Tenants refusing to renew lease (Sydney)

NSW is different to other states with this and not normally the best idea to give the tenants notice. There are some problems with your proposed plans as I have mentioned before already.

1. There is no renewal notice, so you can only legally ask the tenant if they want to renew.
2. You want to renew and end the lease at the same time which can give the tenants a reason to contest the vacate notice.
3. You will need to give them 90 days notice during a periodic lease and then they then can leave at any time which will place you at a greater disadvantage than having the tenant give 3 weeks notice.

You may want a perfect tenancy setup but sometimes it isn't possible and the best outcome is achieved by simple communication and cooperation with the tenant.

 

This is not the rental market to be p/off good tenants. Rents aren't moving and are only going to decline or continue to stagnate over the next few years.

Best practice is to ask them to sign up to another 12 months, but I wouldn't be busting a boiler if they don't want to.

 

Noted, many thanks for your opinions. I would much rather keep them on at the current rent than have to suffer extended vacancy and/or reduce rent as I've had to in the past.

Didn't know a vacate notice could be contested, thought it was just a matter of allowing the specified time period. Learning!

 

Ah Ok.
Yeah, maybe a more forceful approach by the PM.
Polite but firm, that's what I'm used to.

 

It is quite easy for the tenant to prove that it was retaliatory because you asked them to renew and gave them notice to vacate at the same time. Also if you advertise for a new tenant as well, they have even more evidence.

 

As has been suggested, we also send out a Notice to Leave with the new lease at the appropriate notice period. It may seem counter-intuitive but it applies a certain amount of pressure on the tenant to make a decision and protects the landlord against an automatic rollover to a periodic lease. Sure, they might move out but they were probably going to anyway in this case and it gives us/the landlord control over the letting process and at a time of the landlord's choosing (which should essentially be predetermined by having the lease expire at an appropriate time of year).

If they haven't signed the new lease by minus 30 days to lease expiry we simply retract the new lease offer and commence advertising the property to minimise vacancy (with landlord authority of course). Obviously the preference is always for the tenant to stay as per the lease offer but once the tenancy goes to periodic things generally aren't in the landlord's favour and it's our duty as property managers to protect the landlord's interests and minimise vacancy at all times. This method works extremely well and it's actually just happened with one of my own properties under management with us - the tenant has elected to move out and we now have 60 days to prepare for vacancy and relet the property at an opportune time that suits me, not 5 days before Christmas because the tenant was only required to give 2 weeks notice!

Property managers should take control and not allow rollovers to periodic. It's completely legal and I also ensure this is also done with my other properties interstate also.

- Andrew

 

This can apply to QLD but not NSW though. Just to clarify so people do not get confused seeing as this is a Sydney specific thread.

 

Not like this in Victoria either. Also, the lease type (I.e. fixed, or month to month once the lease period expires) does not affect require notice periods.

(Because some posters don't have a state or city listed in their profile, the advice they give in some threads is sometimes (inadvertently) quite misleading.)

 

And sometimes they might be talking about an IP in a different state to where they live.

 

Ok so my own thread really has just made me more confused.

Some advocate sending vacate notices along with renewal notices. Some say this will cause a messy tribunal.

Some advocate avoiding periodic leases like the plague. Some say this is just how it has to be sometimes.

Maybe I need to make a spreadsheet of which advice was given from which state, as the title of this thread suggests I'm currently asking about Sydney/NSW.

 

Yes, I've noticed that a few times. Though, those posters tend to specify the location to which they are referring.

 

Sometimes not, and then you have everyone speculating and trying to be right

 

@DaveM , i was told by my PM that some landlord insurers don't like periodic / month-to-month leasing. What is your experience with this? Have you had any problems with your insurers?

Edit - I actually instructed my PM yesterday to be as friendly as possible in terms of getting my tenants to renew onto a fixed lease. When I was I tenant i had too many instances where the communication from the PM was just downright rude.

 

We always ask to renew and probably get about 70% go to new fixed leases and the rest roll to periodic. I have no problems with periodic and although in WA the notice period is quite significant it often suits me better as my plans for the property are quite fluid especially if they are a pre-development site where I cannot estimate how long I'll be taking to get ready to demolish and build.
I'm covered under EBM for fixed or periodic leases.
Sadly I just had to turn down a proposed tenant who wanted a 2yr lease as I'm going to demolish the house in the next 12 or so months so I'm only looking for a 6mth then periodic rollover for that place.

 

Hi guys,

I've spoken with the OFT in both Victoria and NSW and they advised there was no problem with this practice in either state (this was about 6 months ago). Do either of you have any information to the contrary supporting the position that's it's not permitted? I would have specified Qld only however to my knowledge there's no problem in Qld, NSW or Victoria so I don't believe the advice is misleading however it'd be great to clear it up if you have any further information as it's always possible the OFT employee on the phone was incorrect.

To clarify, MyPropertyPro only operates in Qld and the advice I've received for NSW and Victoria is for my personal portfolio and my PMs in those states are more than happy to use this method as they don't see any issue with it either.

Cheers!

- Andrew

 

Just spent a few minutes doing this and there is a clear pattern.

For NSW and WA, the advice is to NOT issue a vacate notice with the offer to renew, and periodic is fine.

For QLD and SA, the advice is the opposite: DO issue a vacate notice along with the renewal offer, and avoid periodic leases like the plague.

 

I can assure you that if a landlord and some uppity PM tried this number on me I'd go through any inconvenience to rub their red faces in it. It's nothing short of bullying.
I have stayed for many years on a periodic lease: 5 years, 9 years etc. I also allow my tenants to roll over to periodic and have no problems. If you can't cover a week or two of vacancy, you're doing something wrong.
In one place the tenant moved out in late November and I didn't get someone in until January. But this was mostly due to a combination of me being fussy and the PM not being very intelligent or motivated. There were tenants around.
In another place the tenant's friend moved in the very same week he moved out. Didn't get a chance to do any cleaning or floor sanding.

 

Re. Victoria :

According to www.consumer.vic.gov.au you can certainly end the tendency at the end of a fixed lease.

If you say it's because the fixed lease has ended, you need to give 90 days notice. If you prefer not to give a reason, you need to give 120 days.

I didn't see anything on the site ( quick look) that prohibits sending both requests at the same time, but I think it would be much more politic to use a step by step approach. First, ask if the tenant wishes to renew. Then if not, send a notice to vacate.

 

Would this work in NSW? @Nick Valsamis

 

Yes basically the two notices are issued independently and therefore are both valid within the bounds of appropriate time frames. The fact they're issued at the same time is viewed as coincidental as either can also be retracted at any time also (provided they haven't been executed). Obviously a discussion with the tenant and some good communication is the first and best step to take. In the end though, if the tenant won't make a decision and is exposing the landlord to vacancy risk then the onus is and should be on the protection of the landlord and reducing their risk and the only way to do this is to issue both at the same time.

The number of properties I have in my personal portfolio is in the double digits and managing and staggering vacancy risk is a large consideration. Although I plan for 2-4 weeks vacancy per year per property (depending on varying factors), I simply can't allow tenants to have control over when they vacate in case they all end up on periodic leases and decide to vacate over Christmas at short notice when it's quite hard to find tenants. It's not being nasty or bullying, it's simply acting in my best interests and running an efficient business which property investing certainly is.

I'm a tenant myself, co-run a property management agency and I'm a property investor so I understand it from all fronts. The legislation is there for a reason - to protect all parties - and as a tenant I don't see anything unfair about being asked to provide my landlord with some cash flow certainty given he's already taking on all the other categories of investment risk. I choose to rent and that is simply one of the downsides as far as I'm concerned. Each to their own with how they choose to run their portfolio of course.

Thanks for checking that out @Joynz. I might call the OFT again on Monday to double check and will report back with any findings.

- Andrew