Victorian rental property owners will need specific reasons to ask their renters to move out as part of recent rental property law reforms. 

“More rights mean more respect for every renter”

The Victorian government has announced it is “making renting fairer” with a new set of reforms. Key amongst the changes are the banning of ‘no-fault evictions’ and a cap on the fees tenants must pay if they break a lease. 

The reaction from the real estate industry is negative.

As explained by Minister of Consumer Affairs Gabrielle Williams, the reforms will be introduced to Parliament over the next 12 months, with some taking effect before the end of this year.

The ban on ‘no fault’ evictions

The centrepiece of this round of reforms is the ban on no-fault/no-grounds evictions. When this becomes law, renters can no longer be asked to leave a property without a ‘legitimate’ reason. This change mirrors similar laws recently passed in New South Wales.

The list of valid reasons for eviction is expected to include:

• Breach of the lease agreement (e.g. failing to pay rent)

• Damage to the property

• The owner or their family decides to move into the property

Other rental reforms

Victoria will also limit the fees property owners can charge renters for breaking a lease. While rental providers are entitled to reasonable compensation for lost rent, the government says these fees should not place an undue financial burden on tenants.

According to the Government, “For fixed term rental agreements of five years or less, Government will legislate a cap: for example, targeting one week’s rent based on the proportion of remaining months of the agreement, up to a maximum of four weeks in total. If that’s in place and applies to you, then you won’t pay more than four weeks for breaking your lease.” 

Other proposed reforms aim to address additional fees and improve transparency for renters. They include the following:

• Eliminating payment fees:

• All payment methods, including rent tech apps, must allow renters to pay rent without incurring service fees.

• Current laws mandate at least one fee-free payment option. New reforms will extend this to all payment methods.

• Background check costs:

• Property owners and managers will no longer be able to require prospective tenants to pay for background checks during the application process.

• Bond claim transparency: 

• Rental owners will have to provide more evidence to support their claims if they fail to return a bond in full.

• Financial penalties will apply for property owners or management companies found to be making fraudulent or dubious claims to keep bond money or hold onto it for longer.

• Fob support

• Property managers or owners cannot refuse a reasonable request for an additional building access fob.

• It will become an offence to deactivate an electronic key or security device unless it is directly related to terminating a rental agreement.

What happens next?

The changes will be phased in gradually as legislation moves through Parliament. The government has indicated the banning of no-fault evictions will be the first priority, with this expected to be tabled before the end of the year.

What do 2024 and 2025 rental reforms mean for your rent roll?

Many REA principals and property managers are asking if this new legislation is really needed and if there are other ways to protect renters while taking into account situations which fall outside the parameters of the legislation.

Banning no-fault evictions is a frustrating move because of the lack of flexibility for property owners. When the change is introduced, it will become very difficult to deal with ‘menace’ renters who make life unpleasant for others and the property owner, but don’t cause damage and pay their rent on time. 

Other changes may potentially add to management costs, such as fob support and background check costs being handled by the agency. These will need to be passed onto owners and, therefore, renters. 

From an administrative standpoint, there is (more) work to be done. Another round of rental reforms must be communicated to rental property owners and applied as soon as they become law. Most of these changes won’t drastically affect ‘business as usual’ if you have quality renters in your properties, but you will still need to educate your clients to ensure they understand why certain actions must or can’t be taken and give fair warning about additional costs you may need to introduce.