Tenancy Agreement FAQ - Australia-VIC

Tenancy Agreement FAQ - Australia-VIC Tenancy Agreement FAQ - Australia-VIC GeneralWhat is meant by Governing Law?The Governing Law will be the jurisdiction in which the property is located. It may or may not coincide with the jurisdiction in which the parties reside. The Residential Tenancy Agreement will be governed by the laws of the jurisdiction where the property is located. Why isn't a verbal residential tenancy agreement sufficient?The problem with oral agreements is that they can be difficult to enforce. If a dispute arose, a court would have to hear evidence and decide whose version of the truth to accept. If there is a written agreement, courts will generally be obligated to uphold the terms of the written agreement even if they don't agree with them. What is addressed in a residential tenancy agreement?A Residential Tenancy Agreement typically addresses the following: the type of property being let; the address of the property being let; the term of the tenancy and whether the tenancy is fixed or periodic; the amount of rent payable, how often and when the rent should be paid; and the provisions of any bond. In addition, a residential tenancy agreement may also identify the following: taxes that are payable by the tenant; landlord improvements and signing incentives; tenant improvements and signing incentives; landlord and tenant repair obligations, who will pay for what utilities; whether the tenant can assign or sublet the property: notice provisions for termination of the tenancy; and insurance provisions. What makes a residential tenancy agreement different from a commercial property lease?A residential tenancy agreement is a tenancy agreement for your home. Governments have recognised the sanctity of the home and have extended increased protections to tenants by enacting laws ensuring a minimum set of rights for tenants. A Residential Tenancy Agreement cannot take away these basic tenant rights. When should the tenant be given a copy of the tenancy agreement?A copy of the agreement signed by both parties must be provided to the tenant within 14 days of beginning the tenancy. The PartiesWho are the parties to the tenancy agreement?The parties to a tenancy agreement are the lessor, also called the landlord, and the lessee, also called the tenant. The lessor owns the property and allows the lessee to use the property in exchange for monetary payments called rent. Who is the landlord's agent?The landlord's agent may be anyone who looks after the property for the landlord. An agent may be the landlord's friend, a landlord's family member or a landlord's real estate agent. Landlords are usually held responsible for their agent's actions. What does ACN mean?Under the Corporations Act 2001, every company in Australia is issued with a unique, nine-digit number. This number is referred to as an Australian Company Number (ACN) and must be shown on a range of documents. The purpose of the ACN is to ensure adequate identification of companies when transacting business. New companies are issued with numbers by the Australian Securities Investments Commission (ASIC) upon registration. What are the landlord's obligations?The landlord's obligations are defined by the terms and conditions contained in the tenancy agreement and the laws specific to Victoria. The landlord must: give the tenant a copy of the guide Renting a home: A guide for tenants and landlords on or before the occupation date; keep the premises and common areas in good repair; ensure that any replacement water appliance, fitting or fixture has at least a Standards Australia 'A' rating; make sure all external doors have locks, and windows can be secured; ensure that the tenant is given a key as soon as possible after changing any lock; let the tenant have peace and quiet in the premises; and not enter the premises to carry out a general inspection until after the end of the first three months of the tenancy and even at this time, follow the rules regarding proper notice periods. What are the tenant's obligations?The tenant's obligations are defined by the terms and conditions contained in the tenancy agreement and the laws specific to Victoria. The tenant must: keep the premises reasonably clean; not cause damage; notify the landlord or agent in writing as soon as possible if any damage is done; avoid causing a nuisance to neighbours; make sure that they and their visitors respect the rights of neighbours in regard to privacy, peace and comfort; make sure the premises are not used for any illegal purpose; get the landlord's or agent's permission, preferably in writing to: change a lock in a master key system; install fixtures; make additions or alterations or do renovations; and give the landlord or agent a key as soon as possible after changing any lock. It is very important to remember that, unless otherwise agreed, the tenant must restore the premises to the condition they were in immediately before the installation of fixtures, additions, alterations or renovations, fair wear and tear excepted. What if I don't know one party's name or contact information?A blank space will be provided in the form that can be filled in later if you are missing information about one of the parties. We recommend, however, that you attempt to make the contract as complete as possible, for greater certainty. What happens if I breach a term of the tenancy agreement?If you breach a term of the tenancy agreement you are responsible for correcting it. If you are the tenant, this may involve you paying money to fix any problems caused by yourself or your guests. If you do not voluntarily pay to correct the breach you can be sued for damages sustained as a result of the breach and/or possibly evicted by the landlord. The PremisesWho can live in the premises?Only tenants and people listed as occupants may reside in the premises. The landlord must be informed and approve of any change to the list of permitted tenants. Children born or adopted while the tenant lives in the premises are automatically added to the tenancy agreement as occupants. Also, each jurisdiction may restrict the number of tenants/occupants in the premises if that number violates health or safety standards for housing. Health and safety standards are typically expressed as 1 person per X sq. metre. The standard varies from jurisdiction to jurisdiction so if you are concerned, check with your local housing/public health authority. What is a basement suite and how does this differ from renting a room?Typically, letting a room or a basement suite means you are sharing an accommodation with the landlord. A basement suite is a self-contained dwelling unit complete with its own kitchen, bathroom, and living area. Most tenants of a basement suite use a separate entrance to enter the house than the rest of the occupants. If you rent a room, you will likely share either the kitchen or bathroom with the landlord. What are body corporate bylaws?A body corporate is the group of all the owners of lots or units which share common property. The body corporate bylaws refer to the set of rules governing the internal management of those lots. The bylaws may specify rules relating to noise, parking, behaviour of guests, pets, garbage disposal and the use of common property. The bylaws are sometimes referred to as a Community Management Statement. Tenancy Agreement TermWhich tenancy agreement term should I use?LawDepot allows you to choose from 2 main types of tenancy agreement terms. Fixed End Date - A tenancy agreement with a fixed end date gives certainty of term for both the landlord and the tenant. It specifies the exact day the tenancy will end. The advantage here is that neither party has to give notice to terminate the tenancy agreement, it simply ends on the specified date. During a fixed term tenancy agreement the landlord cannot increase the rent, or change any other terms of the tenancy agreement unless he specifically reserves the right in the agreement, and the tenant agrees to the changes. Periodic - A periodic tenancy will continue so long as neither party wishes to terminate the tenancy agreement. To terminate the tenancy agreement the landlord and tenant must give notice of their intention to leave as specified by statute. A landlord can raise the rent, or change the terms of the tenancy agreement in these types of agreements by providing proper notice as required by statute. At the end of the notice period the tenant must move out or the landlord can start eviction proceedings against them. What happens when a tenant tries to terminate a fixed term tenancy?Typically when a tenant agrees to a fixed term tenancy, usually for either 6 months or 1 year, the tenant is agreeing to be responsible for the rent for that period of time. If the tenant vacates the premises prior to the end of the term of the agreement, the tenant will typically still be responsible for payment of rent for the entire length of the lease (provided the tenancy is not in a jurisdiction that allows the tenant to give notice to prematurely end a fixed term tenancy). Typically, if the Landlord is able to re-rent the premises prior to the end of the lease of the breaching tenant, the breaching tenant is no longer required to pay rent as the landlord cannot collect double rent for the premises. In addition, some leases may contain penalty clauses whereby the tenant is required to pay re-rental fees to cover part of the cost of the landlord having to re-rent the premises. However, the amount of the re-rental fee has to be reasonable and must be a pre-estimate of the damages that the Landlord will suffer in having to re-rent the premises early. What happens when the tenancy agreement term expires?The expiry of the tenancy agreement does not necessarily terminate the rental arrangement. If a Periodic term is selected, the tenancy agreement will automatically renew based on the same terms as the first tenancy agreement, unless it is varied by giving proper notice as required by statute. So a Periodic monthly tenancy agreement that continues for one year is actually 12 separate, automatically renewing tenancy agreements. The tenancy agreement will continue to renew automatically until one of the parties wishes to terminate the tenancy agreement (by giving proper notice as required by statute). If a Fixed term is selected, the leasing relationship may still continue after expiry if both the landlord and the tenant wish it to. In some jurisdictions, statute dictates that it will become a Periodic term tenancy agreement, usually of the month-to-month variety, though this may vary. In other jurisdictions, the Fixed term tenancy agreement may become a tenancy at will or a tenancy at sufferance when it expires, which lasts only as long as both parties wish it to, and is not subject to as much legal protection as a Periodic tenancy agreement. If you wish to terminate all rights under a Fixed term tenancy agreement as soon as the tenancy agreement expires, you must serve proper notice before the end of the tenancy agreement term, in accordance with local statute. RentDoes the landlord have to provide receipts for rent payments?Yes, landlords must provide the tenant with rent receipts on request. If the rent is paid in person, the rent receipt should be paid immediately. If the rent is not paid in person but a receipt is requested, the landlord must provide a receipt within 5 business days. If the rent is paid in person but a receipt is not requested, the landlord should keep a record of all the payments made (for 12 months). On request, the landlord must provide a copy of the record within 5 business days. Failure to comply with these requirements could result in a $500.00 fine. What should be included in a rent receipt?The receipt should state: the tenant's name; the address of the premises; the date the money was paid the period the payment covers; the amount paid; and that it is a receipt for rent. Can the landlord increase rent?For fixed term tenancies, landlords can only increase rent if they have provided specific terms in the tenancy agreement allowing for rent increases. In any case, the landlord can only increase once in any 6 month period. The landlord must provide the tenant with at least 60 days' written notice before increasing the rent. Can a tenant challenge a rent increase?If the tenant disagrees with the rent increase the tenant can apply to the Director of Consumer Affairs Victoria for a declaration stating the rent is excessive. The Director will only grant such declarations in limited circumstances (e.g. if it is higher than the general level of rents for comparable premises or if the level of services available to the tenant have been reduced). The tenant must request a rental assessment within 30 days of receiving notice of the rent increase. NoticeHow much notice do I need to give to terminate a tenancy?In most jurisdictions, there is a minimum period of notice required by statute. The tenancy agreement can specify a notice period longer than the legal minimum, but it cannot specify a period shorter than the legal minimum. If it does, the legal minimum notice will still be required. You should consult the governing statute for these legal minimums as they will vary according to jurisdiction and the type and length of the tenancy agreement. What is notice to enter?A landlord usually does not have the right to enter a rented apartment suite unless there is an emergency, for example a fire or gas leak, or unless the landlord gives the tenant proper notice as defined by statute. So long as the proper notice is given, a tenant cannot refuse entry to a landlord. What should I do if I do not want to renew my tenancy agreement?You must provide proper notice to the landlord that you do not intend to renew the tenancy agreement, before the tenancy agreement expires. Notice must be given a certain amount of time before the tenancy agreement expires, as dictated by statute in your jurisdiction. This amount of time is called the notice period. Typically, the notice period is one month for leases with a term of one month or less, and two or three months for leases with a term of more than one month, but this will vary according to the jurisdiction. You should consult the governing statute for the jurisdiction the property is located in to find out the required notice period for your tenancy agreement. Bond and DepositsWhat is a bond/security deposit?A bond/security deposit is a sum of money the tenant pays to the landlord to guarantee that the tenant will fulfill all obligations under the tenancy agreement. The landlord holds the security deposit in trust for the term of the tenancy agreement to ensure that the tenant does not default on the terms of the tenancy agreement or otherwise damage the property. Should the tenant damage the property (normal wear and tear excluded) or if the Tenant has not paid rent, the landlord is entitled to recover the amount owing from the security deposit. Usually the tenant must provide the landlord with the security deposit at the start of the tenancy agreement term. At the end of the tenancy agreement term, the tenant will receive the deposit back minus any deductions for repairs/restoration. Please note: in some jurisdictions, a landlord is not allowed to ask for a security deposit. In other jurisdictions, a landlord may require both a security deposit and other types of deposits (for example, a pet damage deposit). You should review the governing legislation for the location of the property to make sure the type of deposit is allowable. What is the maximum amount of bond/security deposit?In Victoria, when rent is $350.00/week or less, the maximum bond equals one month's rent. The landlord can apply to the Victorian Civil and Administrative Tribunal (VCAT) if they want a higher bond. Usually, higher bond will only be allowed if the tenancy agreement provides that the premises are the landlord's usual place of residence and the tenant is only occupying the premises until the landlord comes back or if the rent is more than $350.00/week. What should the landlord do after accepting a bond?When the landlord accepts a bond payment from the tenant the landlord must: complete and sign the Bond Lodgement Form and give the tenant a copy; within 10 days of receiving the bond forward the bond money and RTBA's copy of the Bond Lodgement Form to the RTBA (there is $1000 fine for not doing so); and ensure that the RTBA receipt is received and keep a copy. Who is the Residential Tenancies Bond Authority (RTBA)?The RTBA is the organisation authorised to look after the bond during the tenancy. At the end of the tenancy, the RTBA will repay the bond as agreed by the landlord and tenant or as directed by the Victorian Civil Administration Tribunal or a court. When can the landlord deduct from the bond/security deposit?The landlord can deduct from the bond/security deposit when the tenancy ends and the tenant owes the landlord money for either unpaid rent or damage to the premises. The landlord generally cannot deduct for reasonable wear and tear on the premises, (i.e. wear and tear that occurs just from living in the premises). The landlord can deduct for stains on the carpet or countertops, large holes in the wall, and missing appliances and other such things that are beyond reasonable wear and tear. Condition ReportWhat is a condition report?Prior to moving in, the tenant and the landlord should walk through the premises and write down any existing damage. This written account is called a condition report. The landlord and tenant should both get a copy of this report. It is also a good idea to take photographs or a video of the condition of the premises. This will assist in interpretation of the a condition report if there is a dispute at the end of the tenancy. In some jurisdictions, a condition report is also required upon moving out, as a condition for the landlord to make a claim against the tenant's security deposit/bond. Why do I need a condition report?A condition report will help to prove what damage was caused by the tenant for purposes of deducting the amount to fix the damage from the bond. What needs to be considered when filling out a condition report?The following should be considered when filling out a condition report: Before the tenant occupies the premises, the landlord must provide the tenant with 2 copies of the condition report. A $500.00 fine can be imposed if this is not done. The condition report should include a comprehensive list of the condition of all the contents in the premises (including fixtures, furniture and appliances) at the start of the tenancy. The tenant should make a note on the condition report if they disagree with any of the points. The tenant must sign the report and return a copy to the landlord within 3 days of moving in. The condition report should be kept in a safe place. The condition report provides evidence of the condition of the premises at the start of the tenancy and it may help resolve any dispute which may arise. Where can I obtain a copy of the condition report form?A copy of the Condition Report Form can be obtained from Consumer Affairs Victoria. You can obtain their form by clicking here. MiscellaneousWhat is an assignment and how does it differ from a sublease?Assignments and subleases both occur when the tenant gives his/her rights under the tenancy agreement to a third party. A sublease or an assignment typically requires the consent of the landlord. An assignment occurs when the tenant gives to a third party all of his or her remaining rights under a tenancy agreement for the entire term of the tenancy agreement. If a tenant assigns property and the landlord consents to the assignment, that tenant no longer has any rights to the property nor any obligations to the landlord. In a sublease the tenant can transfer a portion of the leased space (e.g. a room in a house) or a portion of the tenancy (e.g. for 5 of the remaining 6 months of the tenancy agreement) to a third party. The original tenant retains whatever rights under the tenancy agreement he or she has that were not transferred to the third party, and also retains most of his or her obligations under the tena ncy agreement. The original tenant can still sue and be sued by the landlord for lease violations. What are signing incentives?Signing incentives are bonuses the landlord gives to the tenant, typically for either signing a tenancy agreement or signing a fixed term tenancy agreement. They may include free month's rent, or a rent decrease for the months of the fixed term tenancy. If the tenant breaches the tenancy agreement, these incentives may have to be paid back to the landlord. Why do tenants need insurance? Doesn't the landlord already have it?While the landlord typically has insurance, it usually covers only the landlord's assets and liabilities. If you want coverage for your personal belongings or for your own negligence, you need to have renter's insurance. What coverage you want should be discussed with an insurance agent. What is meant by the Act?The Act refers to the legislation governing residential tenancy agreements in your jurisdiction. After you select the Location of Property when you are filling out the Tenancy Agreement Details, you will see a link beneath your selection to the governing legislation for the jurisdiction you have selected. It is not necessary to specifically state the name of the Act in your contract, as the relevant legislation is satisfactorily identified by the severability clause of your tenancy agreement. What does the clause other charges will be treated as rental arrears mean?Some rental contracts contain payments other than rental payments. For example the tenant may be required to pay utilities bills, or NSF charges, late fees or other charges. If these charges are not paid by the tenant, the landlord may treat these unpaid amounts as non-payments of rent and start eviction proceedings against the tenant for non-payment of rent. If this clause was not in the contract, the landlord could not treat a failure to pay these bills as a non-payment of rent and could not start and eviction process as quickly (or at all in some cases). What happens if I sign a tenancy agreement but cannot move in or take possession?When you sign a tenancy agreement, you are promising under contract that you will pay rent to the landlord. This is a legal obligation that courts take seriously. You may be liable to the landlord for loss of revenue that the landlord suffers as a result of you not paying the rent, even if you have a good reason for not being able to take possession. In some situations it may be less costly for you to simply take possession and immediately serve notice that you will be vacating as soon as the notice period expires - it may sometimes be better to pay for one or two months' rent than to go to court and be forced to pay more. Because this is a complicated situation, you may wish to contact a qualified lawyer in your jurisdiction, especially if large sums of money are involved. You should inform your landlord immediately of the situation, so it cannot later be claimed that the landlord suffered losses as a result of not knowing that you were not going to move in. You may also wish to contact your local Residential Tenancies Board or government agency who oversees landlord/tenant disputes to find out the extent of your liability, which may or may not be limited by statute. What is the Victorian Civil Administration Tribunal (VCAT)?VCAT is a tribunal authorised to deal with many issues including disputes arising from the Residential Tenancies Act, 1987. VCAT is not as formal as a court but it does operate independently form Consumer Affairs Victoria.