Starting a Tenancy

The new year is a time of new beginnings and for a lot of people, is also the time when they may vacate a rental property and begin a tenancy in a new one.

In 2023, landlords are at an advantage, thanks to tight vacancy rates and rising rents.

However, they also have plenty of responsibility when it comes to looking after their tenants.

It is important that both landlords and tenants educate themselves on what they need to do before starting a tenancy, at the commencement of the lease and during the period of the tenancy. Let’s look at those three stages.

1. Before starting a tenancy

Before listing their property for rent, a landlord must ensure it is fit to live in. This means it must be safe, secure, clean and maintained to a reasonable condition.

The property does not need to be brand new and in mint condition, but its state and level of repair should match its age and the cost of the rent being paid.

At a minimum, it must be structurally sound; have adequate lighting and ventilation; electricity or gas; adequate plumbing and drainage; hot and cold water for drinking, washing and cleaning; and have bathroom facilities with privacy, including toilet and washing facilities.

Once those standards are ticked off, landlords must inform potential tenants if the property is planned to be sold, subject to court action, or in a strata scheme with a strata renewal committee.

Landlords must not mislead tenants, or hide relevant events from the property’s history, such as flood damage, health and safety risks, criminal activity and other reasons, listed here.

Tenants wishing to apply to live in the property are asked to fill out an application form for review by the landlord. They can be expected to provide rental history, references and proof of employment.

If their application is successful, the tenant is notified and the next step is signing a rental agreement.

2. Starting a tenancy

Before agreements are signed, or tenants move in, a landlord must provide them with copies of the tenant information statement, the proposed tenancy agreement, two copies of the condition report and a copy of strata by-laws if applicable.

The landlord then gives the tenant the signed tenancy agreement.

Most landlords then request the tenant pay a rental bond as security, which is a maximum of four weeks’ rent and is refunded at the end of the tenancy unless there is a reason for the landlord to make a claim against it. This can be lodged with NSW Fair Trading, either digitally through an online portal, or manually.

Are we in agreement?

Residential tenancy agreements are legal, binding agreements between landlord and tenant. They must be in writing- although verbal agreements are still binding- and there is no cooling off period.

The agreements can either be fixed term (for a period of time with specific start and end date), or periodic (fixed term has expired or was not specified). Fixed term agreements automatically roll into periodic agreements unless renewed.

Other bits and pieces

An important part of this stage of the tenancy is the condition report, which landlords must fill out before the tenants move in and include the general condition of the property, room by room.

Tenants must then review this and complete their part of the report within seven days of moving in. This is the chance for the tenant to identify any current damages, hazards or necessary repairs that they could otherwise be held responsible for.

The landlord must then provide tenants with their contact details at this stage,along with all necessary keys, garage remote controls and access to any common areas at the property.

Landlords must supply essential services such as electricity, gas and water, unless the property is separately metered. Telephone and internet, however, are the tenant’s responsibility.

3. Managing a rental property

Most landlords engage property managers to manage their rental properties, though they do have the option to manage it themselves.

Either way, it’s landlords who are responsible under residential tenancy laws.

If a landlord decides to self-manage, they will save on agency fees and have full control over the process, but this can be time intensive due to the requirement to be across tenancy laws and potentially complex documentation.

If a landlord engages an agent to manage their property, the agent must be a licensed real estate agent or the assistant of one.

Before entering a management agreement with the agent, the landlord should make sure they are happy with how often inspections will take place, the reasons for which they may be contacted directly (ie for all repairs or only more expensive ones), and their fee structure.

The agent is responsible for vetting tenants, ensuring agreements are completed and signed, lodging the rental bond and the day to day management of the tenancy. That includes arranging repairs or maintenance, rent collection and admin, conducting inspections, handling disputes and paying the rent to the landlord (after fees) at the end of the month.

Agent’s fees usually range between 5 and 12% of the gross weekly rental and include letting and management, plus potentially advertising costs, tenancy agreement preparation and other things that may vary between agencies. Landlords should carefully check what is included under the fee structure when comparing potential managing agents.

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