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.