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The recent proposed changes to the Residential Tenancies Act 1987 may do more harm than its intended purpose of encouraging more investors to create more supply into the already tight New South Wales residential property market.

The draft Residential Tenancies Bill 2009 has 3 objectives – to fairly balance the rights and obligations of tenants and landlords; to modernise and update the law in line with current practices and to reduce the level of disputes by providing greater clarity and certainty in legislation.

Some key proposals of the draft which is of concern to investors include the following:

• “Rent control” – provide additional powers and discretion to the Consumer, Trader and Tenancy Tribunal (CTTT) and tenants to successfully argue rent increases could be deemed excessive.
• Alterations – provision that allows tenants to make minor or cosmetic alterations to the property at their own expense without the permission of the landlord.
• Security of tenure – measures to encourage long-term leases and giving greater protection against eviction for tenants who have occupied the same premises for 20 years or more.
• Breaking lease – allowing tenants to break a lease early without penalty in certain situations, such as when they accept an offer of public housing or need to move to a nursing home.
• Subleases – Tenant may sublease the property and the landlord cannot unreasonably withhold consent.
• Sale of rented property – requires a tenant to be told before a rented property is placed on the market and the selling agent to make reasonable efforts to agree with tenant on available times for inspection.

Some property analysts believe the above is perceived to be legislating against a property owner who may be behaving unfairly against the tenant rather than a legislation to regulate fairness among tenants and landlords alike.

Popularity: 6% [?]

NRAS property at Stony Creek Estate, Cairns, Australia

In July 2008, the Rudd government announced a A$623 million initiative to build 50,000 new residential dwellings provide affordable housing to alleviate the severe housing shortage across Australia’s capital cities.

Named the National Rental Affordability Scheme, property investors can now receive up to A$100,000 in annual tax-free incentives over a 10-year investment period from the government in return for providing rental properties at 20 – 25% below open market rentals.

How does it work?

The federal government’s aim is to provide affordable rental accommodation to two broad classes of renters:

1. ‘Critical infrastructure workers’ – this group includes teachers, nurses, fire-fighters and police who have been priced out of the areas which they work;

2. ‘Income and welfare recipients’ – this group are those residents who are being forced to live further and further away from Australia’s capital cities as a result of fast rising rents.

Corporate superannuation funds, property developers and ‘not-for-profit’ organisations were invited to apply and partner with the government to build, fund and own properties which comply to affordability guidelines which resulted in more than 10,000 NRAS-approved properties now well underway in construction.

Investors who purchase NRAS-approved properties are eligible to 10 years of annual ‘tax-free’ incentives commencing at $8,672 in 2010. Each year, the incentive increases according to the rental component of the official rate of inflation. As rental properties increasing at their highest rate in 20 years, the annual NRAS incentive increase for 2010 is estimated to be 8.4%.

NRAS qualifying criteria

NRAS incentives are available only for properties which meet its eligibility criteria as follows:

• New and ‘off-the-plan’ properties only;
• Rented to ‘approved tenants’ at 20 – 25% below market rentals within the same suburb / region;
• Managed by an ‘approved property manager’ who is responsible in selecting eligible tenants, set rental rates and manager the investment property;
• Investment property is rented under the NRAS for 10 years (except in certain circumstances).

As the government intends to issue 50,000 licenses for properties which meet the criteria, individual property investors need to be aware there is a limited number of properties available under NRAS over the next few years.

Purchasing an NRAS property

The process for individual, private investors to purchase an NRAS property involved a little-known concept called ‘non-entity joint venture partner’ whereby the investor enters into a joint venture with an approved NRAS developer or institution (Joint Venture partner) who has been granted an NRAS licence from the government for a particular property. The investor purchases the approved NRAS property and then enters into two agreements:

1. A principle lease agreement with the JV partner who holds the NRAS licence;
2. A property management agreement with an approved property manager who is responsible for selecting tenants, managing the property, set rental rates and ensure compliance with the NRAS requirements.

The federal government pays 75% of the NRAS incentive to the JV partner, who in turns pays this amount to the property manager, who in turns pays it to the investor. The investor directly applies to the state government for the remaining 25% of the incentive.

Investors should also request for a ‘private binding ruling’ issued by the Australian Taxation Office from the JV partner to ensure the purchasing process and requirements are correctly set up to avoid possible non-compliance of any NRAS eligibility criteria.

Among the currently approved NRAS projects include properties located in the following locations:

1. Burnie, Tasmania;
2. Laidley, Calliope, Karalee, Proserpine, Southport, Booval, Redbank Plains, Caboolture and Townsville in Queensland.

Popularity: 38% [?]

Tenants who are renting homes and apartments need to be aware there may be a little more than paying a refundable up-front bond when signing on a new lease agreement with the real estate agent.

Depending on which state in Australia, there are one-off expenses which tenants may be required to pay, especially in the case of brand new apartments, units or townhouses which tenants are moving into for the first time. It is always advisable to check with the Department of Fair Trading if tenants are unsure about their rights and obligations.

Based on guidance from the Department of Fair Trading, a list of common expenses which the tenant is liable to pay in the course of leasing a new residential dwelling include the following items:

1. Water usage – tenant can only be charged for the metered amount of water usage. In the event there is no individual meter for a rented premises such as apartments and units, then a tenant cannot be charged for water usage.
2. One-off and on-going expenses which include opening of account with utilities such as:

• Electricity provider
• Gas provider
• Telephone / internet service provider

The landlord is responsible to pay for all service charges relating to water and sewerage issued by the local water supply authority. Under no circumstances can connection fees be passed on to the tenant.

Popularity: 4% [?]

With the imminent completion of the Verve’s luxury apartments in Erskineville by renown property developer AV Jennings, the first of its 106 apartment is now available for rent in Sydney’s hip and eclectic inner west.

This brand new, top floor apartment boast a 30sqm sun-drenched balcony over-looking serene internal gardens, swimming pool and tennis court. Filled with day long natural light, this north-west facing unit boasts a large 90sqm internal space with open plan kitchen and dining which walks out to the balcony made for entertaining, summer BBQs, sunbathing or to simply to read your favourite book.

Why I would rent this apartment:

• Brand new and top floor apartment with spanking new Smeg / Omega gas kitchen and other high-quality finishes.
• The sun-drenched 30sqm balcony is built for entertaining family and friends and adds a fresh dimension to the already large 90sqm internal open-living plan.
• Located within a 5-minute walk to St Peters train station, you are merely 3 direct stops or 10-minute train ride from Central station and 6 direct stops from Circular Quay, Sydney Opera House and the Botanic Gardens.
• A double side-by-side car space means you will never have to hunt for scarce public / visitor parking in this popular inner city location for your second car.
• Sydney Park’s outdoor activities – walking, running, biking, family picnics, is 5 minutes away. Sydney Park is also a leash-free park for dog lovers.
• 10-minute drive to Sydney CBD, Chinatown, Broadway Shopping Centre, Sydney Fish Markets and Sydney airport.
• Erskineville and Newtown’s cafes, pubs, restaurants precinct located within a 10 minute stroll.

Other key features include:

• Master bedroom walks out to sunny north-west balcony
• Built in wardrobes in both rooms
• Reverse cycle air-conditioning
• Large 8sqm basement storage facility
• Study nook with ducting for internet connection
• Cable TV connection points in living and master bedroom
• Internal laundry and dryer facility
• Convenient garbage chute disposal
• Security video intercom

This apartment is available from early December and is managed by Johanna Cheong from Infinity Property Agents at 0430 597888.

Popularity: 24% [?]

The recently completed Motto apartments in Erskineville by Austcorp is now ready for occupation. Most of the 2 bedroom apartments within this development are maisonette style – double storey living with its own internal stairs and the master bedroom usually on a separate level from the living and dining areas for added privacy.

The  Motto apartments are beautifully constructed, with quality kitchen equipment, bathroom finishings and spacious living areas. It is also approximately 5 minutes stroll to the Erskineville train station.

Apartment C420/2 Nassau Lane within this development is a 2 bedroom, 2 bathroom and 1 secure car space unit and has recently been leased at $650 per week through property management company Let’s Rent. This apartment is a maisonette style with internal laundry, ensuite and private balcony.

Please refer to this post for more details of Motto apartments.

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Popularity: 19% [?]