NSW tenancy laws – proposed reforms may drive away investors

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.

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