Investors' rights at risk, agent warns

Planned changes to New South Wales tenancy legislation shift the balance of power too far in favour of tenants and could drive investors out of the market, according to Laing+Simmons general manager Leanne Pilkington.

The NSW Office of Fair Trading recently released the Residential Tenancies Bill 2009, which is anticipated to be introduced this year.

The government is at risk of causing an exodus of investors from the market at a time when rents are already predicted to rise due to a shortage of properties, Pilkington says.

"A gross mistake this legislation makes is effectively removing the notion of a fixed-term lease," she says.

"A tenant will be able to break a fixed-term lease simply by giving 14 days' notice to the landlord, subject only to the payment of a 'break fee'.

"What impetus is there for a landlord to enter a fixed-term lease, and how could they possibly budget (for) their investment if it can be dissolved on a whim?

"Conversely, landlords will be required to increase the notice period from 60 to 90 days to tenants once a fixed term expires. Once the tenant advises vacant possession, which they can do at any time in this 90-day notice period, they're only liable for rent up to that point.

"This is a prime example of how far the law could potentially be steered away from landlords."

Pilkington also points to a proposed change that would enable tenants to make some cosmetic changes to the premises without the landlord's consent as another example of the unfairness of the legislation.

"While the costs of installation will have to be met by the tenant, the legislation stipulates that a landlord must not unreasonably withhold consent to a fixture, alteration, addition or renovation that is of a minor or cosmetic nature," she says.

"Not only is a minor cosmetic nature not defined, but the scope for disputes at the commencement and end of a lease, when the alteration may need to be reversed, is huge.

"The industry obviously welcomes legislative changes that reduce the number of disputes between tenants and landlords and improves dispute resolution mechanisms, but unfortunately the changes proposed at this stage open the door for a vastly greater number of disputes to occur."

For a comprehensive study of the planned legislative changes and their implications for investors, see the February 2010 edition of Australian Property Investor.