What’s changed: New NSW Residential Tenancy Laws

Article by Silvia Liu Marketing Specialist 16 February 2020

According to the Real Estate Institute of New South Wales (REINSW), the NSW Office of Fair Trading has announced “sweeping changes” to the Residential Tenancies Amendment (Review) Act 2018 and the Residential Tenancies Regulation 2019.

REINSW President Leanne Pilkington said “Significant changes are coming which will affect property managers, landlords and tenants.”

The new NSW residential tenancy laws will come into effect on 23 March 2020. Here’s a breakdown of what’s changed:

1. Rental money and sales money to be in separate trust accounts

Property managers must have separate rental and sales trust accounts from 23 March 2020. The licensee in charge of an agency must ensure that there are separate trust accounts for rental money and sales money and that money from rentals and sales are paid into the appropriate accounts.

2. Appointment of a single licensee in charge

From 23 March 2020, only the licensee in charge will be able to approve trust account transactions. In the new regulation, it states that “a real estate agent may not authorise the withdrawal of money from a trust account unless the real estate agent is the licensee in charge of the business to which the trust account relates.” Agencies must nominate a licensee in charge by notifying NSW Fair Trading by 1 March 2020.

In addition, the licensing system has been restructured, functions have been restricted for different licences and qualification requirements have increased.

3. New smoke alarm obligations

From 23 March 2020, landlords and property managers will need to ensure smoke alarms installed in rental properties are in working order. Failure to comply will result in hefty penalties.

To ensure smoke alarms are in working order, the landlord or property manager must:

• Carry out annual checks
• Replace a removable battery in all smoke alarms in the period specified by the smoke alarm manufacturer (for a removable lithium battery), or otherwise annually
• Repair or replace a smoke alarm that is not working within 2 days of becoming aware that it is not working
• Replace a smoke alarm with a new smoke alarm within 10 years from the manufactured date, or earlier if specified by the smoke alarm manufacturer
• Give at least 2 business days’ notice to inspect or assess the need for smoke alarm repair or replacement, and at least 1 hour notice to carry out repair or replacement of a smoke alarm

Conversely, tenants must notify their landlord or property manager if they discover that a smoke alarm is not working, or if a battery needs to be changed. For hardwired smoke alarms, repairs and replacements must be carried out by a licensed electrician. Here are further details around smoke alarm requirements for rental properties.

Note that the existing provision that allows landlords to enter the rental property without consent has been extended to include inspecting or assessing the need for repairs or to replace a smoke alarm. However, proper notice must be given to the tenant.

If you’re a PropertyMe subscriber, Reminders can you help keep track of smoke alarm and pool compliance, as well as more general tasks like knowing when your owner’s landlord insurance policy is expiring. Here’s how to apply Reminders to your properties.

4. Minimum rental standards and urgent repairs

All rental properties must meet the following seven requirements at the start and throughout the tenancy to be considered fit for habitation:

• Structurally sound property
• Adequate natural or artificial lighting in each room, except storage rooms or garages
• Adequate ventilation
• Supplied with electricity or gas and have adequate electricity or gas outlets for lighting, heating and appliances
• Adequate plumbing and drainage
• Connected to a water supply service or infrastructure for the supply of hot and cold water for drinking, washing and cleaning
• Contains bathroom facilities, including toilet and washing facilities, which allows user privacy

NSW Fair Trading noted that the above requirements are baseline standards. Meeting them does not automatically mean that the property is fit for habitation. For a full list of requirements, please check out NSW Fair Trading.

Furthermore, from 23 March 2020, NSW Fair Trading will have the power to issue rectification orders if tenants require urgent repairs or maintenance.

5. Minor alterations, additions or renovations

From 23 March 2020, tenants will be able to make minor alterations, additions or renovations. The landlord cannot unreasonably withhold consent if the alteration, fixture or addition is one from the prescribed list in the new regulation. However, the tenant will still have to obtain written consent from the landlord.

These minor alterations, additions or renovations include:

• Securing furniture to a non-tiled wall for safety reasons
• Fitting a childproof latch to an outdoor gate of a single dwelling
• Inserting fly screens on windows
• Installing or replacing an internal window covering (i.e. curtains)
• Installing cleats or cord guides to secure blind or curtain cords
• Installing child safety gates inside the property
• Installing window safety devices for child safety
• Installing hand-held shower heads or lever-style taps to assist elderly or disabled occupants
• Installing or replacing hooks, nails or screws for hanging paintings, picture frames and other similar items
• Installing a carriage service to connect a phone line or to access the internet and any associated facility or customer equipment
• Planting vegetables, flowers, herbs or shrubs (shrubs that don’t grow more than 2 meters) in the garden if existing vegetation or plants do not need to be removed
• Installing a wireless removable outdoor security camera
• Applying shatter-resistant film to window or glass doors
• Making modifications that don’t penetrate a surface, or permanently modify a surface, fixture or structure of the property

The landlord may require that the following changes be carried out by a qualified person:

• Installing hand-held shower heads or lever-style taps to assist elderly or disabled occupants
• Installing a carriage service to connect a phone line or to access the internet and any associated facility or customer equipment

However, these changes will not apply to properties that are listed on the loose-fill asbestos insulation register or if the property is a heritage item.

As per existing requirements, tenants will still be liable for any damage they cause to the rental property and must leave the property in the same condition as at the start of the tenancy, except fair wear and tear. This means that any alterations, additions or renovations must be fixed or removed at the end of the tenancy.

If the work is not done in a satisfactory manner, landlords and property managers may apply to the Tribunal to seek compensation from the tenant.

6. Rent increases and break lease fees

For periodic leases, rent increases are limited to once a year. This does not apply to fixed term leases that are less than two years in duration that specify when, and how much, rent is increased by.

For all new fixed-term leases that are three years or less, entered into from 23 March 2020 onwards, the following break fees will apply:

• Four weeks’ rent if less than 25% of the lease had expired
• Three weeks’ rent if 25% or more but less than 50% of the lease had expired
• Two weeks’ rent if 50% or more but less than 75% of the lease had expired
• One week’s rent if 75% or more of the lease had expired

Additionally, with fixed-term agreements of 20 years or more, the Act is flexible. However, you cannot modify or exclude the following mandatory terms:

• The responsibility of the landlord to pay rates, taxes and charges
• The limit of no more than one rent increase per year
• Access to the NSW Civil and Administrative Tribunal to resolve disputes
• The grounds on which the agreement may be terminated

7. Protection for domestic violence victims

Victims of domestic violence will be able to terminate their tenancy immediately and without penalty. In the event that a tenancy is terminated due to domestic violence, landlords and their agents are prohibited from listing the victim on a tenancy database.

Note that these provisions came into effect on 28 February 2019. Further information can be found here.

8. Added transparency and clarity

The new NSW residential tenancy laws strengthen information disclosure requirements. The reforms will prohibit tenancy database operators from charging tenants to access their own personal information held on the database.

Additionally, before a tenancy agreement is signed, the landlord or property manager:

• Will be required to give the tenant a copy of the strata scheme’s by-laws. They will also need to let the tenant know if a strata renewal committee is currently established for the scheme
• Must be transparent about any proposal to sell the property (i.e. preparing a contract for sale) or if a mortgagee is taking court action for possession of the property
• Must not make false or misleading statements or knowingly conceal material facts
• Must disclose these new material facts, in addition to the current ones

Furthermore, landlords and property managers must obtain the tenant’s prior written consent to publish photographs or video recordings of premises. This includes property interiors for advertising purposes which may show the tenant’s possessions.

The new standard form of agreement and condition report are available in the new regulation and must be used from 23 March 2020 onwards.

If the landlord or property manager fails to comply with any of the information disclosure obligations, a tenant will be able to end their tenancy agreement by giving at least 14 days’ notice or by applying to the Tribunal for an order to end the tenancy. Plus, the Tribunal can order the landlord to reimburse the tenant for any costs incurred as a result of ending the tenancy agreement.

9. Water efficiency measures

From 23 March 2020, for new and existing tenancy agreements, the landlord can only pass on water usage charges to the tenant if the property is separately metered, meets water efficiency measures, and the charges do not exceed the amount payable by the landlord.

Additional water efficiency measures include:

• All taps and toilets need to be checked at the start of the tenancy so that any leaks are fixed
• All taps and toilets must be checked whenever any other water efficiency measures are installed, repaired or upgraded

From 23 March 2025, all toilets in rental properties must be dual flush with a minimum three-star rating in accordance with the Commonwealth Water Efficiency Labelling and Standards (WELS) scheme. Landlords who are considering replacing or upgrading existing toilets should consider installing dual flush toilets.

10. New standard form of agreement and condition report

The standard form of agreement and condition report have been updated to increase transparency and reflect the new laws.

Condition reports have been improved by:

• Allowing a condition report to be provided to tenants electronically
• Introducing a penalty if a landlord or agent does not provide a tenant with two hard copies or one electronic copy of the completed property condition report at the start of the tenancy
• Providing that tenants complete and return the condition report within 7 days of taking possession of the property (instead of from when they receive the condition report), but only if the tenant has received the condition report

The new standard form of agreement and condition report are available in the new regulation and must be used from 23 March 2020 onwards.

If you’re a PropertyMe subscriber, entry and exit inspection reports have been updated to comply with the new residential tenancy laws. We’ve also made the forms more printer-friendly. Check out our Knowledge base article for more information.

When do these new rental laws come into effect?

The NSW residential tenancy laws will come into effect on 23 March 2020.

The Residential Tenancies Act 2010 will be amended by the Residential Tenancies Amendment (Review) Act 2018 and the Residential Tenancies Regulation 2019 will replace the current Regulation.

For more information, please visit NSW Fair Trading and NSW Legislation:

• Residential Tenancies Amendment (Review) Act 2018
• Residential Tenancies Regulation 2019

Summary of changes

Here’s a summary of the NSW residential tenancy law changes for your convenience:

If you enjoyed this blog post on NSW residential tenancy laws, you might also be interested in Industry Experts Reveal Real Estate Predictions for 2020 and What the Queensland Rental Reforms Mean For Landlords and Tenants.

Let us know your thoughts on What’s Changed: New NSW Residential Tenancy Laws by emailing [email protected].