How Will The Residential Tenancies Act Reform Impact You | Teal Talking Property Episode 3

1 Dec 2017

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Full Transcript Brad Teal & Prue Bryant:

Brad: We will today cover the changes to the Residential Tenancies Act, which was announced by the Victorian Andrews Government in October 2017. And there are 14 major reforms outlined in the paper, which has had a fair bit of public discussion since it was announced what the changes were, and over this next short period, we will go through the changes. And Prue is an expert on residential tenancy and her knowledge of the Reform Act is quite large because she’s been involved in a number of committees and general industry discussion, but we look at it from the point of view of protecting our landlords’ investments, also with respect to tenants, and we’re going to cover a number of the major changes because some of them are minor and they’re implemented anyway. So Prue, do you want to go over, just briefly discuss things about the removal of the 120-day notice to vacate for no specified reason, limiting the use of end of fixed-term notices to vacate, etc. So I’ll let you tell us all about the new Reform Act.

Prue: Okay, thanks, Brad. Well firstly, I just want to say that it’s obviously imperative that our landlords are informed about what impacts these changes will have on them and obviously their investment properties. With regards to the 120-day notice, that’s a no specified reason notice, I believe that if that is actually removed, then that’s going to have definite impact on the landlords. It means that a landlord is going to find it very difficult to actually get their property back and obviously their tenant out of their property. At the moment, they can use a lot of other notices, and that would be that if they want to sell their property, they can give a 60-day notice, or if they want to move back into the property, they can give a 60-day notice. But at the moment, the 120-day notice is actually used if they don’t really know what reason. They might be considering selling or they might be considering moving back in, it’s just that’s what it is. It’s a no specified reason notice. So that’s going to be a little bit alarming if that is actually removed. I also believe that one of the other major impacts would be the pet clause, and I feel that at the moment, if a tenant actually does have a pet, and we can’t really strictly not allow somebody to have a pet.

Brad: Well, VCAT will…every single time we’ve taken a challenge by a landlord to VCAT for a tenant having a pet…and this is really 100% only occurs where a tenant fills in an application form and doesn’t tell us that they have a pet, and then when they move in, we find that they’ve got two Alsatians or six cats or whatever, and we find this out at the first property inspection that we do after a few months and/or neighbors ringing complaining about dogs barking. And we go to VCAT, VCAT will absolutely say, “You can’t stop a tenant having animals.” And if they have ignored putting that on their application, it doesn’t mean anything these days.

Prue: I know, and that’s the thing. Quite a few of these proposed reforms are actually being practiced at the moment by VCAT, and I do believe that one of those that VCAT is actually proceeding with and has been for a number of years, obviously we’ve experienced it in our office, is the pet one. And that’s because, as I said, there’s no landlord that can unreasonably refuse a tenant to have a pet, so again, that’s going to be something that’s going to be really challenging with regards to landlords and tenants and pets, and I think that it’s a concern because it really comes down to the interpretation of the member at VCAT on the day.

Brad: Yes, and that is unpredictable. Another big one that I see has a lot of ramifications for landlords, is the ability for a tenant to make minor property modifications. Now, “modification” is a hard word to define because modification would infer that something is being improved, but that’s a matter of opinion, but also, the word “minor.” What does the word “minor” be? Does a tenant have a right to change the color of a feature brick wall, for example? Paint a brick wall? It will never be redeemed after that because once you’ve painted the brick wall, it’s always painted. Can they put an extension out the back? Is that minor, does it need council approval?

Can they take plants out of the garden? Can they remove lawn and put in stones? I mean, it just goes on and on and on, the list of potential minor, and the word “modification,” I think this opens up a real Pandora’s box as far as going forward and the ability for a landlord to then redeem the property out of a bond, because minor is not really the true essence of what someone has done to the property. It ends up being major and costs more to redeem than the price of the bond. I think this is a bad one.

Prue: And again, I think it comes back to VCAT and obviously the interpretation of what is minor. I think that if this law is going to be changed, then I really believe that they need to be clear on what the minor modifications are, because there’s going to be a huge discrepancy between what one person thinks is minor and what another person thinks is minor. I mean, currently, we do have situations where, you know, in the leases, it states that if a tenant wants to put, say as an example, picture hooks up, they have to get written permission from a landlord. So there are things at the moment that, again, are sort of slightly being practiced with regards to this, but I do believe that it needs to be really clear.

Brad: Another one is faster tenant reimbursement for urgent repairs. For example, if on a weekend the sewage blocks and a tenant pays for a plumber to go and get the works fixed, we would pay them the following week without any issues. But this needs clarity because obviously there is always a dispute about the cost of urgent repairs because plumbers, electricians, builders, if stairs fall, collapse, break, whatever it is, there is always a bit of a lashing of good luck in the pricing of what are deemed to be urgent repairs. But that’s not a problem with us.

Prue: Yes, look, I think we’re extremely lucky in our company because we have really good procedures in place with regards to after-hours and emergency repairs. And touch wood, I guess we have over 3,500 properties, and we don’t have an issue with regards to this. So I don’t see that this is going to have an impact on us. I do believe that we have fantastic, as I said, procedures in place with regards to this.

Brad: All right, and a ban on rental bidding and rental apps.

Prue: I can’t really remember the last time we had rental bidding, but I do believe that if the rents are set correctly at the start by, obviously, the property managers and the BDMs, then I do believe that that shouldn’t be an issue. Look, I think that there are probably some agents out there that…

Brad: But what’s wrong with that?

Prue: Well…

Brad: I mean, do you now say that 1,000 properties last Saturday at auction in Melbourne, which creates its own economic weather pattern because of the amount of people who go to auctions, the amount of advertising. If you didn’t have a free-market enterprise of being able to go to an auction, what’s now the line of distinction between you can have an auction on a property for its sale, but you can’t have an auction on a property for its rental? And it’s such a minor percentage of dealings that it’s almost irrelevant. But is this the first foot in the door, so to speak, to stop the auction process in time? I mean, that’s extreme. The bidding system, the underquoting system, underquoting laws, for example, should be called quoting laws, not underquoting laws. But the bottom line is that I don’t like it.

Prue: Yes, look, I think that it’s completely separate to the sales auction process. And I can understand where you’re coming from, but I do believe the problem with the rental side of things is that, particularly around the times of, say, December, January, where there’s probably limited stock and there’s a lot of people looking. People get so desperate that they want a property that they’ll actually bid for it or they’ll offer $50 or $100 more. That’s where it’s going to get really messy.

Brad: Okay, but regularly, and we have a policy that an increase in rent and/or a lump-sum payment of 12-months in advance will not favor a tenant over another decent application. Because what that typically means is that a person will be trying to offer favor to have their application, which may or may not be a good application, looked more favorably by a landlord, but we make the judgement for our landlord and recommend either one, two, or three applications. So I don’t think it’s a very good thing for landlords. It should…just leave it to be open market conditions, and if that happens, someone wants to offer, well, I reckon that’s good luck for the landlord.

Prue: Yeah, look, it can be good luck for the landlord. Of course, and there’ll be some landlords that’ll want more money, but you’ve got to keep it fair and reasonable and I think that’s why this law needs to be looked at.

Brad: So, this is a bit of a summary, just a general chat about the property market residential tenancies. I noted the other day they’re up to 8% vacancy factor in Perth at the moment. Melbourne is, I believe, 1.5%, very, very low vacancy factor. You want to give some comment in regard to the performance of the Melbourne residential property market?

Prue: Across our 10 offices, we can have slightly varying vacancy rates. Obviously, our offices are inner-city, and we’ve also got our Gisborne Sunbury offices, which are further out. I do believe that all of our markets are really strong and there is a high demand of rental properties. I do think that we are coming into our most extremely busy period which is, as I said before, December, January, February, and that’s obviously just because people are relocating, and school starts and things like that. So the vacancy rate will probably even become tighter just because there’s such a high demand of people looking for rental properties.

Brad: Yes, I agree, and the economic circumstances that cause a place like Perth is really driven by the turn-down in the mining industry.

Prue: Yes, it’s an industry thing.

Brad: So, all right, well, there’s a quick summary. We’ll have a chat in a few weeks and give you an update of the market closer to Christmas. But I thank you for listening to “Teal Talking Property” and we will catch you very soon.