No fault evictions explained – what will they mean for renters and landlords?

NSW Premier Chris Minns recently announced his government would legislate to stop landlords from evicting tenants without grounds – in an attempt to help provide greater rental security across the state. The announcement came in response to a crisis in homelessness and lack of available and affordable rentals, especially in Sydney, where historically low vacancy rates have created tough market conditions for renters.

No-fault evictions occur when a landlord terminates a tenancy agreement without needing to provide a specific reason, as long as they give the tenant the required amount of notice.
As it stood until now in NSW, landlords could end a lease by giving 30 days’ notice at the end of a fixed-term agreement or 90 days’ notice during a periodic tenancy, notice for a No Cause termination for a Periodic Lease. This flexibility was beneficial for landlords, especially as it allowed them to vacate the property and list it again for considerably higher rent. However, it has led to an increase in housing insecurity for tenants.

What has changed?

The ban on no-fault evictions is designed to provide greater security and stability for tenants in their living arrangements. Under the new rules, landlords will no longer be able to terminate a lease without a valid reason. Acceptable grounds for eviction now include failure to pay rent, damage to property, illegal use of the premises, causing or allowing interference to the peace and quiet and comfort of the neighbours or if the landlord or their family members need to occupy the property.

Benefits for tenants

The ban will be a big win for tenants. Many people have spent the last couple of years living with the fear of losing their home with little notice and needing to find something else in a market where there’s not much to choose from and prices are inflated. The ban provides tenants with greater security and ownership over their situation. They can be reassured that they can maintain their tenancy by paying on time and looking after the property.

Another potential benefit is that more tenants staying longer in the one area will help create more stable communities, with long term neighbour relationships, engagement in community activities and schools, plus support for local businesses.

What it means for landlords

While the ban on no-fault evictions is a win for tenants, it presents new challenges for landlords. Property owners now have fewer options to regain control of their properties, which could be particularly problematic in situations where they wish to sell, renovate, or simply choose a different tenant. Landlords may feel that their rights to manage their properties are being impinged upon, leading to concerns about their ability to protect their investments.

Some specific stories have included landlords with tenants who pay late every month, and maintain a position where they are two weeks late with their rent. They would love to replace those tenants with ones who pay on time, but being two weeks late will not be an acceptable reason for eviction.

Opposite effect

Some landlords argue the no-fault changes could make them more cautious about entering into new rental agreements, particularly with tenants who may pose a higher risk of breaching the terms of the lease. There is also concern that it might lead to more disputes being taken to the NSW Civil and Administrative Tribunal (NCAT), as landlords will need to provide and prove justifiable reasons for ending tenancies.

Finally, there is the risk – as there is every time there is an announcement by some level of government that is designed to crack down on landlords- that investors will exit the market, reducing the supply and making the situation even worse for tenants.

Landlords see property investing as a business. If their return on investment is affected significantly by restrictions like these or increases to the tax they must pay, they will often sell the asset and put their money elsewhere. When they sell, it is often to owner-occupiers, which means even fewer rentals on the market.

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