Tenancy Agreement FAQ - Australia-NSW

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A residential tenancy agreement is a legally binding contract made between a landlord and tenant. The tenancy agreement gives a tenant the right to exclusive use and enjoyment of the described residential property in exchange for money paid to the landlord. Additionally, the tenancy agreement outlines the rights and responsibilities of both the landlord and tenant during the tenancy agreement term. LawDepot provides a written Residential Tenancy Agreement.

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Contents

General

What is meant by Governing Law?

The Governing Law will be the jurisdiction in which the property is located. It may or may not coincide with the jurisdiction in which the parties reside. The Residential Tenancy Agreement will be governed by the laws of the jurisdiction where the property is located.

Why isn't a verbal residential tenancy agreement sufficient?

The problem with oral agreements is that they can be difficult to enforce. If a dispute arose, a court would have to hear evidence and decide whose version of the truth to accept. If there is a written agreement, courts will generally be obligated to uphold the terms of the written agreement even if they don't agree with them.

What is addressed in a residential tenancy agreement?

A Residential Tenancy Agreement typically addresses the following:

  • the type of property being let;
  • the address of the property being let;
  • the term of the tenancy and whether the tenancy is fixed or periodic;
  • the amount of rent payable, how often and when the rent should be paid; and
  • the provisions of any bond.

In addition, a residential tenancy agreement may also identify the following:

  • taxes that are payable by the tenant;
  • landlord improvements and signing incentives;
  • tenant improvements and signing incentives;
  • landlord and tenant repair obligations, who will pay for what utilities;
  • whether the tenant can assign or sublet the property:
  • notice provisions for termination of the tenancy; and
  • insurance provisions.

What makes a residential tenancy agreement different from a commercial property lease?

A residential tenancy agreement is a tenancy agreement for your home. Governments have recognised the sanctity of the home and have extended increased protections to tenants by enacting laws ensuring a minimum set of rights for tenants. A Residential Tenancy Agreement cannot take away these basic tenant rights.


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The Parties

Who are the parties to the tenancy agreement?

The parties to a tenancy agreement are the lessor, also called the landlord, and the lessee, also called the tenant. The lessor owns the property and allows the lessee to use the property in exchange for monetary payments called rent.

Who is the landlord's agent?

The landlord's agent may be anyone who looks after the property for the landlord. An agent may be the landlord's friend, a landlord's family member or a landlord's real estate agent. Landlords are usually held responsible for their agent's actions.

What does ACN mean?

Under the Corporations Act 2001, every company in Australia is issued with a unique, nine-digit number. This number is referred to as an Australian Company Number (ACN) and must be shown on a range of documents. The purpose of the ACN is to ensure adequate identification of companies when transacting business. New companies are issued with numbers by the Australian Securities & Investments Commission (ASIC) upon registration.

What are the landlord's obligations?

The landlord's obligations are defined by the terms and conditions contained in the tenancy agreement and the laws specific to where the property is located. The most important obligations of the landlord include providing the tenant access to the property and allowing the tenant peaceful enjoyment of the property. The legal owner of the property also has obligations to maintain the property to minimum standards.

What are the tenant's obligations?

The tenant's obligations are defined by this tenancy agreement and the laws specific to where the property is located. The most important obligations of the tenant are to pay rent on time and not to cause damage to the premises.

What if I don't know one party's name or contact information?

A blank space will be provided in the form that can be filled in later if you are missing information about one of the parties. We recommend, however, that you attempt to make the contract as complete as possible, for greater certainty.

What happens if I breach a term of the tenancy agreement?

If you breach a term of the tenancy agreement you are responsible for correcting it. If you are the tenant, this may involve you paying money to fix any problems caused by yourself or your guests. If you do not voluntarily pay to correct the breach you can be sued for damages sustained as a result of the breach and/or possibly evicted by the landlord.


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The Premises

Who can live in the premises?

Only tenants and people listed as occupants may reside in the premises. The landlord must be informed and approve of any change to the list of permitted tenants. Children born or adopted while the tenant lives in the premises are automatically added to the tenancy agreement as occupants. Also, each jurisdiction may restrict the number of tenants/occupants in the premises if that number violates health or safety standards for housing. Health and safety standards are typically expressed as 1 person per X sq. metre. The standard varies from jurisdiction to jurisdiction so if you are concerned, check with your local housing/public health authority.

What is a basement suite and how does this differ from renting a room?

Typically, letting a room or a basement suite means you are sharing an accommodation with the landlord. A basement suite is a self-contained dwelling unit complete with its own kitchen, bathroom, and living area. Most tenants of a basement suite use a separate entrance to enter the house than the rest of the occupants. If you rent a room, you will likely share either the kitchen or bathroom with the landlord.

What are body corporate bylaws?

A body corporate is the group of all the owners of lots or units which share common property. The body corporate bylaws refer to the set of rules governing the internal management of those lots. The bylaws may specify rules relating to noise, parking, behaviour of guests, pets, garbage disposal and the use of common property. The bylaws are sometimes referred to as a Community Management Statement.


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Tenancy Agreement Term

What happens when a tenant tries to terminate a fixed term tenancy?

Typically when a tenant agrees to a fixed term tenancy, usually for either 6 months or 1 year, the tenant is agreeing to be responsible for the rent for that period of time. If the tenant vacates the premises prior to the end of the term of the agreement, the tenant will typically still be responsible for payment of rent for the entire length of the lease (provided the tenancy is not in a jurisdiction that allows the tenant to give notice to prematurely end a fixed term tenancy). Typically, if the Landlord is able to re-rent the premises prior to the end of the lease of the breaching tenant, the breaching tenant is no longer required to pay rent as the landlord cannot collect double rent for the premises.

In addition, some leases may contain penalty clauses whereby the tenant is required to pay "re-rental fees" to cover part of the cost of the landlord having to re-rent the premises. However, the amount of the "re-rental fee" has to be reasonable and must be a pre-estimate of the damages that the Landlord will suffer in having to re-rent the premises early.

What happens when the tenancy agreement term expires?

The expiry of the tenancy agreement does not necessarily terminate the rental arrangement. If a "Periodic" term is selected, the tenancy agreement will automatically renew based on the same terms as the first tenancy agreement, unless it is varied by giving proper notice as required by statute. So a "Periodic monthly tenancy agreement" that continues for one year is actually 12 separate, automatically renewing tenancy agreements. The tenancy agreement will continue to renew automatically until one of the parties wishes to terminate the tenancy agreement (by giving proper notice as required by statute).

If a "Fixed" term is selected, the leasing relationship may still continue after expiry if both the landlord and the tenant wish it to. In some jurisdictions, statute dictates that it will become a Periodic term tenancy agreement, usually of the month-to-month variety, though this may vary. In other jurisdictions, the Fixed term tenancy agreement may become a "tenancy at will" or a "tenancy at sufferance" when it expires, which lasts only as long as both parties wish it to, and is not subject to as much legal protection as a Periodic tenancy agreement. If you wish to terminate all rights under a Fixed term tenancy agreement as soon as the tenancy agreement expires, you must serve proper notice before the end of the tenancy agreement term, in accordance with local statute.


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Rent

What is a reservation fee?

A reservation fee is a sum of money (up to the equivalent of 1 week's rent) given by a prospective tenant to a landlord while the landlord is deciding whether to accept the tenant's application. The reservation fee is meant to be a sign of good faith but will not guarantee the tenancy. If the tenancy does go ahead, then the reservation fee will count as the tenant's first week's rent. If the landlord does not accept the tenancy, or makes no decision within 1 week of the fee being paid, the landlord must refund the reservation fee. If the tenancy is granted but the tenant no longer wishes to accept the tenancy, the landlord is entitled to keep the reservation fee.

Does the tenant have to pay any rent in advance?

Yes, on the first day of the tenancy the tenant must pay rent in advance tenancy as follows:

  • two weeks rent in advance, if the weekly rent is $300 or less, or
  • one month rent in advance, if the weekly rent is more than $300.

Advance rent is not money that the landlord can keep in reserve as some form of extra rental bond. A tenant cannot be asked to make any more rent payments until the rent which they last paid has been used. For example; on the day the tenancy commences the tenant may pay two weeks rent and be 14 days in advance. As each day passes the tenant becomes one day less in advance, so that when the rent next falls due (a fortnight later) the tenant is no longer in advance with the rent. By making their next fortnightly payment the tenant is again 14 days in advance and the cycle continues.

How often does the tenant have to pay rent?

If the weekly rent is $300.00 or less, a tenant cannot be required to pay the rent other than on a weekly or fortnightly basis.

Does the landlord have to provide receipts for rent payments?

Unless the rental payment is directly being deposited into the landlord's account, the landlord must provide a receipt for the payment. The receipt should state:

  • the date of payment;
  • the period for which the payment was made;
  • the address of the premises
  • the name of the tenant
  • the name of the landlord or agent; and
  • the amount of rent paid.

Does the landlord have to keep any records of rental payments?

Yes, the Residential Tenancies Act requires landlords to keep a record of all rental payments for up to 12 months after the tenancy.

Can the landlord increase rent?

For fixed term tenancies, the landlord cannot increase rent until after the fixed term of the tenancy expires. For all tenancies, the landlord must give the tenant 60 days notice in writing before a rent increase. If the landlord is serving the notice by post 4 additional days must be added onto the notice period to allow for delivery of the notice.

Can a tenant challenge a rent increase?

If the tenant disagrees with the rent increase the tenant has certain options:

  • The tenant can negotiate the rent increase with the landlord. The tenant should prepare a letter to the landlord detailing why the rent increase is too high. The tenant may want to provide evidence of market rents in the area or evidence of improvement the tenant has made to the property. If the landlord agrees to lower the rent increase, the lowered rent increase will be payable on the same day as provided in the original notice.
  • The tenant can apply to the Consumer, Trader and Tenancy Tribunal to either reduce or withdraw a proposed rent increase. The tenant must make the application within 30 days of receiving the written notice of the increase. The tenant will have to prove that the rent increase is excessive. Usually, the Tribunal will accept evidence of comparable rents of similar properties within the area.


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Notice

How much notice do I need to give to terminate a tenancy?

In most jurisdictions, there is a minimum period of notice required by statute. The tenancy agreement can specify a notice period longer than the legal minimum, but it cannot specify a period shorter than the legal minimum. If it does, the legal minimum notice will still be required. You should consult the governing statute for these legal minimums as they will vary according to jurisdiction and the type and length of the tenancy agreement.

What is notice to enter?

A landlord usually does not have the right to enter a rented apartment suite unless there is an emergency, for example a fire or gas leak, or unless the landlord gives the tenant proper notice as defined by statute. So long as the proper notice is given, a tenant cannot refuse entry to a landlord.

What should I do if I do not want to renew my tenancy agreement?

You must provide proper notice to the landlord that you do not intend to renew the tenancy agreement, before the tenancy agreement expires. Notice must be given a certain amount of time before the tenancy agreement expires, as dictated by statute in your jurisdiction. This amount of time is called the "notice period". Typically, the notice period is one month for leases with a term of one month or less, and two or three months for leases with a term of more than one month, but this will vary according to the jurisdiction. You should consult the governing statute for the jurisdiction the property is located in to find out the required notice period for your tenancy agreement.

Does a notice of termination have to meet any requirements?

Notice of Termination has to:

  • be in writing;
  • state the address of the premises;
  • be signed and dated;
  • allow the required period of time;
  • provide the date on which the tenant intends to, or is requested to, move out (NB: do not use words such as 'by' or 'on or before' in the notice);
  • give full details of all breaches (if any) or reasons for ending the agreement;
  • and, if given to a tenant, include a statement that information about their rights and obligations can be found in the tenancy agreement.

A notice of termination can be posted or delivered in person however, if it is being posted, at least 4 working days should be added on to the notice period to allow for delivery of the notice. The notice period starts the day after the notice has been served.

What is the minimum amount of notice to be given when terminating a tenancy?

In New South Wales, when a fixed term tenancy is about to come to an end, either party can give 14 days notice to end the tenancy. The notice can be served up to and including the last day of the fixed term. However, once the fixed term has expired, tenants must give at least 21 days notice to end the tenancy and landlords must give at least 60 days notice to end a tenancy.


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Bond and Deposits

What is a bond/security deposit?

A bond/security deposit is a sum of money the tenant pays to the landlord to guarantee that the tenant will fulfill all obligations under the tenancy agreement. The landlord holds the security deposit in trust for the term of the tenancy agreement to ensure that the tenant does not default on the terms of the tenancy agreement or otherwise damage the property. Should the tenant damage the property (normal "wear and tear" excluded) or if the Tenant has not paid rent, the landlord is entitled to recover the amount owing from the security deposit. Usually the tenant must provide the landlord with the security deposit at the start of the tenancy agreement term. At the end of the tenancy agreement term, the tenant will receive the deposit back minus any deductions for repairs/restoration.

Please note: in some jurisdictions, a landlord is not allowed to ask for a security deposit. In other jurisdictions, a landlord may require both a security deposit and other types of deposits (for example, a pet damage deposit). You should review the governing legislation for the location of the property to make sure the type of deposit is allowable.

What is the maximum amount of bond/security deposit a landlord can ask for from a tenant?

In New South Wales, the maximum bond that can be required is as follows:

  • Four weeks rent, for unfurnished premises, or
  • Six weeks rent, for fully furnished premises with a rent of $250 or less per week, or
  • Unlimited, if the rent for fully furnished, premises is more than $250 per week.

When can the landlord deduct from the bond/security deposit?

The landlord can deduct from the bond/security deposit when the tenancy ends and the tenant owes the landlord money for either unpaid rent or damage to the premises. The landlord generally cannot deduct for reasonable "wear and tear" on the premises, (i.e. wear and tear that occurs just from living in the premises). The landlord can deduct for stains on the carpet or countertops, large holes in the wall, and missing appliances and other such things that are beyond reasonable wear and tear.

Condition Report

What is a condition report?

Prior to moving in, the tenant and the landlord should walk through the premises and write down any existing damage. This written account is called a condition report. The landlord and tenant should both get a copy of this report. It is also a good idea to take photographs or a video of the condition of the premises. This will assist in interpretation of the a condition report if there is a dispute at the end of the tenancy.

In some jurisdictions, a condition report is also required upon moving out, as a condition for the landlord to make a claim against the tenant's security deposit/bond.


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Why do I need a condition report?

A condition report will help to prove what damage was caused by the tenant for purposes of deducting the amount to fix the damage from the bond.

What steps are required to fill out a condition report?

The steps needed to complete a condition report are:

  • The landlord or agent must fill out and sign the condition report in triplicate (i.e. 3 copies) noting the cleanliness, general condition and working order of each applicable item on the report. Any comments should be written in the space provided, or on a separate page if there is no room.
  • If the property is furnished, a list of all the furniture and the condition of each item should be attached to the report.
  • The tenant should then be given 2 copies of the filled out condition report at or before the time the tenancy begins.
  • The tenant should take the report away and fill out the 'tenant agrees' column with a Y (for yes) or an N (for no). If the tenant does not agree they should write a reason in the comments area of the report.
  • The tenant should sign and return a copy to the landlord or agent within 7 days and keep the other copy for themselves.

Should the condition report specify any repairs that the landlord will complete?

If the landlord or agent promises, prior to the start of the tenancy, to fix anything or do other work (e.g. cleaning or painting) this should be noted in the space provided at the end of the condition report. The tenant will then have written evidence on which to take the matter further if the repairs or other work are not carried out by the agreed date.

Additional Terms

Can I add any additional terms to the tenancy agreement?

You can add additional terms provided those new terms:

  • expand on one of the standard terms of the agreement, or
  • cover a matter under the Act which is not already dealt with in the agreement.

Any term that conflicts with the Residential Tenancies Act 1987 or the standard terms will be held unenforceable.

All additional terms are negotiable between the parties.


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Miscellaneous

What is an assignment and how does it differ from a sublease?

Assignments and subleases both occur when the tenant gives his/her rights under the tenancy agreement to a third party. A sublease or an assignment typically requires the consent of the landlord. An assignment occurs when the tenant gives to a third party all of his or her remaining rights under a tenancy agreement for the entire term of the tenancy agreement. If a tenant assigns property and the landlord consents to the assignment, that tenant no longer has any rights to the property nor any obligations to the landlord. In a sublease the tenant can transfer a portion of the leased space (e.g. a room in a house) or a portion of the tenancy (e.g. for 5 of the remaining 6 months of the tenancy agreement) to a third party. The original tenant retains whatever rights under the tenancy agreement he or she has that were not transferred to the third party, and also retains most of his or her obligations under the tenancy agreement. The original tenant can still sue and be sued by the landlord for lease violations.

What are signing incentives?

Signing incentives are bonuses the landlord gives to the tenant, typically for either signing a tenancy agreement or signing a fixed term tenancy agreement. They may include free month's rent, or a rent decrease for the months of the fixed term tenancy. If the tenant breaches the tenancy agreement, these incentives may have to be paid back to the landlord.

Why do tenants need insurance? Doesn't the landlord already have it?

While the landlord typically has insurance, it usually covers only the landlord's assets and liabilities. If you want coverage for your personal belongings or for your own negligence, you need to have renter's insurance. What coverage you want should be discussed with an insurance agent.

What is meant by the "Act?"

The "Act" refers to the legislation governing residential tenancy agreements in your jurisdiction. After you select the Location of Property when you are filling out the Tenancy Agreement Details, you will see a link beneath your selection to the governing legislation for the jurisdiction you have selected. It is not necessary to specifically state the name of the "Act" in your contract, as the relevant legislation is satisfactorily identified by the "severability" clause of your tenancy agreement.

What does the clause "other charges will be treated as rental arrears" mean?

Some rental contracts contain payments other than rental payments. For example the tenant may be required to pay utilities bills, or NSF charges, late fees or other charges.

If these charges are not paid by the tenant, the landlord may treat these unpaid amounts as non-payments of rent and start eviction proceedings against the tenant for non-payment of rent. If this clause was not in the contract, the landlord could not treat a failure to pay these bills as a non-payment of rent and could not start and eviction process as quickly (or at all in some cases).

What happens if I sign a tenancy agreement but cannot move in or take possession?

When you sign a tenancy agreement, you are promising under contract that you will pay rent to the landlord. This is a legal obligation that courts take seriously. You may be liable to the landlord for loss of revenue that the landlord suffers as a result of you not paying the rent, even if you have a good reason for not being able to take possession. In some situations it may be less costly for you to simply take possession and immediately serve notice that you will be vacating as soon as the notice period expires - it may sometimes be better to pay for one or two months' rent than to go to court and be forced to pay more.

Because this is a complicated situation, you may wish to contact a qualified lawyer in your jurisdiction, especially if large sums of money are involved. You should inform your landlord immediately of the situation, so it cannot later be claimed that the landlord suffered losses as a result of not knowing that you were not going to move in. You may also wish to contact your local Residential Tenancies Board or government agency who oversees landlord/tenant disputes to find out the extent of your liability, which may or may not be limited by statute.


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