Residential Tenancies Act 2010 Update

What are the main reforms in the Act?

Residential Tenancies Act 2010 was passed by Parliament on 10 June 2010. The Act will not come into effect immediately. A new Regulation will need to be developed, which will include standard tenancy agreements and condition reports.

It is expected that the new Act and Regulation will come into effect later this year. Once written the Regulation will be released for further community consultation.

In the meantime, EAC will continue to raise matters of concern including possible drafting errors and lack of clarity that in our opinion require attention in the drafting of specific sections.

The following overview explains some of the key changes; a detailed assessment is not possible until the release of the Regulation.

The key changes in the Act are explained below.

Pre-tenancy

Holding fees

The Act will permit holding fees to be charged only after an application for a tenancy has been approved. This assumes that applications are approved on the spot. This may present procedural problems for both tenants and landlords and needs to be considered through the consultation process for the regulations.

Once accepted the holding fee keeps the premises off the market for up to 7 days with no provision for any refund to the applicant if they decide not to enter into an agreement. The 1987 Act (current position), provides that the landlord may retain a fee equivalent to only the amount of rent that would have been paid for the period reserved and refund the remainder (if any) to the applicant.

Information to be provided and material facts

Section 27 (1) compels a landlord to provide a tenant with their telephone number or other contact details even if they have an agent.

The Act requires the disclosure of material facts to prospective tenants; such as if the landlord has drawn up a contract to sell the property or if a mortgagee has taken court action to recover possession.

Selling of property

The landlord must give a minimum of 14 days written notice prior to commencement of marketing. It obliges the selling agent to make reasonable efforts to agree with the tenant on the days and times the premises will be available for inspection. A limit of 2 inspections per week are provided in the Act, and the parties can negotiate if more access is required. If the landlord and tenant fail to agree, the landlord can access twice per week without consent (section 55) provided 48 hours notice is given to the tenant on each occasion.

Limit on amounts payable by tenant before agreement

The tenant can no longer be charged the $15.00 contribution towards the lease preparation fee.

Limit on Bonds payable by tenant

Under section 159 bonds are limited to the equivalent of 4 weeks rent for both furnished and unfurnished premises – current position is 6 weeks rent for furnished premises. Under section 161 (2) bonds can no longer be topped up in an ongoing tenancy.

Urgent repairs

Under section 62 (j) definitions of urgent work and repairs now includes the addition of cooling.

Breaking a lease early

The Act will enable 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. The Act also introduces the concept of an optional ‘break fee’, fixing the penalty payable in other cases where a tenant breaks a lease early. A break fee is invoked only if the agreement provides for the early termination of the fixed-term. The break fee for a fixed term agreement for a fixed term of not more than 3 years is an amount equal to 6 weeks rent if less than half of the fixed term had expired or an amount equal to 4 weeks rent in any other case.

Where there is no break fee term in the agreement the current position remains that the defaulting tenant is liable for compensation to the landlord for any loss (including rent) to the end of the fixed term and the landlord has an obligation to mitigate the tenant’s loss.

Termination notices

Periodic agreement (continuing)

The Act increases the “no grounds” notice given to tenants who are no longer in a fixed term lease from 60 days to 90 days. A tenant may give 21 days notice – no change from current position.

Fixed term

A landlord may end a fixed term agreement at any time before the end of the fixed term to take effect not earlier than 30 days after the day on which the notice is given – current position is 14 days. The tenant may end a fixed term by giving 14 days notice – no change from current position.

The Tribunal’s discretion has been removed whether to end a lease ‘without grounds’ where the landlord has given proper notice and we are advised there will greater certainty of possession through the Tribunal where a tenant does not move out in accordance with a ‘no grounds’ notice. However, section 114 (1) provides that the Tribunal may suspend the operation of an order for possession of the premises for a specified period if it is satisfied that it is desirable to do so, having regard to the relative hardship likely to be caused to the parties by the suspension. The interrelationship between these two sections is not yet clear and its effect, if any, on the level of certainty for possession.

Rent arrears evictions

We are advised that the time taken for a landlord to get their application heard by the Tribunal where the tenant is behind in rent will be shortened. Section 88 (4) provides that a landlord may apply to the Tribunal for a termination order before the termination date specified in a non-payment termination notice, however the Tribunal must not consider such application until after the termination date.

The Act also gives a guarantee to tenants that their tenancy can continue if their rent arrears are paid or if they follow an agreed repayment plan. However, this guarantee may not apply if the landlord makes an application to the tribunal for a termination order and the tribunal is satisfied that the tenant has frequently failed to pay their rent on time.

The notice must inform the tenant that the tenant is NOT required to vacate the premises if the tenant pays all the rent owing or enters into, and fully complies with a repayment plan agreed with the landlord. Any warrant for possession issued as a result of any order for possession, cease to have effect if the tenant pays all the rent owing or enters into, and fully complies with a repayment plan agreed with the landlord and the tenant has not vacated the premises.

If a tenant repays all the rent or enters into, and fully complies with, a repayment plan the landlord must notify the Tribunal if the landlord has applied for a termination order and the application has not been finally dealt with or the Sheriff if a termination order has been made and a warrant for possession has been issued but has not been enforced.

Alterations

The Act gives tenants greater flexibility to make minor alterations at their own expense, provided they obtain the landlord’s written consent. Where the parties fail to agree the tribunal may adjudicate. Landlords will be able to reasonably refuse requests involving internal or external painting or work not reasonably capable of rectification, repair or removal. The Act also clarifies the rights of landlords to seek compensation where the work is not done to a satisfactory standard or will impact on the ability of the premises to be rented in the future.

At this time, it is unclear whether there is increased risk of landlord liability for personal injuries as a result of work performed or what process a landlord should follow to control the alteration. The development of the supporting regulations may add clarity to this provision.

Rent payments

The Act will require all tenants be given at least one free and easy option to pay their rent. Tenants will be required to pay the landlord’s costs for any dishonour fees.

Sub-letting

The Act gives tenants greater flexibility to sub-let part of the premises or bring in an extra co-tenant, provided they obtain the landlord’s written consent. Landlords will be able to reasonably refuse such requests, on the grounds of the person is listed on a tenancy database; the number of occupants will exceed the number permitted under the agreement or lead to overcrowding. Other potential grounds such as a lack of references; income; history of violence that could influence a landlord’s consent have not been defined in the Act.

Under section 75 (1) the Landlord may withhold consent to a transfer or sub-letting relating to the whole tenancy or residential premises whether or not it is reasonable to do so.

The landlord must not charge for giving consent to a transfer or sub-letting, other than for the reasonable expenses of giving consent. There is no catch-all to protect a landlord’s right to decide whom he or she must contract with.

Goods left behind

The Act will streamline procedures currently in place but in summary the tenant must be given notice that the goods will be disposed of after 14 days or 90 days in the case of personal documents. Method of notice includes by post and orally and failing these options by posting a notice in a prominent position on the premises for 2 days. The ability to remove perishables remains unchanged. The landlord may require a former tenant or person who claims the goods to pay an occupation fee for each day the goods are left on the premises or stored if the quantity of goods left on the premises is sufficient to prevent the renting of the premises. The occupation fee must not exceed the amount of rent for 14 days.

Water efficiency

The Act will require rented premises to be water efficient if tenants of separately metered premises are to pay for water. The standards for water efficiency will be determined when the regulations are made later this year. Landlords have 12 months in which to carry out any required work if they wish to continue to directly recover the cost of water usage from tenants.

Co-tenant disputes

The Act introduces new measures to resolve disputes between co-tenants or shared households, including domestic violence situations. Victims of domestic violence living in a rented property will have the right to change the locks and seek to take over the tenancy if their name is not already on the agreement.

Tenant may vacate before end of termination notice period

The tenant’s obligation to give 21 days notice after they have received a termination notice from the landlord has been removed – they are able to leave prior to the notice period.

Defects in termination notices

The Tribunal has power to fix minor procedural defects and not have to send the parties back to the start.

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