Tenants refusing to renew lease (Sydney)

It's quite an ssumption that all landlords are concerned about leases. To many it is an unrealistic imposition which they do not wish to inflict on their fellow human being. A fixed term lease to start with, sure. After that, everyone needs to chill out.

 

But are you making it up? If not, then this is a very interesting conundrum for a LL to find themselves in.

I'd be interested to find out how others have dealt with this. Has anyone had to make a claim on their LL insurance, with only a periodic lease in place? How did it play out?

 

I didn't realise Youi did LL insurance….. that's worth investigating…………. Any other pros/cons you've come across while using them (that you're aware of) @wylie?

 

Hi Nick,

A tenant can only claim that a notice was retaliatory if they believe the notice was given as a result of trying to enforce their legal rights (such as asking for repairs) i.e. an eviction was given as an unrelated retaliation. See FS10 here. Issuing a Termination Without Grounds is not breaching the tenant's legal rights at all, nor would they have been deemed to have been trying to enforce their legal rights as they wouldn't have been asking for anything - they've simply received a Notice to Leave. It's well within the legal bounds of the landlord/PM provided the appropriate notice period is given. The tenant does have the right to go periodic if no action is taken but obviously the onus is on the PM to take this action to prevent them from doing so if that is the wish of the landlord.

A landlord does not have to give any sort of reason, legitimate or otherwise to look for another tenant. That's why the Notice to Leave Without Grounds procedure and notice period exists. Once again, provided the correct notice period is given, the landlord can end the tenancy without grounds i.e. no reason, provided it is not before the end of the fixed term and the appropriate notice period is given. This in no way means the agent/landlord can't issue the notice giving minimum notice prior to the end of the fixed term, it just means they can't end the agreement prior to the end of the fixed term - you can issue the Notice to Leave on day one of a 12 month lease if the landlord chooses (this is what happens routinely on all tenancies in in the United Kingdom). This information is actually under the Termination Without Grounds section (FS10 above) - there is nothing about legitimate or any other type of reason on either the FS10 or in the Act itself (see Division 2 Sect. 84(1)-(4) and Sect. 85 (1)-(4)) Obviously the tenant can apply to the tribunal at anytime for anything they want but the legislation is very clear.

 

Same. There are lots of vested interests in this thread.

At an 8% management fee, a one-week lease preparation fee doubles the annual management revenue for the property manager.

But it MAY save you money.

Back testing this theory over my portfolio (your mileage may differ) - I would be net 13 weeks rent out of pocket to my property manager.

 

Advertising and subversive strategising, you suggest?

 

Landlord pays lease renewal fee to property manager which reduces the risk to both the landlord and property manager cashflow. No win:win in that!

 

PM plays on anxiety and sense of superiority to ensure solid income for business.

 

That would be true if the PM is charging for a lease renewal fee which they should not! It takes little time to prepare a lease - particularly for the same tenant - so any PM charging half a week or even a week's rent for a "lease preparation fee" is simply gouging the investor. In fact, no other fees aside from a management fee and a letting fee should be charged and the letting fee should really be to cover costs of time and resources to let the property. I can assure you there is no profit in letting fees! Charges like statement fees, lease renewal fees, admin fees and all those little extras PMs try to include in management agreement simply inflate the overall cost to the landlord (often while hiding under a lower %) which is unacceptable. If you are paying these fees to your PM then renegotiate your management contract!

Yes, the landlord could pay a letting fee if the tenant decides to vacate. If that happens they were more than likely planning to vacate anyway as it's probably why they don't want to sign a lease (not always). It's a risk vs. reward decision for the landlord i.e. possibly pay a letting fee now and minimise vacancy risk or cop two weeks notice at a bad time of year later and have greater vacancy. The risk should be fully explained to the landlord as they make the final decision anyway.

In the end, the PM is working for the landlord, not the tenant. They should represent the landlord and act in their best interests and I'm sure no investor employing a PM would disagree with that! While considering the tenants' needs is an important part of being a PM and a landlord (I buy all my tenants Christmas presents and am very flexible with all requests), in the end it's business, not philanthropy and no one is trying to be cruel - it's just part of the deal of being an property investor.

 

I had Youi for a little while but left when I discovered something in the PDS that I found quite alarming. I honestly can't remember exactly what it was now but it was something to do with their flood cover. I ended up switching to Suncorp as their flood cover was far superior and when TS started providing building insurance I switched again (I believe Suncorp own TS now so the flood cover is comparable).

There are definitely policies out there with certain insurers that don't cover rent loss if the lease has gone periodic so beware!

 

I've got about 10 polices with them, they don't insure some postcodes or areas, apparently they don't have data on some postcodes so won't provide cover.
I've made one claim through them, it was promptly arranged but it wasn't the gold plated service I have received from Allianz or Suncorp in the past. We received a cash pay out after an assessor looked at a damaged IP fence and we then arranged our own repairs.

During business hours you speak to someone in Australia but at night I think it might be a call centre in South Africa?

By moving these polices to Youi we saved at least $4500 per year greatly improving our cashflow.
They also provide probably one of, if not the most competitive owner occupier home insurance policy in north Qld where polices with other providers doubled or tripled after cyclone Yasi.

We've got other polices still with QBE and Allianz.

 

Great info/feedback @wylie. Cheers!

 

Yes you can do that. But I doubt that the tenant will be happy and cooperative if they have to move when they don't want to.
Therefore it would be likely that you will only have the ability to do your open house during the last 2 weeks to find a replacement tenant. So you will then most likely have some vacancy and pay your letting/advertising fees again.

On the other hand if they go on a periodic lease, they may not even move out for another year and then will need to give you 3 weeks notice. This would effectively save you from paying additional fees and give you another week to advertise.

I've had my last 3 tenants give me 4 weeks notice on periodic leases, but that will only be the case if the PM has a good cooperative relationship with the tenant. In the end it is up to the landlord to make the decision if they want to take the risk and evict the tenant to find a new one.

 

But you see, the tenants do have a legal right to remain on a periodic lease. Also, referencing the UK has no relevance to NSW legislation and procedures anyway.
The tribunal may also have a different interpretation than the file you mentioned.

The extract from the legislation is as follows:

RESIDENTIAL TENANCIES ACT 2010 - SECT 115 Retaliatory evictions

(1) The Tribunal may, on application by a tenant or when considering an application for a termination order or in relation to a termination notice:
(a) declare that a termination notice has no effect, or
(b) refuse to make a termination order,
if it is satisfied that a termination notice given or application made by the landlord was a retaliatory notice or a retaliatory application.

(2) The Tribunal may find that a termination notice is a retaliatory notice or that an application is a retaliatory application if it is satisfied that the landlord was wholly or partly motivated to give the notice or make the application for any of the following reasons:
(a) the tenant had applied or proposed to apply to the Tribunal for an order,
(b) the tenant had taken or proposed to take any other action to enforce a right of the tenant under the residential tenancy agreement, this Act or any other law,
(c) an order of the Tribunal was in force in relation to the landlord and tenant.

An extract from the NSW Fair Trading website:

"You need to apply to the Tribunal within 30 days after the date to vacate specified in your termination notice. Whether you obtain a possession order is up to the Tribunal to decide, based on the evidence you and the tenant present at the hearing. In the case of notice 'without a reason' the Tribunal must make a possession order if the notice was served correctly, unless the tenant can prove it was retaliatory."

In Summary

As explained above in point 1, it would be evident that the landlord gave the termination notice because the tenant refused to renew their lease.
As explained above in point 2b, the landlord would be evicting the tenant because the tenant utilised their right to remain on a periodic tenancy.
As detailed by Fair Trading, the retaliatory section can still apply to the no grounds eviction if the tenant can prove that it was retaliatory, which is quite easy to do.

You can dispute the legislation as much as you want, but if you try this in NSW you would struggle to come out ahead and very likely to have more vacancy time with non-cooperative tenants. Eg, they may only give access for the last 2 weeks and they may be present during the inspection and mention all the bad things to prospective tenants. Yes tenants that are annoyed may actually do that.

 

Hi Nick,

I was just making mention about the UK more as a point of interest. Obviously it has nothing to do with NSW.

I'm not disputing the legislation, I'm reading it exactly as it's written and nothing there states that issuing a notice to leave without grounds is breaching the tenants rights. There is no 'right' of a tenant to go onto a periodic lease if an appropriate notice to leave without grounds has been issued within the appropriate time frames therefore they can't claim that a right of theirs has been breached.

I called the NSW OFT today and spoke with them at length and they confirmed that issuing a notice to leave without grounds is not considered retaliatory in those circumstances and provided the appropriate notice periods are given, it would be thrown out in a tribunal if a tenant tried to claim that. They said 'tenant rights' are those defined by the act e.g. maintenance, access requirements etc. and going onto a periodic lease isn't a 'right' per se that they can claimed has been breached, it's simply a progressive outcome if no other action is taken.

They also confirmed that issuing a notice to leave along with a lease is also permitted. If you speak to them and they tell you otherwise, please let me know. We could split hairs and debate this all day long I guess but until there is a precedent and/or a test case maybe we'll never truly find the outcome of such an event.

 

It's kinda like a PM who suggests putting the rent up when everyone else is putting their's down. It doesn't help the LL at all. I would highly recommend that PMs check with the landlords before they take action on these sorts of things.
Fortunately, most PMs are sensible and simply respond, "I asked but the tenant didn't want to sign another lease and they don't have to."