Tenancy agreement (lease) for rented premises
In most cases, before the tenant moves into a rental property they will need to sign a lease; a legal contract between the tenant (the person renting the property) and the landlord. The lease is an important document as it determines the legal relationship between these parties and should be read carefully, by both parties, before it is signed since, after the lease is signed, neither party can cancel the contract without incurring a penalty; this is referred to as there being no “cooling-off period”.
Types of Lease agreements
The two most common types of leases are fixed term agreements and periodic agreements, and, as their names suggest, they are differentiated by different time spans rather than a monetary scale or the type of property.
Fixed Term Lease
The fixed term leases are created to encompass a set period of time and have an end date for the lease. The agreement must be in writing, although verbal agreements can also be binding. Landlords can be fined should they fail to complete a written agreement. The tenancy agreement provided by New South Wales Fair Trading can be downloaded clicking the following link: Standard Residential Tenancy Agreement. Note that the terms of the standard residential tenancy agreement cannot be varied (except for tenancy agreements that are for a fixed term of 20 years or more.
Periodic or Continuing Lease (month by month)
Once a fixed term lease ends, and no new agreement is signed, the tenancy will usually roll over to a periodic lease (also known as a continuing agreement), should the tenant continue renting the property. Even though there is no new signed lease to replace the expired lease, the terms and conditions of the original agreement will continue to apply. It is also possible that the original agreement never had a fixed term, that is, it never had an ending date; in this case, the agreement would also be referred to as a periodic agreement.
Unlawful Terms on the Lease
There are certain terms that cannot be included in a residential tenancy agreement. Should any of the following terms be included not only will they be invalid, but the landlord may be fined:
- requiring a tenant to have the carpet professionally cleaned, or pay the cost of cleaning, at the end of the tenancy (unless the cleaning is required because animals have been kept on the premises during the tenancy);
- requiring a tenant to take out any form of insurance, such as home contents or public liability insurance;
- exempting a landlord, agent or any other person acting on behalf of the landlord or landlord’s agent from legal liability for any negligent act or omission;
- requiring the tenant to pay a higher rent, a penalty or some other form of damages if they breach the agreement;
- giving the tenant a reduced rent or rebate for not breaching the agreement;
- requiring the tenant to use the services of a particular person or business to carry out their obligations under the agreement, such as a nominated lawn mowing or pool cleaning company; and,
- requiring the tenant to use a specific utility provider if there is no restriction on utility providers available for the property.
What is a rental bond?
A bond is a payment by the tenant to the landlord that acts as security against the tenant not meeting the terms of the lease. The bond must only be in the form of money and must not be more than an amount of 4 weeks rent. Landlords and agents sometimes ask for additional amounts of bond (that is, over and above the usual four weeks’ bond) if the tenant keep a pet. These ‘pet bonds’ are often not lodged with Renting Services and instead are kept in an account maintained by the landlord or agent. Pet bonds are not lawful in NSW. The landlord/agent must not require that the tenant pay a bond before signing a lease, however, an agent may ask for this amount and the tenant is free to accept the request and provide the bond requested. The landlord/agent must deposit the bond with Fair Trading.
The landlord/agent must give the tenant the option of using the voluntary NSW Fair Trading Rental Bonds Online system, however they may not require the tenant to use this system.
Lodging a bond
All rental bonds for residential properties in New South Wales need to be deposited with the NSW Fair Trading. Agents and landlords usually initiate bond lodgements and claims, and are obliged to give the tenant a bond lodgement form for signing. A tenant can choose to lodge a bond using Rental Bonds Online or using a paper form.
Rental Bonds Online is administered by NSW Fair Trading and provides a secure service to manage and refund bond money. New tenants must be offered the option of using the Rental Bonds Online service provided by NSW Fair Trading. In addition, it is expected that landlords or agents give the tenant the getting started with getting started with Rental Bonds Online guide.
Refund of the Bond
A full refund should be given to the tenant if the rent has been paid in full, all bills relating to the property have been duly paid, and the property is left in good condition when he moves out. Claims can’t be made for ‘fair wear and tear’, such as carpets wearing out over a long time.
At the end of the tenancy, the tenant should fill the Claim for Refund of Bond Money form from NSW Fair Trading. If the landlord/agent dispute the amount claimed by the tenant, they must apply to the NSW Civil and Administrative Tribunal (NCAT) within 14 days of receiving the notice and tell Fair Trading in writing that they have so applied. The NCAT will decide how the bond will be paid out.
Transfer and Sub-letting
A landlord cannot unreasonably withhold consent to either transfer of sub-let should one of the original tenants, under the current tenancy agreement, remains as a tenant. Should the tenant get written permission from the landlord to transfer or sub-let the rental property, the tenant becomes the head tenant and must take on landlord responsibilities.
It is considered “reasonable” for a landlord to withhold consent if the number of proposed occupants is more than allowed by the tenancy agreement or planning laws, the proposed tenant or sub-tenant is listed on a tenant database (see below, “Factsheet 19: Tenant databases”) or the landlord reasonably thinks that the premises will become overcrowded.
NOTE: if the proposed transfer or sub-letting is for the whole tenancy or the whole premises, the landlord can withhold consent – whether or not it is reasonable.
The landlord must give the property in a ‘reasonably’ clean state and provide and maintain the property in ‘reasonable’ repair, determined to an extent, on the age, potential life of the premises, and the amount of rent. Also, any repairs referred to in the condition report must be completed. The landlord is not required to fix any damage that the tenant causes. However, if the landlord decides to fix the damage, they must limit the cost of any repair or replacement should they intend to later ask for compensation from the tenant. The Residential Tenancies Act 2010 and Residential Tenancies Regulation 2019 provides a list of urgent repairs in a rental property, which includes a: burst water service; blocked or broken toilet system; serious roof or gas leak; dangerous electrical fault; flooding or serious flood damage; serious storm or fire damage; failure or breakdown of the gas, electricity or water supply, or any essential service or appliance provided by a landlord or agent for hot water, water, cooking, heating, or laundering; and, all faults or damages in the premises that make the premises unsafe or insecure.
As of March 2020, rent increases for periodic leases are limited to once in 12 months. However different rules apply if you are a tenant of DCJ Housing or the Aboriginal Housing Office.
Fixed term leases of less than 2 years can be increased if the lease agreement states the amount of the increase or the method of calculating it. Otherwise, the tenant must be given at least 60 days’ written notice of any potential rent increase.
If the tenant thinks the rent increase is too high he can apply to the NSW Civil and Administrative Tribunal (NCAT) for an order that the new rent is excessive. This must be done within 30 days of getting a rent-increase notice.
See Factsheet 11: NSW Civil and Administrative Tribunal and contact your local Tenants’ Advice and Advocacy Service for advice.
Tenancy Law Changes
New rules which came into effect on the 23 March, 2020. For example, all rental properties will now have to meet seven minimum standards before they can be considered ‘habitable’. The standards include that the property is structurally sound, has natural and artificial light, adequate ventilation and plumbing and drainage. Now landlords can’t unreasonably refuse consent to tenants who want to make minor alterations, repairs or renovations to the rental property. Minor alterations here are fly-screens on windows, child safety features including child gates or and fixing furniture to a wall, or hand-held shower heads or lever-style taps to help elderly or tenants with a disability. Landlords and property managers will also have to make sure that smoke alarms in the property work, or face significant penalties. Importantly, if a tenant wishes to leave a fixed-term tenancy early, the amount to be paid for the early termination of the lease (or ‘break fee’ penalties) will generally be reduced and taper-off the further through the contract the tenant has satisfied. This will only apply to tenancy agreements entered into after the changes come in.
The Tenants’ Union of New South Wales has written information sheets on many subjects related to residencial leasing. The following links will forward you to the relevant subject matter:
- Factsheet 01: Residential Tenancies Act
- Factsheet 02: Starting a tenancy
- Factsheet 03: Bond
- Factsheet 05: Rent arrears
- Factsheet 06: Repairs and maintenance
- Factsheet 07: Locks and security
- Factsheet 08: Privacy and access
- Factsheet 09: You want to leave
- Factsheet 10: Landlord ends agreement
- Factsheet 11: NSW Civil and Administrative Tribunal
- Factsheet 12: Domestic violence and tenancy
- Factsheet 13: Strata scheme tenants
- Factsheet 16: Ending fixed-term tenancy early
- Factsheet 17: Discrimination
- Factsheet 18: Transfer and sub-letting
- Factsheet 19: Tenant databases
- Factsheet 20: Smoke alarms
- Factsheet 21: Mortgagee repossession
- Factsheet 22: Disaster damage
- Factsheet 23: Utilities
- Factsheet 24: Mould
- Factsheet 25: Goods left behind
- Factsheet 26: Asbestos and lead
- Factsheet 28: Sale of rented premises