Changes to Residential Tenancies & How they will impact Residential Sales and Purchases

We have seen some significant changes to residential tenancies over the last year and it’s important to understand how these changes may impact your upcoming purchase plans.

This article highlights some of the more prevalent changes and will assist buyers and sellers to understand these changes and how they might impact a sale or purchase of property.

Key Change - Vacating a Tenant

Several changes were made to the Residential Tenancies Act at the end of 2022, but for buyers and sellers, one of the biggest changes was new legislation about how tenancies may be ended by a landlord or a tenant.

For owners and managing agents, a tenant can no longer require a tenant to vacate “without grounds”, however the following additional “with grounds” options for giving notice to a tenant to vacate were added:

1. End of a fixed term agreement;
2. Undertaking a significate repair, renovation or demolition;
3. Change of use;
4. Owner or relative moving into property;
5. Preparing to sell, or sale of rental property requiring vacant possession; or
6. Property is required by a State Government Program

For tenants, they have benefited from the following additional “with grounds” options:

1. Property not in good repair;
2. Death of a co-tenant;
3. Entitlement to student accommodation has ended (eg. no longer a student);
4. Failure of owner/manager to comply with repair order; or
5. Misrepresentation by lessor or agent.

Although additional ‘grounds’ have been included, there are still very strict timeframes (which vary depending on the ‘grounds’ given) that must be followed to give a tenant enough time to vacate the property.

Impacts on Purchases and Sales of Residential Property

It’s important to understand that a fixed term tenancy does not automatically end when the property is sold, and the agreement must be honoured until the end date.

Of course, the tenant and owner may agree to end the tenancy early because of the sale, but this is only if they agree to such an arrangement. The tenant is otherwise entitled to stay until the end date of their agreement, or until the expiry of the relevant notice period.

For buyers, a key point to understand is that you may not necessarily be able to move in straight away if there is an existing fixed term tenancy, and this might significantly impact your moving plans when it comes time for settlement. This is something that should be discussed with the seller or selling agent before the contract is entered into, and is one of the things Enterprise Legal will consider and discuss for you whenever we review your draft contract. For example, if f the tenant has agreed to vacate early during the sale negotiations, we will need to ensure this is reflected in the Contract.

For sellers, you will need to know whether your buyer intends to move into the property so that you can factor in whether you have grounds to terminate the tenancy, and if so, how much notice you are required to give.

This should also be discussed at the outset and reflected in the contract, including ensuring the contract has appropriate due dates.

Key Change – Minimum Standards

Another key change is the obligation on landlords to maintain ‘minimum housing standards’
The minimum housing standards have been updated and will apply to new leases entered into from 1 September 2023 to 1 September 2024 (and a ‘new lease’ includes any renewal or formal variation of an existing lease). The minimum housing standards require:

1. The premises to be weatherproof and structurally sound. Premises are not weatherproof if the roofing or windows of the premises do not prevent water entering the premises when it rains.
2. Fixtures and fittings to be in good repair and not likely to cause injury to a person;
3. Functioning Locks or latches on all external windows and doors secure the premises but only applies to those could be accessed without having to use a ladder.
4. The premises to be free of vermin, damp and mould but does not apply to any caused by the tenant.
5. Privacy coverings for windows in all rooms in which you would expect privacy, such as a bedroom but does not apply to a window if a line of sight between a person outside the premises and a person inside the room is obstructed by a fence, hedge, tree or other feature of the property. Privacy covering for windows can be achieved with the use of any of the following:

a) blinds;
b) curtains;
c) tinting; or
d) glass frosting.

6. Adequate plumbing and drainage that is connected to a water supply service or other infrastructure that supplies hot and cold water suitable for drinking.
7. The bathroom and toilet facilities at premises must provide the user with privacy. In addition, each toilet must function as designed, including flushing and refilling, and be connected to a sewer, septic system or other waste disposal system.

a) Kitchens must include a functioning cook-top.
b) Laundries must include the fixtures required to provide a functional laundry other than whitegoods.

Failure to comply with the minimum requirements means that you risk:

1. Increased rent may not be enforceable as the tenant may apply to the Queensland Civil and Administrative Tribunal (QCAT) for an order reducing the proposed rent increase.
2. A tenant may claim that you have breached your obligations of the tenancy agreement and can vacate the property early without penalty.
3. A tenant may apply to QCAT to seek an order requiring remedy of the failure to comply.

The minimum housing requirements may appear standard and what you would expect from any property but it’s important to understand your obligations from the outset if you are intending to rent your property so you can consider this at the time of your property search.

For buyers, they will need to consider whether the property they are purchasing already meets these requirements, or whether any works need to be done as this may affect things such as the purchase price offered, or seeking agreement from the seller to take certain steps before settlement can be completed.

Enterprise Legal's Top Tips

1. Find out from your agent about any tenancies that are in place at the property you are looking to purchase.
2. Request a copy of the Lease Agreement to determine what the requirements are for ending/maintaining the lease, so that you can decide on appropriate timeframes.
3. Get your property contract reviewed by us before you sign it, Contract so we can discuss your obligations and options with you.
4. Inspect the property initially before you put in your offer but also try to be present during your Building and Pest Inspection. Inspectors will often speak with you about different issues during their inspection, so it is an ideal time to discuss any issues in accordance with the minimum housing standards and in general so that you may negotiate any rectification required with the seller.

Enterprise Legal’s property team are experts in working with buyers and sellers throughout the conveyance process, including navigating these changes and what practical and legal impacts they will have before, during and after the conveyance process.

Please don’t hesitate to contact our Conveyancing team if you have any questions about this article or to discuss your next purchase or sale.