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.

Join Australia's most dynamic and respected property investment community
  1. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    763
    Location:
    New York
    I agree that's the current situation - however NSW FairTrading on +61 2 9895 0111 told me when i called is that in the future you wont have 2 options.

    As of 2019 you will only have the break fix fee and you cant choose "option 2" as the tenants entire obligation with only 25% of the lease left is 1 weeks rent.

    Mitigation of losses is an option no longer allowed as of 2019.

    As I said before......this is really really bad for Landlords, basically any Tenant can just walk in the last 13 weeks of a 1 year lease and we are going to be left holding the bag for the time it takes to secure a new tenant (eg 2-3 weeks), you wont be able to "plan" for a new tenant/lease because at any time a tenant can just walk on you.
     
    Last edited: 19th Dec, 2018
    Tom Rivera and Michael Mitchell like this.
  2. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    763
    Location:
    New York
    I really don't understand how this is even legal eg basic contract law.

    eg currently a tenant signs a contract that says....im going to rent from you for 52 weeks at $X dollars.

    Instead now its.....im going to rent from you for 52 weeks......but if I change my mind anytime from week 39 to 52 I can tell you get stuffed....here's 7 days rent and get lost.

    lol can you imagine the public outcry if landlords could say to tenants......uhm sorry you didn't vacuum before the last inspection or your hair is too pink.....here is a weeks rent I'd like you to leave today and good luck securing a new apartment.
     
    wylie, Skinman, Blueskies and 2 others like this.
  3. Tom Rivera

    Tom Rivera Property Manager Business Member

    Joined:
    1st Jul, 2015
    Posts:
    1,370
    Location:
    South East Queensland
    Realistically, even if the tenant walks early and owes 4 weeks of rent- it's not a lot. One to two weeks covers the letting and advertising costs, then you only have a couple of weeks to replace them. In the vast majority of cases a tenant should be able to be secured within two weeks, but there's no guarantee, and this only gets worse towards the end of the lease.
     
  4. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    763
    Location:
    New York
    Sure but when this happens "every year" its going to add significant overheads to the cost of renting.....these overheads must be passed on to the tenant in the form of higher rents because the landlord is taking on much more risks.

    In every business transaction its always who is wearing risk that determines need to manage risks.

    Now that basic contract law (eg commitment for 52 weeks) no longer exists in a tenant/landlord relationship.....the investor MUST recoup these risks to cover the 2 weeks each year they 'could' be out if the tenant does the dirty on them and leaves before the 52 weeks date.
     
    KayTea likes this.
  5. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,303
    Location:
    Perth, WA
    Who are you trying to convince though? Because unfortunately, residential rental prices don't really move in line with costs to the landlord.
     
  6. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    763
    Location:
    New York
    Of course they do.

    Ive never understood why people continue to insist rental prices aren't "market driven" as LL's get in or in this case out of the market there are less properties available for rent.....prices go up.

    Likewise as more LL's understand the new NSW rules and get shafted one or two times by tenants walking out on them leaving LL holding the bag on empty properties.....prices go up.

    At the end of the property is just an investment like any other (yes even equities are a market.....demand goes up prices go up, yields go down). Its just that some people don't understand investing is a zero sum game.
     
    Michael Mitchell likes this.
  7. Shogun

    Shogun Well-Known Member

    Joined:
    26th May, 2018
    Posts:
    379
    Location:
    Perth
    What about recovering costs under "Tort" law?
     
  8. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,303
    Location:
    Perth, WA
    Break lease stuff has nothing to do with tort law really.

    Plus the issue here is that it looks like the proposals are mandatory in that they replace the usual common law rules on break leases.
     
  9. Shogun

    Shogun Well-Known Member

    Joined:
    26th May, 2018
    Posts:
    379
    Location:
    Perth
    The secretive business of the Law.

    I guess this is why we have the separation of powers. The Courts need to determine if legislation is fair and equitable?
     
  10. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    763
    Location:
    New York
    So now its almost 2019 wonder if we will actually hear from @GladysB this year seeing she never actually responded in all of 2018 about how landlords are going to be left high and dry from proposed changes to rental laws by tenants only needing to give 7 days notice.

    Its amazing that politicians talk about "community consultation" but never bothered to actually discuss with affected parties in all of 2018 and refuse to return any form of community contact I made to her and her office.
     
    Michael Mitchell likes this.
  11. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,303
    Location:
    Perth, WA
    I'm sure there already has been lots of community consultation to get to this point. Probably years worth.

    It would have been mostly with larger organisations or other groups with specialist residential tenancy experience. Like I said earlier, what's the point of extensively consulting with people or parties that don't even have enough knowledge of how the current laws work?
     
    Michael Mitchell likes this.
  12. Dean Collins

    Dean Collins Well-Known Member

    Joined:
    21st Feb, 2016
    Posts:
    763
    Location:
    New York
    Sigh.....still trying to get a rise out of me I see. Seems 2019 will be the same as 2018.

    As I've said before I understood the current situation, I was trying to say that its not going to be the same in the future....you keep insisting you will still be able to strike the clause from future contracts.....when NSW Fair Trading are saying you wont be able to as its going to be mandatory once the legislation is introduced.

    And yes I will keep contacting GladysB office as technically I don't have a "state rep" due to being a non resident though I've also been in contact with my "previous local member" but lets face it I've been living in NY for over a decade so don't expect them to take it on as a cause to pursue.

    As for "industry consultation" no one here seemed to know about it or have mentioned it previous to my post so don't understand why you think they "have done enough". In addition only 1 out of my 4 PM's bothered to tell me about it so I imagine I'm not the only one caught by surprise.
     
  13. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,303
    Location:
    Perth, WA
    I'm not just here to troll you - I'm trying to educate you and anyone else reading this thread a little.

    I personally don't think its good enough to have just a general complain to your MP about this sort of thing. While you might think its helpful, or at the very least, doesn't hurt - but my view is that it lowers the credibility of all private landlords everywhere, however slightly.

    I've seen the legal and policy discussions that go into the consultation and law reform work. They are sometimes at a very high level for technical legal issues, which is what I would characterise break lease liability as. The average PM would not be consulted directly - it would be the state REA organisation - or more likely, the lawyers assisting them.

    I can already say from my experience in WA that the state fair trading people running our own consultations had a very dismissive view of private landlord submissions. Basically they didn't get any credible ones and they couldn't even find a representative body for landlords either. I believe in the end it was only REIWA and then tenancy groups that had any meaningful input.

    So the TL;DR of it all is that if you want to sway tenancy law reforms, then its best to do it properly. Either educate or organise yourself and other landlords to do it better.
     
    Redwing and Ted Varrick like this.
  14. Davothegreat

    Davothegreat Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    326
    Location:
    Sydney
    I'm not a lawyer but the word "notice" does not exist on the page linked earlier at all, so I can't see how it can be interpreted to suggest that notice periods are changing. Nor does it suggest these mandatory break fees are the "only" fees that are able to be charged, only that these fees are payable no matter what. I don't see how this prevents other clauses like advertising costs from being put into a lease, only that these aren't "mandatory" clauses and therefore may be subject to negotiation.
     
  15. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,579
    Location:
    WA