The relationship between a tenant and a landlord can be a fractious, but most often it’s a relatively stable one governed by a contract and fostered mutual benefits. The landlord is seeking a reliable tenant who will look after the property and the tenant is seeking a place to live.
Most landlords are good landlords and most tenants are good tenants. The majority of the time, both parties respect the rules set down by the contract (also known as the tenancy agreement, or the lease) and the relationship rolls along in reasonable fashion.
However, there are advocates for the tenants who seem to be focused on pushing the boundaries of the contractual relationship with scant regard for the needs of the landlord. These advocates seem to forget that unless the landlord gains some benefit from the relationship, they will simply pull out of the market and invest elsewhere.
Tenant unions are going too far
Tenant unions in Victoria, New South Wales and Queensland have been agitating for a greater share of power for tenants in the relationship between a tenant and a landlord, leaving landlords with little or no say over how their investment property is managed.
Things that have been top of the tenant’s union wish list include:
- Rental increases limited to once a year and no more than CPI,
- Tenants automatically allowed to have pets,
- Tenants automatically allowed to continue a tenancy agreement irrespective of the landlord’s wishes,
- Tenants allowed to make modifications to the property without landlord permission,
- Minimum standards that all properties must meet, including “adequate natural lighting” in all rooms except the garage or storage rooms.
Most of these demands, which have been largely enshrined in law in New South Wales and Victoria, leave landlords with almost no say over how their property is managed. This lack of control has landlords feeling disempowered and very worried about the future of their investment.
Of particular concern is the inability to end a tenancy arrangement without grounds.
Landlords will opt out
A landlord should be able to decide who lives in their property. Most landlords want a tenant who will stay for a good period and will look after their property. If the tenant isn’t a good tenant, doesn’t look after the property to the landlord’s satisfaction the landlord should have the right to end the lease agreement and get a new tenant in. A property represents a significant level of investment – hundreds of thousands of dollars – and is designed to support the investor into retirement.
But that control is no longer available to the landlord. They must allow a tenant to remain in their property against their wishes. That’s idiotic!
Why would an investor buy a property if they have almost no control over how that property is looked after or cared for?
So here’s the sad economic reality:- If these unions continue to erode the rights of landlords in this equation, there will be fewer landlords offering investment properties to the market. Fewer properties will further exacerbate the rental market crisis that is afflicting the eastern seaboard states. Vacancy rates are at around 1 per cent or below. This is officially a tight rental market. This means that tenants are struggling to find a place to live that is suitable to their needs and within budget. This increased demand is putting pressure on rents, and we will inevitably see rental prices increase across the board.
There must be a balance between tenant and landlord. There must be an equitable relationship where legislation governs for the majority of good landlords and good tenants, not for the minority of bad landlords or tenants.
Good legislation would offer protection to both tenants and landlords that would impact on the relationship very little. Good legislation is a ‘break in case of emergency’ tool that helps the aggrieved party gain a fair and just outcome. Bad legislation distorts the relationship between contractual parties and puts the balance of power too far to one side of the equation.
What we’re seeing now is a suite of bad laws being ushered in that are prejudiced against landlords and create additional difficulties for the relationship to overcome.
Watch this space, there is more to come here.
Intuitive Finance – the smart choice
The world of banking and finance can be a pretty daunting one for both novice and sophisticated investors and since our establishment in 2002 we’ve focused on providing outstanding service and business standards.
This approach was vindicated when we were named Victoria’s Best Finance Broker at the 2017 Better Business Awards.
So if you’re considering investing in, or developing, property, why not contact Intuitive Finance’s Brisbane home loan experts or mortgage brokers in Sydney today to ensure you have the right information and expert support on your side no matter what stage of the property ownership journey you are on.
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.