With any property investment we have to consider the landlord responsibilities – those obligations that purchasing it creates.
In the case of Property Investors, one of these obligations when renting a property will be finding and managing a Property Manager – or indeed deciding to do the job ourselves, and becoming the Property Manager as well as the landlord.
Being a landlord is a serious job, that brings with it not just significant financial considerations, but legal requirements along with a number of real considerations in order to do it efficiently and effectively.
Even if you use a property manager, who will advise you and act on your behalf – as an owner/investor, it’s critical that you understand the rules that apply in regards to your obligations as the landlord.
While in the past many tenants felt landlords had unreasonable rights, with updates in the law, the pendulum has swung in favour of the tenants, and many landlords feel their rights have been reduced, and their responsibilities increased.
As a landlord it is critical you comply with the legislation in your state. If you don’t, you can end up with a serious fine, and further issues that can be extremely costly and time consuming.
These days, tenants tend to know their rights; the problem is many landlords don’t, and the rental process can become complicated.
Some key Considerations:
Taking a bond
All sensible landlords will take a bond from their tenants as a security deposit. If tenants fail to keep the premises clean, damage the property or don’t pay rent, the landlord or their agent can make a claim against their bond at the termination of the tenancy.
This bond must be forwarded to their state’s residential tenancies bond authority, which will hold the bond on behalf of the tenant and landlord throughout the tenancy.
Usually, the bond is equivalent to one month’s rent, but it can be higher for expensive properties or if the rental property was previously the landlord’s own home. Keep in mind that if you increase the rent on the property during the tenancy, you can’t increase the amount of the bond – so understanding what is realistic and reasonable is important for both the landlord and the tenants.
Costs of rectifying what is called “fair wear and tear” cannot be claimed. As a landlord, however, you can make a claim on the bond for:
- Cleaning expenses required to bring it back to a reasonable rental condition.
- Abandonment of the property.
- Any unpaid bills
- Breakage or loss of the Landlords property
- Any unpaid rent
- Any damage caused by the tenant or the tenant’s visitors
In NSW the arbiter is the Consumer, Trader and Tenancy Tribunal. In Victoria, if there is a disagreement about the bond, or the landlord wants to claim compensation over and above the bond, they need to apply to the Victorian Civil & Administrative Tribunal (VCAT). Other states and territories have their own equivalent bodies.
Filling out a detailed entry condition report at the beginning of any tenancy, and keeping photographic evidence of the property, is very important. This can be used as evidence to assist the landlord or their agent in claiming all or part of the bond, for the reasons listed above.
Rent can be paid by the tenant weekly, fortnightly or monthly. Requesting that the rent is paid by direct debit is one way to help ensure rent is paid on time – but is not obligatory.
Utility and Council service charges
The landlord needs to organise and pay for the installation and connection fees for electricity, gas or oil supply, and manage and pay for water rates as well as council taxes.
As a landlord you have a responsibility to:
- Provide the tenant a copy of the booklet relevant to your state which outlines their rights before they move into your property.
- Make sure the premises are vacant and clean by the time the tenant is due to move in.
- Keep the premises and common areas in good repair.
- Ensure any fitting or fixture meets Standards Australia ‘A’ rating.
- Reimburse the tenant if the tenant has paid costs of any utilities for which the landlord is liable.
- Ensure all external doors have locks and windows that can be secured.
- Provide the tenant with all the relevant keys as soon as possible after changing any lock.
- Ensure the tenant has peace and quiet and reasonable enjoyment of the premises.
- Must not enter the premises to carry out inspections until after a certain period of time, and after this time, follow the state’s rules regarding proper notice to do so.
When can you visit your property?
Local legislation stipulates how often you can do this and how to go about it.
For example, depending on what state you are in, the landlord may have the right to enter after a specific period of time, having given written notice to the tenant only to:
- Carry out duties under the local state Residential Tenancies Act
- Get a property valuation
- Show prospective buyers or lenders the premises.
- Show prospective tenants the premises.
- Be able to demonstrate a reasonable belief that the tenant has not met their lawful responsibilities as a tenant.
Under these circumstances, the landlord is allowed to enter the premises if the tenant is not home, providing the requirements regarding written notices have been met. The landlord does not have the right to enter in an unreasonable way or stay any longer than necessary, unless it is with the tenant’s permission.
Sometimes you will be contacted by your tenant or property manager informing you that an item needs to be repaired.
You need to respond quickly to requests for “urgent repairs” and you need to know what is classed as an “urgent repair”. If you don’t respond in a reasonable time, your tenant may have the right to arrange for these repairs to be completed – which you may have to reimburse.
If non-urgent repairs are not attended to, your tenant may apply to the tribunal for an inspection and subsequent report. The tenant can also apply to the tribunal for a repair order.
Legislation usually prevents tenants from withholding rent while waiting for repairs to be done.
When can you increase the rent?
With a standard fixed lease, you usually can’t increase your rent until the end of the lease term unless your agreement states otherwise. In any case, you will need to understand your state’s rules around raising the rent and how to provide notice of any proposed rent increase properly.
How to end a tenancy?
There are a number of set ways to end a tenancy agreement and these vary slightly from state to state. Even if an agreement has a fixed end date, you will need to give formal notice to end the tenancy.
As the tenant’s rights to remain in the property are protected by law, if you want to end the tenancy, you need to check:
- The reasons allowed in your state for giving notice to end a tenancy.
- How the notice needs to be given and the requirements within that official notice or form.
- How much notice you need to give before the end of any agreement.
As a landlord you have the right to choose the tenant you consider most suitable for your property, but equal opportunity legislation makes it unlawful to discriminate against or harass people. This means that you can’t select your tenant based on their age, race, religion, sex or a number of other discriminatory reasons. If you do, you can become liable to pay damages or fines.
Ultimately, in order to maximise your investment returns and minimise headaches, you should consider using a professional property manager to look after your properties, when considering all of the landlord responsibilities. This way, all contact with tenants should be through them, which should insulate you from the hassles of all of the above – including finding tenants, completing agreements, arranging maintenance, repairs or improvements, and if necessary, sorting out any issues at the tribunal.
As an investor wanting to maximise their returns, streamlining your rental process is critical. By having a good understanding of the current relevant requirements and laws in your state, you can optimise your tenants’ satisfaction, your rental returns and yield, whilst minimising costs and risk, which is essential for any serious Property Investor.
Using a professional Property Adviser means landlord responsibilities amongst many more considerations are taken into account within your Property Investment Plan.
Information given is general in nature. You should consult an expert who can advise on your local legislation.