, provided an original tenant remains, the concept of a partial transfer could also potentially be used to allow occupants to become tenants – through the transfer of a ½ interest by the original tenant to an occupant. That is, 1 tenant can become 2 tenants provided that the number of permitted occupants is not exceeded and an original tenant remains. Policy officers at NSW Fair Trading have confirmed that this is Fair Trading's intention. How such a situation will ultimately be handled by the CTTT remains to be seen
Do all tenants get a say in any “rearrangement” of a tenancy?
- For example, say you have 2 female flat mates, A and B, and B wants to transfer her interest to a man, Z, and leave. The landlord is happy to accept Z as a tenant. A will remain after B departs, but does A have any rights in relation to the choice of the replacement tenant? It appears that A has no grounds upon which to object to the landlord’s choice of a new tenant.
- The RTA 2010 appears to be silent in this regard. The best option available to A is to make a general application to the CTTT in relation to the proposed transfer.
- The provisions in relation to rent increases are similar to those in the RTA 1987. There is no general prohibition to increasing rent during the fixed term, but the amount of the increase or the method of calculating the increase must be set out in the agreement.
- Rent payable under a fixed term tenancy exceeding 2 years, must not be increased more than once in any period of 12 months.
- 60 days written notice of the new rent and the date from which it will become payable is still required regardless of the length of the term and regardless of whether a rent increase clause is contained in the agreement.
- If a tenancy agreement is to be renewed, and the rent is to be increased on renewal, 60 days notice must still be given.
- Notice must still be given even if details of the rent increase are set out in the residential tenancy agreement.
- Notices of rent increase may be cancelled or varied so as to reduce the increase by a subsequent written notice to the tenant, taking effect from the date on which the earlier notice was to take effect.
- A new provision in the RTA 2010, based upon REINSW lobbying, is that a notice of increase is not required if the ‘increase’ is due to the fact that a temporary rent reduction (e.g. a rent reduction to compensate for inconvenience caused by inspections by potential purchasers) has ended, and the rent is returning to the previous level.
- Tenants can now only bring claims to invalidate a rent increase (where the increase was not made in accordance with the RTA 2010) within 12 months of the increase.
- Under the RTR 2010 the prescribed period for making an application for an order that a rent increase is excessive is within 30 days after notice of the increase is given.
After vacant possession given or on abandonment
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- Perishable goods and rubbish can be disposed of immediately
- A landlord must give the former tenant a notice:
- in writing;
- by post to the last forwarding address known to the landlord; or
- orally (in person or by phone).
- The notice must provide that the goods left behind will be disposed of after 14 days (for goods) or 90 days (for personal documents) unless they are claimed by the tenant. The time periods run from when notice is given.
- If notice cannot be given by one of the above methods after two days, then a notice to the tenant can be posted on the residential premises in a prominent position.
- If the quantity of goods left behind is sufficient to prevent the landlord from renting the premises, the landlord can charge an occupation fee for each day the goods are unclaimed.
- The occupation fee cannot be charged for a period of more than 14 days, and cannot exceed the rent which would otherwise have been payable
- Goods can be removed to storage, but storage costs are not expressly permitted to be claimed, but they may form part of the reasonable costs of sale if the goods are later sold.
- If goods are not collected within 14 days, they can be disposed of by selling them or by disposing of them in any other lawful manner. A record of the goods disposed of must be kept.
- Reasonable costs of the sale of the goods and any occupation fee can be deducted from the proceeds of sale, but the landlord or agent must then account to the tenant for the balance.
- Personal documents can be disposed of by returning them to the issuing authority (e.g. by returning a driver’s licence to the RTA), or if it is not reasonably practical to do so, in any other lawful manner the agent thinks fit. Personal documents must not be disposed of in a way which results in personal information about the tenant becoming publicly available.
- As a result of REINSW lobbying Personal Documents no longer includes computer records.
- Landlords and agents can seek directions and orders from the CTTT about goods left behind, and should strongly consider doing so in all but the simplest cases to protect themselves (for example from claims by tenants or hire purchase companies).
- The CTTT has the power to make orders in relation to the delivery of goods, compensation for damage to goods, or the payment of proceeds of sale.
- Purchasers of goods disposed of pursuant to the RTA 2010 get good title.
- There is now no longer any requirement to place newspaper advertisements.