VIC Impacts of the removal of Covid-19 restrictions on Rentals

On March 29 we had both the removal of the Covid-19 Restrictions for rentals and in Vic the introduction of the new rental laws Link.

Plus we have what appears to be a robust property market in many areas. Do we expect that this might now lead to an increase in Notice to Vacates due to

1. rentals below market rates - and is there an inability to raise it to the current rate with existing tenants due to CPI limitations?
2. issues with current tenants
3. investors deciding to sell and take advantage of market conditions
4. Investors not happy with the new conditions which some see as too favourable to the tennant
5. other?

And could #3 then lead to a flood of properties on the market and ease the current "hot" status.
Plus potentially a decrease in vacancy rates, increase in rents.

Any views on what the current rental market is like in Vic? -> I know when leasing one property in late Jan (Ivanhoe) the market was quite soft and we lowered the rent. Looking now there seems to be a lot less available and slightly higher rent for similar properties. We now have situation in Brighton where we have a break lease situation and agent is advising we must rent at the same value after 3 years with same tenant and no change in rent.

 

Are you asking the tenant to keep paying rent until a new tenant is found? If this is the case that could be why the agent is saying you have to rent at the same price.
You could choose to allow the tenant to break lease without penalty and advertise for a higher price assuming current markent rent is now higher.
If you choose the latter, will this cost you more over a 12mth period than re-letting to someone else at the current rate?

 

Yes tenant will be continuing to pay rent until new tenant is found - lease ends late Jan. Agent states that we must advertise at current rate as otherwise we are in breach of the lease clause "your obligation to continue to pay rent is subject to me taking all reasonable steps to reduce my loss by attempting to relet my premises".

We would not allow tenant to break lease - I however cannot see why we cant still advertise at the market rate of rent. If it is a requirement would like to see where this is documented - certainly not in the lease document.

Considering rent has not change for 3 years and talking about a 6% increase - so inline with CPI.

We could also advertise at a higher rate say for 4 weeks and then adjust if no interest - we have been given 3 months notice.
We will also be looking to improve the property - painting etc to make sure its attractive to new tenants.

Otherwise we end up with a new tenant at less than market rate and may then find it quite difficult to get it back to market rate. Agent has said could build in an increase from the time the lease was due to end which is an option but just cant see why we should not just start at market rent.

 

Apartment or house?

 

It is in the Tenancy leglislation relating to rentals in the relevant state.

You must advertise at the same rental for the remainder of the remaining lease period, after which you can build in an increase. I,e, $400 per week until January 11th (lease end date), after which it is $500 per week. You are not being penalised, the rent is the same as you would have received had the tenant remained until the end of the lease.

This is to ensure departing tenants aren’t “trapped” by an unscrupulous landlord who prefers the property to remain empty by asking a very high rent.

You have the option to allow the tenant to break the lease without penalty, and ask whatever rent you want. But you can’t have it both ways.

 

If you could point me to the legislation clause that would be helpful. I checked consumer vic but there is no reference to this. I am searching through the Tenancies Act but yet to find it.
Leaving a rental property early or without notice (breaking the lease)

 

The only market I follow really closely is around Phillip Island, and I can tell you that rentals are tight and now that this has been lifted they’re going to get even tighter.

Rental prices have jumped significantly in the last 6 months with no signs of slowing down.

After speaking to my property manager I’m informed there’s a lot of good tenants being given notice to vacate with not many new rentals coming on the market.

Varying reasons, some are planning to sell due to price increases but a lot want to use their properties as holiday homes and potentially Airbnb as well. I’ve had to give one tenant notice as we’re going to renovate/develop, the rent the tenant was paying is now so far below market rent it made it an easy decision.
Another 2 have come out of fixed lease and we’ve upped the rent 10%, both accepted straight away.

There’s a real shortage of rentals in the surrounding areas too so I’ll be interested to see how it plays out.

 

I guess conversions back to Airbnb’s could be point 5 at least for holiday regions initially.
Seems to generally be a shortage of both places to buy and places to rent in what might be described as the more desirable places to live - so coastal, regional, tree-change, bayside, etc. And with more people likely buying PPORs vs Investors then even more of a shortage in rentals in these areas. We certainly have seen this in QLD with a huge shortage in rentals around coastal locations.