What you need to know if your lease is expiring during COVID-19
The past few months have seen a host of new stimulus and relief measures introduced across the real estate sector in response to the COVID-19 pandemic.
In particular, the passing of the Residential Tenancies (COVID-19 Response) Act 2020 saw a number of temporary legislative changes introduced in WA, determining some important shifts in tenant and landlord obligations when it comes to events such as breaking lease, implementing certain rental clauses and renewing existing tenancies.
With these changes holding important implications on how landlords should approach the lease expiry and renewal process, we’ve compiled some common scenarios to help owners understand their obligations and navigate these changes while also protecting the performance of their investment portfolio.
Can I increase the rent when negotiating a lease renewal with an existing tenant?
Under the new temporary legislation, landlords can’t implement rent increases during the emergency period (until 1st October 2020, unless extended) for existing tenants in the property. If you have a lease expiring during this time, the rent for the renewed lease contract cannot be greater than the amount of rent currently payable.
Can I include a rent increase clause within the new lease?
While landlords can’t increase the rent payable for lease renewals that take place during the emergency period, a rent increase clause can still be included in the lease agreement, providing it doesn’t come into effect during the emergency period and the date of increase is at least six months after any previous increase came into effect. However, landlords must still provide at least 60 days’ notice to the tenant prior to the rent increase being implemented.
SHOULD I include a rent increase clause?
Rent increase clauses can be a great strategy to ensure your rent remains aligned with broader market conditions, especially in improving markets where rental growth is anticipated in the near future. However, in considering whether to include this clause in a leasing contract, it’s important to speak to a property manager with strong local area knowledge to assess whether it’s the appropriate leasing strategy based on local market conditions, leasing competition and the condition of your property. For more insights on how to leverage your property’s rental growth potential, visit our recent article.
My tenant has advised that they will be vacating when the lease expires. How much notice are they required to give?
Under the new legislation, the required notice a tenant must provide to vacate a property has been reduced from 30 days to 21 days during the emergency period, for both periodic tenancies and fixed-term tenancies nearing expiry. If a tenant gives notice at a later date, they will remain liable for rental payments and upkeep of the property until the end of the 21 day notice period, even if it extends beyond the lease expiration date.
What if the tenant doesn’t renew the lease and it expires?
If the lease on your property is nearing expiry, your property manager should already be in contact with you to discuss your options. However, if a fixed-term tenancy expires during the emergency period and a new fixed-term lease agreement has not been entered into, the current lease will continue on a periodic basis. This means that all terms of the lease agreement will continue to be applicable until either you or the tenant provides notice to terminate the tenancy, or enter into a new fixed-term lease agreement for the property.
What if my tenant wants to vacate during their fixed-term lease?
Unless a tenant is suffering genuine financial hardship caused by the economic effects of COVID-19, the normal “break lease” obligations still apply, and the tenant would be responsible for the payment of rent and upkeep of the property until it is re-let or the lease expires (whichever occurs first).
Tenants experiencing genuine financial hardship as a result of COVID-19 can provide a minimum of 21 days’ notice to terminate the tenancy during a fixed-term lease. In these instances, the tenant is only required to pay rent to the end of the 21-day notice period, and compensation for loss due to early termination of the tenancy can’t be sought.
I need to move into my property – can I give the tenant notice to vacate?
Landlords can still provide the required notice to a tenant to vacate the property either at the expiration of a fixed-term lease or during a periodic tenancy. However, if the tenant is unable to provide vacant possession by the required date, or does not wish to do so, the notice can’t be enforced until after the end of the emergency period. In this scenario, we advise working together in conjunction with your property manager to come to an agreement that is beneficial for both parties.
Have any questions we haven’t covered? If you have further questions regarding changes to tenancy legislation, or would like to speak to a member of our property management team about your rental portfolio, get in touch at https://www.momentumwealth.com.au/contact-us/request-consultation/.
For more advice on how to better position your rental property for success in the current market, including key factors to consider when determining your property’s pricing strategy, watch our video below.