QLD RENTAL REFORMS ~ The Biggest Changes To Rental Legislation In A Decade.
As of 1 October 2022, the Queensland government will implement a number of amendments to rental legislation that Lessors and Property Managers need to be prepared for. While there are numerous amendments, the more significant ones I will cover below.
In each of these Matters, I will offer what I believe to be best practices along with my own comments. Some of my comments may seem like an 'unlikely event', however, it is my duty to consistently assess and work to mitigate risks for my Lessors regardless of how 'likely' they may occur. Especially as we continue to navigate through the highest rental demand in Queenslands' history, Lessors and Property Managers would be wise to best protect themselves from those who may seek to exploit some of these new amendments.
*It is also worth noting that the final regulations have not yet been made available and may change.
MATTERS AFFECTING ENDING TENANCIES
As of 1 October 2022, Lessors and the Property Managers that represent them can no longer end tenancies ‘without grounds’. With the removal of this ground, several new grounds are being introduced along with a set of conditions and potential penalties.
Fixed Term Agreements.
A new ground for Fixed Term Agreements will be introduced named ‘End Of Fixed Term Tenancy Agreement’ which will allow Lessors and Property Managers to end a tenancy agreement with 2 months’ notice but only at the end of the agreement term.
Periodic Term Agreements.
With the removal of ‘without grounds’ and no similar new ground introduced, a periodic agreement is essentially a ‘Life Term Agreement’. Lessors and Property Managers will only be able to remove an undesirable tenant by utilizing the prescribed grounds available to them.
6-Month Re-Letting Hold & Possible Penalty Of $6,892.50.
Attached to several of the new grounds for ending a tenancy is a 6-month re-letting ban with a possible fine of $6,892.50. Two very common grounds that these conditions are attached to are ‘The Sale Of The Property’ and ‘Owner Occupation’. The offence reads:
“Lessor cannot re-let the property for a period of 6 months after Form 12 (notice to leave) - Possible penalty $6,892.50. You must not give false or misleading information in Form 12 - Possible penalty $6,892.50.”
It would seem these provisions are based upon the presumption that Lessors and Property Managers will give notice under false pretences to serve the same as what was ‘without grounds’. It is a shame Lessors and Property Managers have lost this protection from undesirables. Ending a tenancy will typically have some loss of income due to vacancy along with added agent fees and work - Lessors and Property Managers do not want to vacate good tenants.
How they will police this provision, I am unsure, however, I believe it will be on the tenants to report. Should the Lessor face an offence, they will have to prove that the grounds given were genuine.
Lessors and Property Managers should be cautious. Queensland is currently facing the lowest vacancy rate in its history and it has no signs of slowing down. Due to this demand and increasing rental prices, there will be some tenants who will use a periodic agreement to their advantage. With current legislation, if a tenant were not agreeable to a rental increase (or simply not an ideal tenant) on a periodic agreement the Lessor/Property Manager could simply provide 2 months’ notice for them to leave. As of October 1 2022 and the removal of ‘without grounds’ these situations will likely be contested (especially given current demand) and pushed to the tribunal for judgement. I am also cautious about how much of an impact this will have on the QCAT pipeline. In what is already a lengthy process for non-urgent applications, it would seem there will be a higher need for decisions by the tribunal, which could further delay cases being heard.
To best mitigate risks to the Lessor, all tenancy agreements should be a ‘Fixed Term Agreement’. Lessors/Property Managers will need to be diligent with notice periods as a ‘Fixed Term Agreement’ automatically rolls onto a Periodic on expiry. Miscalculating a single day could risk the tenancy becoming a Periodic (life) agreement.
Start the process earlier and start using strict written language with deadlines. The lease offer deadline should be at least 2 months and a couple of days from term end. Should the tenant still not have responded or with a definitive answer, ensure you still provide the Form 12 Notice To Leave before the 2 months timeline. This will eliminate all risks of a Periodic Agreement.
If you have a Periodic tenancy currently you will need to act by the the 28th of July 2022 (granting a few days extra). A common misunderstanding is that 2 months’ notice equals 60 days, this is incorrect and a technicality that QCAT will use in favour of the tenant.
MATTERS AFFECTING REPAIRS
Amendments to the tenancy laws relate to the process and authorisation for repairs. We can suspect that these legislations will evolve once the new Minimum Housing Standards come into effect 1 September 2023 & 1 September 2024.
Emergency Spending Authorisation Without Approval.
There has been an increase to the maximum spending amount allowed for a Tenant or Property Manager for emergency repairs from 2 weeks to 4 weeks rent. I would expect the tenant would still need to take reasonable steps to get in contact with the Property Manager first, however, the next point does seem to advise otherwise.
As of 1 October 2022 all form 18a General Tenancy Agreements must now identify the nominated repairer that is the tenant’s first point of call for emergency repairs. I suspect a lot of agencies are about to undergo a lot of unnecessary paperwork just to be compliant. As mentioned in the previous point, I would expect that the tenant would first seek advisement from their Property Manager before arranging emergency works.
New QCAT Order: Repair Orders.
Amendment that replaces the process for obtaining and dealing with an order from QCAT for carrying out emergency & routine repairs, referred to as “Repair Orders”. A tenant will be able to apply directly to QCAT for a Repair Order if they believe the property requires repair. Once a Repair Order is granted it does not expire until the order is completed, in addition to this, Lessors and Property Managers will need to disclose if a Repair Order is on the property and must include it within the Form 18a General Tenancy Agreement prior to the tenant entering the property.
The Repair Orders could stipulate a number of conditions that the Lessor must abide which may include a completion deadline, rental reductions, compensation to the tenant and that repairs are completed by a suitably qualified person. While I know most Lessors do keep on top of the routine repairs of their investment, I do have some concern that this might be exploited. There could be an occasion where damage is caused by a tenant and the Lessor is ordered to repair by QCAT.
While my concern is likely to be an uncommon occurrence (touch wood), to mitigate the Lessors risk, all 4 yearly routine inspection opportunities should be utilised to ensure a clean record of the condition of the property is kept up to date.
The condition of your property has a direct effect on the potential value and return on your investment. Ensure you keep up to date with routine repairs before they develop into larger and more costly jobs.
Ensure that all 4 annual routine inspections are utilised and not rushed - it would be advisable not to delegate to office juniors or outsource to mitigate risk to the Lessor.
Keep an open line of communication, be responsive, and educate the tenants on trouble-shooting and what defines an emergency.
MATTERS AFFECTING THE ENTRY CONDITION REPORT
As of 1 October 2022, tenants will have 7 days to sign, return and dispute the Entry Condition Report. In terms of response from the Property Management community, this amendment seems to be the least of concern or any for that matter.. It must just be me that thought the current 3-day time limit helped encouraged tenants to check and complete the Entry Condition Report before they moved their belongings. This 133% increase in time not only affords the tenants more time to ‘find’ problems but also risks moving damage being included in the report.
Lessors and Property Managers will need to be diligent in their Condition Reports. Ensure that enough time is provided to complete a detailed (and honest) Entry Condition Report along with photography. If Property Managers are going to delegate to office juniors or outsource to third-party companies, they need to be reminded of the potential risk they are adding to the Lessor and headache for themselves.
Should the tenant disagree with the condition of the provided report, do not just accept their amendments. Set up a day/time to meet with the tenants at the property and finalise the report together.
The condition of your property has a direct effect on its potential value and return.
MATTERS AFFECTING THE ENTRY CONDITION REPORT
Arguably the “loudest” and most talked about upcoming amendment is the processes and requirements surrounding pets. A common misunderstanding is that tenants can simply just have pets without approval, this is incorrect. Tenants will still need to seek approval from their Lessor/Property Manager and comply with some of the prescribed grounds/conditions applied to the approval.
Should Lessors and Property Managers receive a pet request, they have 14 days to respond in writing. The response must state whether the Lessor approves or refuses the request. If no response is made within the 14 days it is deemed an approval.
Prescribed Grounds To Refuse A Pet.
As of 1 October 2022 a Lessor loses their right to simply refuse a pet by choice. Lessors/Property Managers will have several prescribed grounds to refuse a pet:
(a) keeping the pet would exceed a reasonable number of animals being kept at the premises;
(b) the premises are unsuitable for keeping the pet because of a lack of appropriate fencing, open space or another thing necessary to humanely accommodate the pet;
(c) keeping the pet is likely to cause damage to the premises or inclusions that could not practicably be repaired for a cost that is less than the amount of the rental bond for the premises;
(d) keeping the pet would pose an unacceptable risk to the health and safety of a person, including, for example, because the pet is venomous;
(e) keeping the pet would contravene a law;
(f) keeping the pet would contravene a body corporate by-law or park rule applying to the premises;
(g) the tenant has not agreed to the reasonable conditions proposed by the lessor for approval to keep the pet;
(h) the animal stated in the request is not a pet;
(i) if the premises is a moveable dwelling premises—keeping the pet would contravene a condition of a licence applying to the premises;
(j) another ground prescribed by regulation.
Don’t go removing fences just yet..
Conditions For Approval.
Lessors/Property Managers will still be able to apply an “outside only” condition, but only if the pet is not the type of pet ordinarily kept inside. To me, this seems like a weak condition, shouldn’t all animals technically be wild and free outside? Joking. Should the pet be “allowed inside” (in writing) Lessors/Property Managers can apply a condition requiring carpets to be professionally cleaned at the end of the tenancy. Lessors/Property Managers will also still be able to apply a professional fumigation condition at the end of the tenancy, but only if the pet is capable of carrying parasites. I mean, humans can carry parasites..
There is a lot of negativity surrounding Pets and the damage they can cause. Personally, in my 10+ years in the Property Management sector I have had a very good experience with pets in our properties, but all credit goes to their responsible owners. In fact, in my experience humans are more likely to cause damage. That said, I do have some concerns with these amendments. The key factor in my experience with pets was that they all had responsible owners. Come 1 October 2022, Lessors/Property Managers are likely to be inundated with pet requests, some of whom may lack the discipline or responsibility that comes with owning a pet.
Firstly I would advise Lessors to check their ‘Pet Policy’ with their chosen landlord insurance. Secondly, extra attention should be paid to Entry Condition Reports and Routine Inspections, especially to floors and doors. If you have higher-end finishes applied to your property a few extra details/photos would help mitigate risk. Thirdly, ensure you spend some time educating the tenants on the responsibilities of owning a pet and their commitment to the condition of the premises. No pet bonds or higher bonds can be applied to tenants. However, if your property’s rental amount is $700+ the law gives no maximum, which gives freedom to negotiate. Something I am undecided on: We all know “outside only” is treated fairly loosely by tenants already, I wonder if the condition allowing pets inside offers more protection by a professional clean clause being attached.
Per the Act, tenants are still responsible for any damage and/or nuisance caused by the pet or other animal.
These amendments are just stage 1. More amendments will continue to be stepped out over the next few years...