The New South Wales (NSW) Government has introduced significant rental law reforms aimed at creating a fairer rental market. As an apartment investor, understanding these changes is crucial to ensuring compliance, maintaining strong tenant relationships, and safeguarding your investment. Let’s break down what these reforms mean for you and how they could impact your rental properties.
Key Changes Since 31 October 2024
Restrictions on Rent Increases
Under the new legislation, rent increases are now limited to once every 12 months, regardless of lease type. Additionally, landlords and agents cannot increase the rent within the first year of a tenancy, ensuring greater stability for renters.
While all tenants will be covered by these new rules moving forward, any fixed-term lease of less than two years that commenced before 31 October 2024 with a rent increase clause will still follow the existing terms until renewal or termination.
Investor Impact: This change requires landlords to be strategic when setting initial rent prices and long-term financial planning. Reviewing lease terms carefully and staying updated on rental market trends will be key to maintaining profitability.
Ban on Upfront Fees & Additional Charges
Property seekers and new tenants can no longer be charged fees when applying for or starting a lease. The only upfront costs landlords or agents can request are:
Holding fee: A maximum of one week’s rent, credited toward rent upon lease signing.
Rent: Payment covering the first rent period.
Rental bond: Capped at four weeks’ rent, processed through Rental Bonds Online.
Lease registration fee: Only applicable for fixed-term agreements of three years or more, payable to NSW Land Registry Services.
This means landlords and agents cannot impose additional charges for:
Conducting background or reference checks
Preparing lease agreements
Arranging property viewings
Providing initial keys or access devices
Charging pet bonds
Any other miscellaneous fees
These rules apply universally, regardless of whether a lease has been signed or a formal application has been submitted.
Investor Impact: Landlords will need to cover administrative costs previously passed on to tenants. It’s essential to budget for these expenses and consider them when setting rental rates.
Major Reforms in 2025
Just Cause Eviction Rules
One of the most substantial changes is the requirement for landlords to provide valid reasons to terminate a lease, effectively banning ‘no grounds’ evictions. Acceptable reasons include:
Tenant breaches of lease agreements
Sale of the property
Major renovations
Owner moving into the property
Investor Impact: This reform means that investors need to ensure clear documentation of lease breaches or strategic planning when selling or renovating properties. Being proactive with lease management and maintaining a strong communication channel with tenants is more important than ever.
Pet-Friendly Rental Rules
New rules will make it easier for tenants to have pets. While landlords can still refuse pet requests, they must provide a valid reason. If a dispute arises, tenants can appeal the decision to the NSW Civil and Administrative Tribunal. For tenants in apartment/community living, they'll still need to satisfy any applicable by-laws.
Investor Impact: Investors may need to reassess their stance on pets. Pet-friendly apartments can attract a wider pool of tenants and potentially lead to longer lease agreements. However, it is important to review lease terms to ensure protections against property damage caused by pets.
Introduction of the NSW Rental Taskforce
To oversee compliance with these new regulations, the NSW Government has set up a dedicated Rental Taskforce under NSW Fair Trading. This taskforce will monitor rental practices, conduct inspections, and address breaches of the new laws.
Investor Impact: Staying informed and compliant is essential to avoid penalties. Consider consulting property management professionals or legal advisors to ensure your lease agreements and property management practices align with these new regulations.
What This Means for Apartment Investors
These rental law reforms are designed to enhance tenant security, but they also require property investors to adjust their strategies. Here’s how you can prepare:
Plan for Long-Term Stability: With annual rent increase limits, focus on maintaining occupancy and reducing turnover costs.
Ensure Clear Lease Agreements: Clearly outline terms related to renovations, property sales, and lease breaches.
Consider Pet Policies Strategically: Weigh the benefits of allowing pets against potential maintenance concerns.
Stay Informed & Compliant: Keep up to date with regulations and consider working with property managers who understand the legal landscape.
Navigating these regulatory changes can be complex, but taking a proactive approach will help you maximise your rental income while staying compliant. A well-maintained building not only attracts quality tenants but also commands higher rents and enhances capital growth. That’s why engaging an experienced strata manager like Compass Strata can be key to your return on investment. For expert strata management, contact Compass Strata today.
