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Are you, or are you considering becoming a Victorian Landlord? You have probably heard a little about the recent legal changes to the Victorian Residential Tenancy Act that were finalised in March 2021. You have also probably heard some drama about increased costs to meet the new laws and more power to the tenants. Some have even declared that property investing is no longer a viable option in Victoria! More than 130 reforms have been introduced, making getting up to date a bit overwhelming.
The changes to the Victorian residential tenancy act have been created in order to make renting a fairer and safer proposition for tenants. As much as there seems to be a general sense of resentment towards landlords, most of us have lived in rental properties.
Around 25% of Victorian residents rent. I have appreciated the availability of fairly priced, good condition properties I have rented. I have also resented the excessive rules and found it difficult to understand why I couldn’t hang a picture on the wall.
Now I am on the other side of the fence, as landlord I want to provide safe, good condition properties at a fair price to my tenants. Of course, I wouldn’t have become a landlord if I didn’t want the investment to pay returns. Residential investing has to produce a profit, or else why would investors accept the considerable hassle and risk of owning a rental property.
Many of the changes are what any reasonable person would expect (eg a functioning toilet!) Some, however provide opportunities for abuse. I’ve highlighted the changes I consider potentially concerning.
Victorian Residential Tenancy Act – Tenant Selection
It is unlawful to discriminate against renters based on their personal attributes such as age, race, religion or disability. Pets cannot be unreasonably refused, but tenants still have to ask permission. Rental providers can only apply to VCAT to refuse a pet.
Landlords can’t request “inappropriate information” in a rental application – for example the renters bond history. I’m not sure I understand why this is inappropriate.
Rental providers cannot encourage someone to enter a rental agreement by misleading or deceptive conduct or statements.
Advertising for Rent
Your investment property can no longer be advertised with a rental range. It has to be advertised for a fixed rent. Landlords and agents cannot ask for or invite rental bids above the asking price.
Unsolicited bids of higher rents by the potential tenant in order to secure a property as still allowed.
Signing a Tenancy Agreement
Certain information now has to be disclosed to the potential tenant when a tenancy agreement is signed:
- If the property is to be sold
- If the rental provider is not the owner of the property, and the rights they have to rent it out (subletting)
- Mortgage default and the home is going to repossessed
- The property is supplied electricity from an embedded electricity network (ie a block of units are all contracted to a single electricity provider, which may not be the cheapest).
- There has been a homicide in the property or common ground within the last 5 years
- The rental property complies with all the legal minimum standard
- If there are any outstanding recommendations from the gas and electricity safety check
- The home is registered under the heritage act 2017
- The property has been used for trafficking or cultivation of drugs of dependency over the last 5 years
- The home has friable or non-friable asbestos identified
- The property is affected by a building or planning applications
- The home or common property is known to have building defects or safety concerns
- There is a current dispute between owners, occupants or the manager that affects the property (Owners corporation act 2006)
I can’t even imagine how awful it would be to have a homicide in or around your property. Or then how difficult it would be to rent when you have to disclose this to potential tenants. This is an unlikely nightmare situation I hope none of us have to tackle!
Landlords cannot ask for more than 1 months rent as a bond, or required payment more than 1 month in advance if the property rents for $900 / week or less.
A condition report must be completed at the start and end of the lease.
I can imagine the bond can be grossly inadequate if you get a nightmare tenant who destroys a property. 1 months rent as bond has been fairly standard before these changes though, so I don’t think this changes much. Rental providers must have to rely on their landlord insurance in these situations.
Landlords need to perform gas and electricity safety checks every 2 years for all new rental agreements after 29th March 2021.
Fair enough. Will increase costs to landlords and tenants, but if it improves safety no-one can really argue with that.
Victorian Residential Tenancy Act Changes – Minimum Standards of Rental Property
These have been improved.
- External entry doors should be fitted with a deadlock if possible
- If this is not possible, the external doors must be openable with a key from the outside, and lockable from the inside with or without a key.
- External doors opening onto a common area (unit corridor) are excluded from this rule
A lockable door seems like a pretty reasonable demand!
Ventilation of the property needs to be compliant with the ventilation standards of the building code of Australia
- Window area should be equivalent to at least 10% of the floor space, or 3% for roof lights.
- Window openings need to be equivalent to at least 5% of the floor space
- Here is a link to more fascinating reading about the Building code
Vermin proof bins
- Council bins must be provided
A rented property must contain a functioning toilet. It must be connected to an appropriate waste system and in a room or structure intended to be used as a toilet area (the mind boggles!).
- Hot and cold water
- A wash basin, shower/bath
- Minimum 3 star rated shower heads
OK. So it has to be a bathroom. You might need to replace a shower head.
- a dedicated food preparation area
- A sink with hot and cold water
- A stove top in good working order with at least 2 burners
Again, expectations are pretty basic.
If provided must have a reasonable supply of hot and cold water
Rented property to be of structural soundness and weather proof
Again, only in line with very basic expectations of a property you would accept living in yourself.
Mould and dampness
Each room must be free of mould and damp caused by the building structure
Can imagine this might cause dramas for those with old properties. But no-one wants to get sick. It’s got to get sorted.
Must have electrical safety switches installed
Seems like a basic safety thing. Don’t want any electrocuted tenants!
All windows in the bedrooms and living area must have coverings that can block light and provide privacy
I don’t have window coverings in my living room, there is no privacy concern. It will help temperature control though. An additional expense, but a one off cost at least.
- External windows that can be opened must remain open and closable
- Where possible, locks are to be provided for all windows. If the window is not capable of having a lock, it must have a latch to secure against external entry.
Again, an additional one off cost and will improve security. Depending on where your property is located depends on whether that extra security is required.
Rooms and corridors should have access to natural or artificial light
Were you just going to have your tenants use torches?!
- A fixed heater is required in the main living area of all homes
- If a fixed heater in the main living area has not been installed, an energy-efficient heater (2 star minimum) must be installed
- From 29 March 2023, the heater in the main living area must be an energy-efficient fixed heater (minimum 2 star rated)
- If the rental property is in an apartment block and installing an energy efficient heater is not feasible the energy efficiency requirement does not apply, but a fixed heater is still required.
A one off additional cost, although may be a significant one. I’m not sure why Victorian properties don’t seem to be that well set up with heating, it gets so cold! Get it sorted and have happy warm tenants who hopefully stay longer.
Damage & Urgent Repairs
Renters must report damage as soon as possible.
If they have made a reasonable attempt to contact the rental provider or agent and the urgent repair has not been fixed immediately, renters can now pay up to $2500 for an urgent repair.
If a renter paid for urgent repairs up to $2500 because the rental provider did not respond, the rental provider must pay the renter back within seven days. Previously rental providers had 14 days.
The list of urgent repairs now includes:
- Failure to comply with minimum standards
- a failure or breakdown of cooling appliances or services
- Failure or breakdown of any safety related devices
- any fault or damage that makes the property unsafe or insecure.
Open to abuse unfortunately. Whilst you have reasonable tenants and reasonable landlords, this isn’t going to be a problem. In fact, you wouldn’t need it, but obviously some landlords have not been fixing urgent safety / comfort issues promptly so here we are. Tenant screening and treating them well will hopefully encourage them to reciprocate your reasonable human approach to issues.
Rental providers need to provide a free set of keys to renters. Extra sets should be provided at reasonable costs.
They kind of need to get in. Ripping tenants off over an extra set of keys is not cool.
Tenants can make simple modifications without seeking permission, including:
- Picture hooks or screws for wall mounts, shelves or brackets on surfaces other than brick walls,
- Wall anchoring devices on surfaces other than brick walls to secure items of furniture,
- LED light globes which do not require new light fittings,
- Low flow shower heads if the original shower head is kept,
- Blind or cord anchors,
- Hardware mounted child safety gates on walls other than brick walls
- Security lights, alarm systems or security cameras that do not impact on the privacy of neighbours, can easily be removed are not hardwired
- Non-permanent window film for insulation, reduced heat transfer or privacy,
- A wireless doorbell,
- Replacement curtains if the original curtains are retained by the renter,
- Adhesive child safety locks on drawers and doors,
- Pressure mounted child safety gates,
- A letterbox lock.
In contrast, painting requires the landlords permission, but should not be unreasonably refused.
Properties under the heritage act will need permits for many modifications, and renters need to adhere to these rules.
Before the end of the rental agreement, the renter must reverse the modifications (fair wear or tear excepted) or pay the rental provider for the cost of reversing them, unless both parties have agreed otherwise.
Most of these seem very reasonable, and may encourage your tenant to stay longer. If renting didn’t feel so much like living in someone else’s house, it wouldn’t be so unappealing.
Once you have your tenant in, you can only increase rent annually.
If your tenant is behind on the rent, but pays back within 14 days, any notice to vacate is cancelled. This can occur up to four times in a year.
This could be annoying. But I guess if they are in financial dire straits, and they are actually paying the rent it’s certainly better than not paying the rent. I’m not sure why you would abuse being able to get away with paying rent late repeatedly, if you still have to pay it. I’m sure there will be a few who just want to annoy the landlord!
Domestic and Family Violence
If a renter is experiencing family violence they can change or terminate the rental agreement and not be held liable for damages in some circumstances. These requires an application to VCAT, who will consider the tenant’s claim within 3 days.
We all know domestic and family violence is a huge problem. Who wouldn’t want to help someone escape from this situation? Involvement of VCAT reduces the risk of non-genuine situations.
You can no longer throw someone out of their rental accommodation without a reason. Say what?! Why would anyone do that? Landlords now have to give a “Valid reason” including sale, change of use or if the owner is moving back in.
A renter can be evicted if they are violent towards the landlord, agent or neighbour
Ending the Tenancy
Renters can request their bond be returned without the landlords agreement.
This goes through an independent body to make sure it is fair and not a greedy landlord trying to maximise profits unfairly. I’ve never been through this process, but hope they are fair to both sides.
Renters can end the tenancy if the property isn’t structurally sound.
A professional clean can only be a term of the lease if it is required to return to the property to the condition it was (apart from fair wear and tear) at the start of the lease.
Landlords need to give the tenants 14 days to collect left behind at the end of a tenancy. The items need to be kept safe in the meantime
Not sure about this. Beyond a significant emergency, I’m not sure why tenants would leave belongings or why the rental provider should clear up after them, and store it! Reasonable if the tenant has left in an emergency, domestic violence, which I assume is why this law was created. But I don’t think it’s uncommon for tenants to leave houses full of “stuff” rather than getting rid of it.
You can find the full information on changes to the Victorian residential tenancy act here.
Rents are Likely to Increase
No one can argue with increased safety precautions, but they do unfortunately increase costs. The gas and electricity safety checks, installation of window locks and new heaters will produce extra costs that will eventually be passed on to tenants.
Risk and Potential for Abuse from the Victorian Residential Tenancy Act
Some of the changes do increase risk for rental providers. You can no longer choose to have pet free tenants in your property. Rental providers now have to apply to VCAT to stop a tenant bringing a pet to a rental property. Pets obviously cause more wear and tear to the properties, increasing costs. Some owners are irresponsible pet owners. It is wonderful for responsible pet owners that rent that it will be a lot easier to find a property. But the extra costs are again likely to increase rent.
The urgent repair law applies to heating and cooling equipment. Fair enough if the air conditioning is broken in the middle of summer. Hopefully common sense will prevail and tenants will realise that if the air con breaks in the middle of the winter that’s not urgent and vice versa. Landlords need to be aware that they need this cash available at short notice.
Victorian Residential Tenancy Act – Conclusion
Most of the new Victorian residential tenancy act laws are what any reasonable tenant and landlord would expect. There are extra safety precautions that will increase costs (and eventually rents), and hopefully safety. A nightmare tenant can abuse the grey areas, making tenant selection and screening even more critical since the changes. Your property manager needs to be on top of helping you ensure your property is up to date with the latest requirements.
Aussie Doc Freedom is not a financial adviser and does need offer any advice. Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes.