NSW Tenants can now walk with only 1 weeks 'cost' 25% of lease left?

Discussion in 'Property Management' started by Dean Collins, 12th Dec, 2018.

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  1. Dean Collins

    Dean Collins Well-Known Member

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    Uhm ??

    I just received an email from one of my PM's.

    She informed me there are some changes to the NSW Residential Tenancies Act in 2019
    New residential tenancy laws

    Most of it was pretty reasonable apart from


    Introducing mandatory set fees for breaking a fixed-term lease early. The break fee will apply to all new fixed-term leases that are 3 years or less that are entered into after the new laws start. The break fees are:
    4 weeks’ rent if 75% or more of the lease remains
    3 weeks’ rent if between 50% and 75% of the lease remains
    2 weeks’ rent if between 25% and 50% of the lease remains
    1 week’s rent if 25% or less of the lease remains


    To which she informed me.....that should a tenant only have 25% left on their lease they can walk with only 1 weeks notice-the rest of the bond (3 weeks) can only be applied to damages and the rest must be refunded.

    Surely this cant be right can it?

    My interpretation is that the tenants are still liable for all rent up until you secure new tenants OR the end of the lease HOWEVER the max you can charge them for advertising,agents fees,writing a new lease etc is 1 weeks rent.

    Anyone on the list have a definitive answer?
     
    Last edited: 12th Dec, 2018
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Refer to the "Break lease" provisions of the lease - this is in lieu of being liable for rent/costs up to the expiry of the lease.

    More of a reason not to take up the break lease provision in the lease. This does not affect the bond or the notice period which are totally separate matters.
     
  3. Marg4000

    Marg4000 Well-Known Member

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    From reading the leglislation outline you linked, it appears she is correct.
    Marg
     
  4. Dean Collins

    Dean Collins Well-Known Member

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    Sorry that didn't clarify it for me.

    Currently isnt the tenant obligated to pay rent until you secure new tenants + reasonable costs (as discussed advertising/agents fee/lease signing fee).

    eg if a tenant gives notice they are breaking the lease and it takes you 2-3 weeks to find new tenants the landlord wont be out of pocket.

    BUT under this new proposed legislation being introduced in 2019.....if a tenants drops keys off at the office and says.....here's a week rent good luck.....then the landlord can be significantly out of pocket.

    It would take us a few days minimum to advertise/arrange open house/select new tenants.
    Then we would be up for the 1 weeks agent new tenant fee+lease signing fee($45 ish)+any advertising costs.

    A landlord will be out minimum 2 weeks rent just because a tenant decided they didn't want to stay the full term of the lease they signed.

    This is outrageous if its really the case.
     
  5. ChrisDim

    ChrisDim Well-Known Member

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    The reforms haven't come into effect yet (regulations not written), but once they do in middle to end of next year - sadly - this will be the case. It's the worse of all new reforms but not as bad as say Vic (i.e. No grounds termination removal and pets reforms).

    Existing agreements will be grandfathered.
     
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  6. Dean Collins

    Dean Collins Well-Known Member

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    Is there a landlord lobbying group we can donate to where we can get our position heard.

    This proposal is untenable and means anytime a tenant wants to walk with less than 50% of the fixed term left....a landlord will be mostly likely out of pocket at least one weeks rent (eg where it costs 1 week for agents and losing 1 weeks rent though vacancy- only able to collect 2 weeks rent - if there is 25% left then landlord will be out even more).

    Surely they haven't thought this through??

    This will end up like "jingle mail" that occurred here in the USA where keys were mailed back to banks on a whim and caused the GFC......except that it will be tenants in Australia causing landlords to lose money.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    @Dean Collins

    The lease as it stands says:
    upload_2018-12-12_10-16-17.png
    upload_2018-12-12_10-16-54.png
    Simply stated, this is an opt-in clause. If you/agent agree that you will permit the tenant to break the lease prior to expiry, then the tenant is up for a fixed fee which has been agreed. OFT is proposing a change which allows this fee to vary depending upon how much of the lease is left to run. As a tenant, you wish to break 6-8 weeks prior to the end of lease, they are currently liable for 4 weeks rent. This is not an equitable situation if the property is in a desirable location or has low vacancy as there may be minimal vacancy between changeovers but if the property is going to languish for months, then you don't need to agree to include that provision in the lease where you have agreed that the tenant is liable for all costs under the lease.

    This isn't a non-recourse loan, as a LL you have the option to agree to include the clause or not.
     
  8. ChrisDim

    ChrisDim Well-Known Member

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    There is no such a group Dean that I know of and these reforms have been debated on for 3+ years and now passed. The general thinking is that on balance, landlords should be "happy" as it could have been a lot worse - given the current negative sentiment for landlords. It just means there is little gain re-leasing once fixed agreements expire in future given that notice for termination from tenants on periodic tenancies is 21 days (which is better than 1 week).
     
  9. thatbum

    thatbum Well-Known Member

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    I imagine they have a fair bit. I'm pretty sure the sliding scale of costs is to reflect the fact that the usual "fixed fees" break lease liability is apportioned by the amount of the lease left anyway.

    So all those agent's fees, letting fees, advertising etc, are normally apportioned anyway - something the current break lease fee provisions don't really reflect.
     
  10. Joynz

    Joynz Well-Known Member

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    In the last couple of weeks there was a post on this site announcing a new landlord lobby group..can’t recall which forum...
     
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  11. thatbum

    thatbum Well-Known Member

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    As someone who has directly been involved in government consultations on tenancy law reform, I have to say I've never heard of a landlord lobby group that either came up with any decent submissions, or had any credibility in the eyes of a state law reform body.

    That doesn't mean one can't be created now of course, but its not as simple as just grouping up and arguing against any proposals we don't like. There needs to be some pretty good understanding of the law reform process and legal policy arguments in the residential tenancy sphere.
     
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  12. Joynz

    Joynz Well-Known Member

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    Completely agree.
     
  13. Skinman

    Skinman Well-Known Member

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    The group is called PICA we had our first WA branch meeting last week. There are also groups in most other states. It’s only $5 to join and while the main intent at present is to lobby proposed policy on negative gearing change. Advocating a position for LL’s on tenancy law change is also proposed.
     
  14. Skinman

    Skinman Well-Known Member

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    Here is some more info and a link

     
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  15. Dean Collins

    Dean Collins Well-Known Member

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    Ok now I get what you are saying, you are saying currently its optional.....so just strike it out.

    However doesn't the link I provided you say its now (eg going to be when introduced) Mandatory?

    eg.....striking it out wont be an option.
     
  16. Dean Collins

    Dean Collins Well-Known Member

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    Thanks, there isn't much content on the site....but just signed on for 5 years because of your post so looking forward to seeing what they achieve.
     
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  17. SoroSoro

    SoroSoro Well-Known Member

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    PICA - Property Investors Council of Australia - started by the Empower Wealth guys, but independent of their business.
     
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  18. highlighter

    highlighter Well-Known Member

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    This doesn't surprise me. There seems to be a strong trend towards growing tenants rights here. Australia does have some ridiculously landlord friendly rental rules compared to most countries. e.g. in Ireland tenancies are usually 6 years minimum with security of tenure laws. There's also much stricter rule around ending tenancies.
     
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  19. bunkai

    bunkai Well-Known Member

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    There are swings and roundabouts here. Assuming notice periods still apply, and someone can correct me, you could potentially could have a new tenant in immediately. Termination fee is on an indemnity basis so LL ends up with 4 weeks less new lease costs.

    I wouldn't be unhappy with that with my properties that are easier to rent. My pricing strategy for 2+ year leases would change change though.
     
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  20. Dean Collins

    Dean Collins Well-Known Member

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    That's my point - the way the proposal read....there is no notice period and a tenant would only pay "a fine" of 1 weeks rent for walking out the door and tossing the keys onto the PM's desk if less than 25% of the lease remains. (at least that's what was the understanding of our PM who sent me the email).

    This is why I don't understand that no one else here seems to be making a bigger deal about it.