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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    Hi Any....and all investors who have properties in NSW and are against the new laws should jump in and comment on this link at Twitter so we can get the attention of NSW Prem GladysB and NSW Fair Trading BEFORE this rule is implemented in 2019 - Less than 25% lease - notice only 1 week on Twitter

    Only 1 weeks notice when less than 13 weeks remain on a 1 year lease is going to be a major major problem.

    It takes at least 1 week to get new tenants in + the landlord will have to pay the agent for finding the new tenants so any time in the last 13 weeks a tenants can walk and the landlord is going to be loosing money EVEN if we find a tenant the very next day.

    This is going to drive rents UP as landlords need to make sure they aren't making a loss here with these new proposed laws.

    Any time a voter complains rents are too high in Sydney im going to point to this legislation to explain why investors are getting OUT of property investing.
     
    Last edited: 15th Dec, 2018
  2. thatbum

    thatbum Well-Known Member

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    Sigh, how is this true?

    This is what I'm talking about. You need to understand the current laws first if you want any credibility in lobbying for law reform.
     
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  3. Dean Collins

    Dean Collins Well-Known Member

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    Correct...its not true today but will be true in 2019 unless you know something the rest of us don't know
    - New residential tenancy laws
     
  4. thatbum

    thatbum Well-Known Member

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    No you misunderstood me. I'm saying a landlord is unlikely to be losing any money if a tenant is found for the next day - they're probably going to be profiting compared to the standard break lease provisions.
     
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  5. Dean Collins

    Dean Collins Well-Known Member

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    You are wrong.

    An agent charges 1 weeks rent to find the new tenant.

    So its impossible for an owner to be ahead. You aren't adding any value to this conversation.....do you even own rental property @thatbum ? Its sounds like you don't understand how things work.
     
  6. bunkai

    bunkai Well-Known Member

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    Dean - where is it proposed that the notice period is to change? (E.g. where is your PM getting their info)
     
  7. Dean Collins

    Dean Collins Well-Known Member

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    The link is in the first post I made but here it is again
    - New residential tenancy laws

    You can find it on the NSW Fair Trading website, however they've also posted the link out on social media etc though they haven't provided the actual gazette wording of the changes yet.
     
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  8. Tom Rivera

    Tom Rivera Property Manager Business Member

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    I just want to clarify- my reading is that the proposed mandatory fees replace ALL current break lease costs, i.e. break lease fee, rent till tenant is replaced, advertising costs, payout of reduction of rent, etc? That's a HUGE imposition to Landlords. It also doesn't incentivise the tenants at all to let the Landlords advertise early in order to seek to minimize their own losses. What a mess.

    Also,@Dean Collins @thatbum is probably the most knowledgeable member of this forum when it comes to tenancy law. I think you two might have just been misunderstanding each other's comments.
     
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  9. Skinman

    Skinman Well-Known Member

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    If this where to be applied in other states the transactional charges to replace a tenant and hence landlords losses would be even higher. In WA & SA most agents charge 2.2 weeks rent to find a new tenant plus in WA you are normally up for a property exit condition report $200 and property condition entry report $200, tenancy database checks etc etc.

    I know it’s not proposed in these states yet but it’s even more of a reason to support organisations like PICA that will give us a collective voice and improved chance to influence these types of changes before they happen.
     
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  10. ChrisDim

    ChrisDim Well-Known Member

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    Tom, you are absolutely correct. Existing agreements will be grandfathered but everything else is replaced by these fixed fees depending on where you are on the tenancy. It will be next year some time BTW when the regulations get assented (and there is an election in the middle... so not yet).

    Just to be clear for people to understand, if say a year into a 2 year lease (which I have a couple of customers with now) OR 6 months into a year long agreement (which is most of our customers), the tenant decides to move out, they are only liable for 2 weeks rent break fee! THAT'S IT. If you are in the last quarter of the tenancy (last 6 or 3 months respectively), it's only 1 week.

    And if it happens to be this time of the year, and a new tenant isn't found for several weeks, the landlord will be out of pocket for thousands of dollars! It is bad, but I think it was the compromise we had to have to have the no grounds termination left alone and no changing to pets (which Victoria did). The other thing to keep in mind is that it throws into question the value of fixing the lease for another term after the initial team has expired given that it offers little security for the most part.

    @Tom Rivera your reforms are coming in soon as well, right?
     
  11. Tom Rivera

    Tom Rivera Property Manager Business Member

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    Basically means there's really no point in offering more than a six month lease.... yet another example of "tenants rights" having a counter-intuitive effect in the real world.

    We're a little behind you guys- they're still in the early phases of considering the options. That said, NSW's reform seemed to happen very quickly since VIC was so *twitch* "popular", so we're probably going to move quickly as well....

    As I operate primarily in lower socioeconomic areas, further erosion of our rights is going to hit me and my clients very hard. It could mean we can't afford to consider anyone who doesn't have a gleaming rental history- say goodbye to 70% of otherwise reasonable applicants.
     
  12. ChrisDim

    ChrisDim Well-Known Member

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    Yikes. The life of the property manager never easy @Tom Rivera - even with a great property manager like yourself!
     
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  13. thatbum

    thatbum Well-Known Member

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    Time for a quick legal lesson in break lease liability basics. From a tenancy solicitor.

    Fixed costs, such as the 1 week agent's letting fees, are pro-rata'd based on the percentage of lease left when those costs are incurred. So if the tenant leaves with 25% of the lease remaining and a new tenant is found for the next day, the landlord currently is only entitled to 25% of that one week letting fee.

    Why is that? Because a landlord has received the 75% of the benefit of those fees already, and would have to incur them again anyway at the end of the lease.

    /end lesson.

    Again, this is what I mean when you want to lobby against law reform without having enough understanding about how the law currently works.

    There is a real issue with whether 1 week is still enough compensation for a landlord in that scenario (I think its low), but using arguments that aren't currently legally correct or true is not doing any favours for credibility on any such submissions.
     
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  14. Michael Mitchell

    Michael Mitchell Well-Known Member

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    I'm waiting to see what changes the Landlord Insurance Policies will implement too.. I think these will largely govern the strategy going forward with tenancies as you're only as good as you're insured risk best-case scenario :/
     
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  15. Ted Varrick

    Ted Varrick Well-Known Member

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    @thatbum thanks for your insightful post.

    Regarding your example of the landlord only receiving 75% of the benefit of fees already paid for, if this would result in a court action of some kind, it seems that to recover the remaining 25% would be uneconomical, unless one was renting to a HNW individual at 10s of thousands of dollars a week?
     
  16. thatbum

    thatbum Well-Known Member

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    Well not necessarily uneconomical. A few things:

    Often while the pro-rata'd "fixed costs" are low, there is still the component of claim for the vacant period until a new tenant is found. This component isn't pro-rata'd, and often forms the bulk of the damages in a break lease claim where there is a slow rental market.

    Secondly sometimes the fixed costs can be surprisingly high. As someone mentioned, its often a 2.2 week letting fee as standard in Perth, with additional costs for PCRs and inspections etc. I've even seen a 3.3 week letting fee from some agencies around here.

    Lastly, these liabilities are still claimable from the bond as per any other tenant liability at the end of a tenancy, so it may be that it can all be done and agreed with by the tenant in any event.
     
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  17. Dean Collins

    Dean Collins Well-Known Member

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    Is there though @thatbaum ? eg the new wording doesn't indicate tenants will be responsible for this at all.

    Has anyone seen anything from NSW Fair Trading to indicate that tenants will still have this obligation? I haven't.
     
    Last edited: 17th Dec, 2018
  18. thatbum

    thatbum Well-Known Member

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    No the point of the break lease fee seems to be as an all-inclusive fee instead of the usual common law approach. So if there is any significant vacancy period, then the set fee will be a lot worse. That's the downside really.
     
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  19. Dean Collins

    Dean Collins Well-Known Member

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    So in the future under these new rules ARE we allowed to charge the tenants until the new tenants take over or are we not.

    Seems to be a pretty simple question. Instead lots of people doing doublespeak.

    When someone far far smarter than me works it out can you come and let dumb people like me know what the new rules are.
     
  20. thatbum

    thatbum Well-Known Member

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    I think the problem is you don't understand how it currently works. Here's a link below that quickly describes the two current options.

    Which break-lease option is best?

    You can then kind of see where they are headed with the proposed changes.