UNDERSTANDING RENT INCREASES

Rent increases are a natural part of the rental market and often stem from various factors, including changes in market demand, property upgrades, and the overall cost of living.

However, as responsible property owners, it is essential to abide by the residential tenancy laws and adhere to specific guidelines to protect your interests and maintain a positive landlord-tenant relationship.

FIXED TERM AGREEMENT TO FIXED TERM AGREEMENT

When considering a rent increase from one fixed term agreement to another, it is essential to be aware of the legal requirements outlined in section 91 of the RTRA Act. Unlike rent increases in periodic agreements, no specific notice period is legally required for a rent increase when moving from one fixed term agreement to another. However, it is considered best practice to provide tenants with as much notice as possible to ensure open communication and a smooth transition.

Please note that the standard two months’ written notice for a rent increase applies only to periodic agreements (periodic to periodic) or in cases where the original fixed term agreement includes a clause allowing for rent adjustments during the tenancy. In such cases, the rent can be increased after a specified period, however, not less than 12 months after the day of the last rent increase for that premises. Non-compliance with this provision is an offence, with a maximum penalty of 20 penalty units.

For example
if a 24-month fixed term tenancy includes a special term stating that rent will increase at the 12-month mark, compliance requires providing the tenant with two months’ written notice of the upcoming rent increase at the 10-month point of the 12-month tenancy.

It’s important to note that the rent will only increase when transitioning from one fixed term agreement to another if the tenant signs the new agreement (Form 18a).

If the tenant does not sign the agreement, the rent remains unchanged, and the lessor has the following options:

1. The fixed-term agreement automatically transitions into a periodic lease, and then two months’ written notice for a rent increase is required. The notice must be given when the agreement is periodic; if given while the agreement is still in the fixed term, it is not valid as the notice period starts when the agreement becomes periodic.

2. Once the agreement is in the periodic stage, the rent will increase automatically after two months, provided that written notice has been given to the tenant during the transition, and not sooner than 12 months since the last increase at the premises. However, please note that periodic tenancies are not common and may not always be in the lessor’s best interest.

3. In the event of the fixed term agreement’s end, a two months’ written notice to leave must be given to the tenant. This notice can be provided up until the day before the fixed term agreement’s end date. If the fixed term agreement is set to end on the agreement’s end date, the two months’ written notice must be given before the end date. Please be aware that the two months’ written notice to end the tenancy cannot be given if the agreement is already in the periodic stage and is only applicable to fixed term agreements.

4. Negotiate a new fixed term lease with an increased rent with the tenant during the periodic stage, without the requirement for a notice period. However, tenants cannot be compelled to enter into a fixed term agreement if they are on a periodic agreement and may choose not to accept the offer of entering into a fixed term lease.

FIXED TERM AGREEMENT TO PERIODIC AGREEMENT

If a tenant is currently on a fixed-term tenancy, and the tenancy is transitioning to a periodic arrangement, it is important to adhere to section 91 of the RTRA Act, which requires two months’ written notice to be given to the tenant for a rent increase to take effect. During this two-month period, the rent increases without the need for a new written agreement.

However, a Lessor or Agent must not increase the rent for a residential premises less than 12 months after the day of the last rent increase for that premises. Non-compliance with this provision is an offence, with a maximum penalty of 20 penalty units.

Most property owners find periodic tenancies less favourable, and we aim to ensure that lessors understand that periodic tenancies can only be ended with specific legal reasons (grounds) as set out in the Act.

It is crucial to note that the two months’ written notice period can only begin from the day after the fixed term ends, as stated in section 91, since the notice period applies to periodic tenancies. If the two months’ written notice is given during a fixed-term agreement, it is not valid, as the agreement is still in the fixed term stage and not yet periodic.

PERIODIC AGREEMENT TO PERIODIC AGREEMENT

If your tenant is currently on a periodic tenancy and the agreement is intended to remain periodic, it is essential to comply with section 91 of the RTRA Act when implementing a rent increase. However, a Lessor or Agent must not increase the rent for a residential premises less than 12 months after the day of the last rent increase for that premises. Non-compliance with this provision is an offence, with a maximum penalty of 20 penalty units.

In this scenario, you must provide the tenant with two months’ written notice of the upcoming rent increase, as outlined in the Act. The rent increase will take effect after the two months’ notice period without the need for a new written agreement.

By adhering to the RTRA Act and providing the required notice period, you can ensure a smooth and compliant rent increase process within a periodic tenancy agreement.

PERIODIC AGREEMENT TO FIXED TERM AGREEMENT

For a periodic tenancy that is being negotiated to transition into a fixed term agreement, there is no specific legal requirement for a notice period regarding a rent increase. However, a Lessor or Agent must not increase the rent for a residential premises less than 12 months after the day of the last rent increase for that premises. Non-compliance with this provision is an offence, with a maximum penalty of 20 penalty units.

This process is considered a negotiation and best practice rather than a legal obligation. It’s crucial to recognise that tenants cannot be compelled to agree to an offer to enter into a fixed term agreement and have the right to decline such an offer.

For example
the tenant may be on a periodic tenancy currently at $300 per week. The lessor and tenant agree on a fixed term agreement and the lessor would like a rent increase to $310. The current date in this example is the 5th of November; the offer that is made to the tenant could be a fixed term agreement commencing on the 24th of November at a new rent rate of $310. If the tenant agrees, then the agreement would be drawn up, signed and commences at the new rent rate as of 24th November.

In conclusion, when transitioning a periodic tenancy into a fixed term agreement, the process involves negotiation, and tenants cannot be compelled to accept a rent increase or enter into the fixed term agreement. Property managers should promptly communicate with the lessor in such situations to decide on the appropriate course of action, ensuring compliance and transparent communication throughout the process.

OVERVIEW:

NEW AGREEMENTS

The Lessor and Tenant can agree to a rent increase at the end of a fixed term agreement by entering into a new agreement. However, it must be at least 12 months after the day of the last rent increase for that premises. There is no requirement to serve a notice about the increase.

If a new agreement is not signed, the agreement becomes periodic (with the same terms and conditions as fixed term tenancy agreement). The rent can be increased by giving at least two months’ notice prior to or on the commencement of the periodic agreement; provided it is 12 months after the day of the last rent increase for that premises.

FIXED TERM AGREEMENTS

Rent cannot be increased during a fixed term unless it is stated in the tenancy agreement and all of the following occurs:

• the agreement states the rent will be increased
• the agreement states the new amount (or how it will be worked out)
• the Lessor gives the Tenant at least two months’ notice in writing, and
• it has been at least 12 months after the day of the last rent increase for that premises.

PERIODIC AGREEMENTS

Rent can be increased if it has been at least 12 months after the day of the last rent increase for that premises and the property manager/owner gives the tenant or resident at least two months’ notice in writing (general tenancies).

If there is a fixed term agreement in place which is to become a periodic agreement, then two months’ notice in writing can be given prior to or on the commencement of the periodic agreement. However, the rent increase can only take effect at least two months after the commencement of the periodic agreement, 12 months after the day of the last rent increase for that premises.

91 Rent increases

(1) This section applies to increases in rent for the following —

(a) a periodic agreement;

(b) a fixed term agreement, during the term of the agreement.

(2) If the lessor proposes to increase the rent, the lessor must give written notice of the proposal to the tenant in the way required by this section.

(3) The notice must state —

(a) the amount of the increased rent; and

(b) the day from when the increased rent is payable.
(c) the day the rent was last increased for the premises.

(4) The day stated in the notice under subsection (3)(b) must not be earlier than the later of the following —

(a) 2 months after the day the notice is given to the tenant;

(b) the end of the minimum period before the rent may be increased under section 93.

(5) Subject to an order of a tribunal under section 92, the increased rent is payable from the day stated in the notice, and the agreement is taken to be amended accordingly.

(6) However, the increased rent is payable by the tenant only if —

(a) the rent is increased in compliance with this section; and

(b) the increased rent is not payable before the end of the minimum period before the rent may be increased under section 93; and

(c) the increase in rent does not relate to —

(i) compliance of the premises or inclusions with the prescribed minimum housing standards; or

(ii) the keeping of a pet or working dog at the premises.

(7) Also, the rent under a fixed term agreement may not be increased before the term ends unless—

(a) the agreement provides for a rent increase; and

(b) the agreement states the amount of the increase or how the amount of the increase is to be worked out; and

(c) the increase is made under the agreement.

(8) This section applies subject to section 93.

93 Minimum period before rent can be increased

(1) A lessor or lessor’s agent must not increase, or purport to increase, the rent payable by a tenant less than 12 months after the last rent increase for the residential premises.

Maximum penalty — 20 penalty units.

(2) For this section, rent is increased for the residential premises if—

(a) a rent increase happens during the term of a residential tenancy agreement; or

(b) a new residential tenancy agreement (a new agreement) is entered into for the residential premises and, immediately before rent becomes payable under the new agreement, either —

(i) rent was not payable for the residential premises; or

(ii) the amount of rent payable for the residential premises was less than the rent that will be payable under the new agreement.

(3) The 12-month period mentioned in subsection (1) applies even if the last rent increase for the residential premises related to a different residential tenancy agreement, including a residential tenancy agreement entered into by a previous owner of the premises.

(4) Also, if the residential premises are moveable dwelling premises in a moveable dwelling park for a long tenancy (moveable dwelling), the 12-month period mentioned in subsection (1) applies whether the last rent increase was for the dwelling or its site, or both.

(5) For subsection (1), it does not matter whether or not the lessor or agent who increases the rent is the same person as the lessor or agent who last increased the rent.

(6) Nothing in this section prevents the lessor or agent from giving notice of an increase in rent within the 12 months mentioned in subsection (1) provided the increase does not take effect until the end of the 12 months.