24 June 2009

Queensland developers, mining companies, banks, real estate agents - be prepared for the new laws!

The new Residential Tenancies and Rooming Accommodation Act 2008 (Qld) commences on 1 July 2009 and will repeal the existing Residential Tenancies Act 1994 and Rooming Services (Accommodation) Act 2002.

While the new Act brings together the two repealed Acts into one piece of legislation, there are some major amendments which will have a significant impact upon various players in the property industry. We have set out a few of the most important changes below and how we consider that they will impact upon your industry.

Leaseback arrangements

It is common practice in any project development work (ie. property, mining and infrastructure development) to invite the previous landowners to leaseback their residential property following the acquisition of a property for a project. The repealed Act did not apply to such leaseback arrangements, provided that the lease was formed under a term of the contract of sale and the buyer was leasing the property back to the seller.

While the new Act provides a similar exemption, the lease must be for a period of 28 days or less in order to qualify for the exemption. If the leaseback arrangements exceed 28 days, the buyer/landlord will need to strictly comply with the provisions of the new Act.

The new Act will apply to any contracts of sale of residential properties entered into from 1 July 2009 that contain a leaseback arrangement that exceeds 28 days. Additionally, if a developer has already entered into an option agreement where the contract has leaseback arrangements that exceed 28 days, care should be taken to ensure that the leaseback arrangement complies with the new Act if the option is exercised after 1 July 2009.

All businesses carrying out project development work should be wary of these arrangements and should ensure that they are up to speed on how to comply with the provisions of the new Act.

Mortgagee in possession

The new Act has lengthened the timeframes that a mortgagee going into possession must give to the tenant in order to take possession of a residential property, from four weeks to two months. This right of termination will only apply if:

• the residential premises are subject to a mortgage;
• a residential tenancy agreement was only entered into after the premises became subject to the mortgage;
• the mortgagee did not consent to the tenancy under the terms of the mortgage; and
• the mortgagee becomes entitled to obtain possession.

If a mortgagee provides a tenant with two months' notice to leave, the tenant may vacate at any time and will not be liable for any loss or expense merely because the tenant vacates the premises early.

A new provision has also been inserted to reassure tenants that, if they are directed by the mortgagee to pay rent directly to the mortgagee and they do so, the landlord has no recourse in respect of any loss or expense arising from the direct payment to the mortgagee.

Accordingly, all banks who operate in the residential market should be aware of these changes when planning to take possession of a property that is the subject of a residential tenancy agreement. Breaches of these provisions are an offence under the new Act.

Advertising rental properties

The new Act now prohibits anyone advertising a residential premises for lease unless a fixed rental amount is stated in the advertisement. Accordingly, advertising "rent ranges" such as $300 to $350 and auction-style bidding will now be prohibited.

If a landlord (or agent) breaches this provision, not only will it be an offence under the Act but the landlord will be prohibited from collecting a rental bond from the tenant. If a rental bond is collected, the landlord will not be able to recover any amount of that rental bond during or at the end of the tenancy and it will also be a second offence under the Act.

However, the landlord or agent may place a sign on or near the premises advertising the premises for lease without stating the rental amount on the sign.

Right to dispute significant changes

The new Act now gives the tenant a right to dispute any "unreasonable" significant changes upon the renewal of a tenancy agreement (ie. going from an existing tenancy agreement to a new tenancy agreement for the same property where there is at least one tenant remaining in occupation of the premises).

If the tenant considers that the significant change is unreasonable, the tenant may apply to a tribunal for an order within 30 days after the tenant enters into the new agreement.

There are certain facts that the tribunal may take into account and the tribunal has the power to reduce the rent or make any other order it considers appropriate in the circumstances. The tribunal also has the power to amend the tenancy agreement.

Significant changes is defined to include a change to:

• the special terms for the tenant agreement;
• the rent amount and whether it must be paid weekly, fortnightly or monthly;
• the way the rent must be paid;
• any services supplied to the premises, other than water, for which the tenant must pay;
• whether the tenant must pay for water supplied to the premises;
• the number of occupants allowed to reside in the premises, if there is a limit on the number of occupants;
• whether pets are allowed; or
• another matter prescribed under a regulation.

Accordingly, care must be taken to ensure that there are no "unreasonable" changes made to a tenancy agreement when it is renewed. While this provision won't prohibit rent increases, landlords will need to ensure that they can justify any rent increases as "reasonable" based upon market trends.

Transitional arrangements

Any tenancy agreement entered into before 1 July 2009 will be taken to continue under the new Act and the provisions of the new Act will apply, without the need to enter into a new tenancy agreement. Accordingly, all notices issued after 1 July 2009 will need to be issued in accordance with the new Act.

There are two exceptions to these transitional arrangements:

• If prior to 1 July 2009, a tenancy was created between the parties to a contract of sale under a term of the contract (ie. leaseback arrangements), then the new Act will NOT apply to such a tenancy; or
• If the repealed Act did not apply to an existing agreement and the new Act now applies to that agreement, the new legislation will not apply to the agreement until 1 July 2010. There is a delayed commencement date for any arrangements caught in this category.

Other changes

There are numerous other changes in the new Act including (but not limited to):

• entering a tenancy agreement;
• accepting deposits;
• increasing rent;
• method of paying rent;
• giving notices;
• landlord's rights of entry;
• ending a tenancy agreement; and
• keeping records.

If you would like further information about how the new Residential Tenancies and Rooming Accommodation Act 2008 will affect your business, please contact us.