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RTA – Five year leases & 120 day no reason notice

Welcome back to our series on the changes to the Residential Tenancies Act. In this article we are looking at the introduction of five-year lease terms and the removal of the 120 day no reason notice. 

Five year leases have been introduced within the last two weeks by Consumer Affairs (May 2019). There are a few differences to a regular 12 or 24 month lease:

  • To be legislatively compliant, it must be drawn up on the prescribed template. If the template is altered or amended the lease may be deemed invalid. You can review the prescribed template on the Consumer Affairs Victoria website.
  • A Residential Rental Provider (you) or their agent may only inspect the property every 12 months.
  • If the Renter ends the agreement early, they pay the equivalent of one months rent for each unexpired full year of the lease term.

Having reviewed the published template, the likelihood of us recommending you enter into a five year lease is low.

Another significant change is the removal of the 120 day ‘no reason’ notice to vacate. In essence, this notice was a straightforward way to end month-by-month lease, while giving the renter up to four months to find a new home.
There are times, rarely, that a tenancy just gets off-track and needs to end. Meaning pattern of late rent payments, pattern of aggressive behaviour, unexplained and unresolved damage to the property amongst others. Some or all of these can be at play.

We are not sure when the 120 day no reason notice is going be withdrawn so in preparation all new leases being offered via Mint Property Management are a minimum 13 month agreement. This may seem counter intuitive but building in the extra time means we can complete two property inspections, at 3 months and then at 9 months, leaving 3 full months (90 days) before the end of the lease. If there are any serious wobbles with the tenancy, an ‘end of fixed term lease’ notice to vacate may be issued. Serving of this notice requires a minimum 90 days, hence the 13 month lease.

The Victorian Government is removing the 120 day ‘no reason’ notice to offer renters a level of stability. In my opinion, unfortunately, the reality will be the opposite. If there are doubts raised around the quality of the tenancy it will be our recommendation to err on the side of caution and start fresh at the end of lease term.

Should you be looking to sell or complete extensive renovations, the 60 day notice period remains in place.

If you want to talk about any of the proposed changes or have specific questions on how these changes may impact your investment property, we are happy to discuss.

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