Long-term renting is on the rise and there’s increasing pressure on both state and federal governments to do more for tenants. Recent changes to the residential tenancy laws in NSW, soon to be followed by VIC, are aimed at protecting the rights of tenants. For landlords, understanding these reforms will help them adapt to the changes and continue to have a reliable investment property strategy.
Changes in New South Wales are now in place, with changes in Victoria set to be placed on any lease signed after July 1, 2020. Other states and territories across the country are currently under consultation and are expected to introduce reforms within the coming years.
Reforms vary in each state, however all will be limiting rent increases, relaxing rules for tenants wanting to make minor property modifications and allow domestic violence victims to terminate a lease agreement early at no extra charge.
Changes in New South Wales residential tenancy laws
The NSW Government Department of Fair Trading advised that the changes aim to reduce disputes over repairs, increase protection and certainty for tenants, and to further clarify the rights and obligations of tenants.
Changes in Victorian residential tenancy laws
The Victorian Government introduced the reforms as part of their Fairer Safer Housing review. They reforms focus on strengthening tenants’ rights and to provide more security and support.
What do the changes mean for landlords?
Debates surrounding the reforms argue that they will discourage investment and in turn, drive up rents as demand will outweigh supply.
In reality, the rental reforms don’t mean chaos for investors. These reforms won’t be the last in history and landlords must adapt to the changes to continue to have a profitable and safe investment.
The two top priorities for landlords as they adapt are to check that their current insurance will continue to provide the right cover, and to claim any depreciation deduction from compulsory improvements.
Every landlord must protect their investment with the right insurance coverage. Some of the reforms do have implications for insurance and every landlord should check if they will be affected.
A key concern for landlords is the increased likelihood of pet damage, with many already picturing their property being destroyed by unruly dogs. Some landlord insurance providers don’t offer pet damage protection, while others have restrictions in place. Some examples of restrictions include capped limits to claimable pet damage or requiring the pet to be named on the lease.
It’s important for all landlords to check-in with their insurance provider before the reforms are in place. There are plenty of landlord insurance options out there, and it’s key for property owners to make sure they have the best suited coverage.
While some of the new reforms do mean landlords will need to make changes to their rental property, they will be able to maximise their cash flow in depreciation deductions from any improvements.
A good example of this is in the New South Wales reform of new water efficiency measures. The measures make it compulsory for rentals to have a dual flush toilet, which can mean a small renovation to an investment property’s bathroom. The landlord will then be able to benefit from the depreciation deductions available from the improvement.
The minor modification reform is one of the most concerning for landlords. However, savvy owners can turn this reform into an advantage and establish more loyalty with their tenant. An open conversation between tenant and property manager can allow the landlord to offer to make the minor modification themselves.
Minor modifications such as fly screens, installing curtains and blinds or glass frosting are commonly placed in the low-value pool and depreciated at an accelerated rate. While it’s still an upfront cost for the investor, the low-value pool will allow them to reap the depreciation benefits sooner.
For more information of how you can benefit from the many depreciation deductions available for your investment property, contact the specialist BMT Team on 1300 728 726.