20 December 2019

New tenancy law concern may mean more disputes end up in ACAT

| Karyn Starmer
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Tenancy law changes could increase the number of people seeking clarification through ACAT. Photo: File.

Recent changes to Canberra’s tenancy laws, designed to help renters make their house a home, have been described as good news for renters, but there are concerns among those in the property industry that the new laws may bring uncertainty into Canberra’s already tight rental market.

The ACT Government’s long-awaited changes provide greater protections for renters by introducing rent increase thresholds, capping penalties for breaking leases and shifting the onus for pet ownership and modification approvals to benefit the tenant. The changes apply to leases signed from 1 November 2019.

BAL Lawyers Director of Commercial and Real Estate Benjamin Grady says that while the changes are largely a move in the right direction, there are concerns around the application and dispute processes set out in the legislation.

“The legislation gives the tenant broad rights concerning the use of the premises but there is an overly restrictive framework for any dispute that might arise,” Grady said.

“Had the legislation been more prescriptive as to the grounds for approval or of any conditions of approval say, for instance, the conditions on which a tenant can keep a dog, both parties would have been afforded greater certainty as to the extent of their rights. Where there is uncertainty, the more likely the chance of a dispute arising and the parties ending up before the ACT Civil and Administrative Tribunal (ACAT).”

Modifications are a particularly grey area and Grady foresees problems for both landlords and tenants.

“The legislation says modifications are permitted in rental properties but it is not clear what is reasonable for a tenant to request or the conditions that can be imposed by a landlord. A prescribed list of terms and conditions would have given greater certainty for tenants, landlords and agents.

“Without prescribed terms, it is really left up to the ACAT to set that precedent as to what is or is not reasonable,” Grady said, noting that applicants would have to pay their own costs to make an application and have a matter heard.

Under the new legislation, rent increases are limited to CPI plus 10 per cent and Grady is concerned about the consequences of limiting rent increases. Canberra’s low vacancy rates mean that many people are struggling to find somewhere affordable to rent.

As landlords face increasing costs, Grady says that limiting rental increases may eventually exacerbate problems for renters and may lead to landlords setting higher rents at the start of the tenancy.

“If the rent does not cover the landholding and management costs, such as land tax, rates and strata fees, but the increase needed to cover these costs is above the new thresholds, landlords are likely to apply to the ACAT for permission to apply for a larger rent increase or increase the starting rent to cover the rises in costs. The added restrictions might also lead landlords to reconsider their investment in residential property altogether,” Grady said.

“With the second round of changes just coming into place, we will have to wait and see how the market reacts. Hopefully our concerns do not eventuate but it is something that the ACT Government should monitor closely to ensure the protections, brought in for the benefit of the tenants, don’t backfire and jeopardise the availability of rental properties in the market.”

If you have a question about the ACT’s new tenancy laws, Benjamin Grady and the Commercial and Real Estate team at BAL Lawyers.

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