Rental arrangements shape up as Labor's next target

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A Labor win at the Federal Election on 2 July could have further implications for property investors beyond taxation arrangements on property.

Negative gearing and capital gains tax arrangements will be drastically over hauled if Labor is victorious at the polls and rental arrangements across the country could face a similar fate with the Opposition pledging to investigate the possibility of standardising some aspects of rental agreements across the country.

Announced under the Labor Party’s affordable housing policy umbrella, the party issued a statement last week announcing there needs to be more focus on the country’s rental laws given the large proportion of the population who are tenants.

“Too often discussions on affordable housing concentrate on home ownership – yet over 30 per cent of all households are renters,” the statement said.

“Labor will ensure that the needs of renting households are considered within the national strategy on affordable housing.

“A Shorten Labor Government will work with the States and Territories to reach agreement on a set of national minimum rental standards.”

In the statement, the Labor Party announced it will look at national minimum standards for rental contract lengths, fair processes where landlords seek termination and ways to provide greater freedom of choice for tenants, but some in the believe any review of tenancy
laws should move beyond that towards nationally standards for all aspects of tenancy legislation.

“It definitely needs a review nationally. Especially now that there are so many new investment properties coming on line,” Cameron Osborne, director of property management firm Melbourne Asset Management, told Your Investment Property.

“Increasingly often we’re finding that tenants are relocating from state to state and there can be some issues with them understanding the differences in tenancy laws from state to state,” Osborne said.

“For example, in Victoria we expect a month’s rent up front whereas some state only expect two, so people will arrive and say here’s my two weeks rent and we have to say no it’s different and you have to re-educate tenants on a lot of issues. It’s the same for owners. We have a lot of interstate owners and they’re often confused by our local laws because they’re so different to how they’re used to things.”

Ross Kocass, director of Sydney based management firm Three Property, also told Your Investment Property that a national system would likely be welcomed.

“Legislation in property management is probably problematic generally speaking. People are fairly transient these days and it’s not unusual to move from state to state,” Kocass said.

“Anybody with property in multiple states would be love a standardised system, they’d be crazy not to. But it’s a question of finding the system that works the best,” he said.

Kocass said forming a national system would need to involve extensive industry consultation and both he and Osborne said the area Labor’s review would focus on aren’t perhaps the most pressing points.

On the issue of rental contract lengths Osborne said the sense of stability they provide may mask further issues.

“Some tenants do want longer leases, we have a lot of people who have to move because the property they’re living in is sold or whatever. But a year in property is a long time and people’s circumstances can change quickly and they might need to move,” he said.

“[For owners] committing to a lease that might be two years could be difficult. You don’t know what interest rates are going to be like and if you’ll need to increase your rent to cover repayments or something like that.

“I’ve had a situation where the owners are happy with a three-year lease, but it’s a matter of negotiating what the rent in year three is going to be at this date and really no one knows what the market will be like in three years’ time.”

On the issue of fair process around evictions, Osborne and Kocass both said there need to be some moves that would be beneficial to landlords, not just tenants.

“I’d have to say there is no doubt the existing system is stacked in favour of the tenant,” Kocass said.

For Osborne, there are some specific aspects of Victoria’s eviction process he would like to see removed.

“In Victoria it works that if a tenant is 14 days behind on the rent they’re given a 14-day notice to vacate,” he said.

“Once that 14-day notice expires the tenancy is null and void, so basically the best the best way to get out of residential tenancy in Victoria is to stop paying your rent… the way the law looks at it is that it’s the owners who have kicked you out, not that you’ve left of your own accord.”

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