14th September 2010
Dear the Residential Tenancies Authority (RTA)
Real Estate Excellence welcomes the opportunity to contribute to the review of the Residential Tenancies and Rooming Accommodation Act (RTRA Act) (section 329) 2 months without grounds provision. Real Estate Excellence also welcomes further opportunity for consultation with other industry related matters.
Stacey Holt Real Estate Excellence has a Queensland membership base of over 200 Real Estate Agents (including Property Managers) and a subscriber client base of over 1500 property managers and Real Estate Agents. Regular education and training events are held throughout Queensland as part of the many industry services provided by Real Estate Excellence. Members, Clients and the Industry were requested to voluntarily answer the questions below that were provided to Real Estate Excellence on the 1st September 2010. The responses from Members, Clients and Industry have been collated to form part of this submission. There are also views of Stacey Holt Real Estate Excellence expressed as part of this submission. Please refer below to the RTA requested questions in Italics form and the Real Estate Excellence responses below.
What impact has the current notice period for termination of fixed term tenancies (without grounds) at the end of the agreement by either lessors or tenants had?
REAL ESTATE EXCELLENCE RESPONSE
• One of many unintended consequences of the two months without grounds provision is increased confusion amongst lessors, tenants and agents which frequently leads to dispute.
• Break lease situation are by far on the increase due to this provision, as tenants find a new home and are ‘stuck with two rents’ to pay after being given two months notice without grounds and then finding a new home earlier then the end date.
• Another unintended consequence is tenants being provided with two months notice to leave with for example three weeks to go of their fixed term lease as decisions by all or one of the parties could not made two months or more out of the end date; the tenants in turn are issuing 2 weeks’ notice to end the tenancy on the end date which sometimes results in a frustrated lessor who has now had to forgo some 5 weeks rent.
• Increased number of periodic tenancies which of course leads to lack of security of tenure for tenants and financial instability for investors.
• Notice to leave forms being issued to tenants with two months to go of their fixed term tenancy that can’t decide when the lessor is financially forced to make a decision; again increased angst and pressure on all parties including agents trying to negotiate.
What are the issues, if any, for lessors, agents or tenants as a result of this provision?
REAL ESTATE EXCELLENCE RESPONSE
• Increased disputes are a major impact as already discussed in this submission.
• Confusion and fear from a tenant’s perspective. Decisions by lessors within unreasonable time frames about their investment tenancies. Agents are in turn provided with these instructions from their lessors.
• Agents forced to issue Form 12’s early as per lessor instructions and their best interests (around two and half months out before the end date of a fixed term)
• Undue pressure on all parties to make substantial decisions within a reasonable time frame.
• As listed above in question one; lessor’s being financially disadvantaged when acting in good faith and allowing tenants more time to consider their future, and then lessor’s being forced to make a decision coming up to the fixed term expiry which commonly now results in tenants being given two months notice which extends past the fixed term end date and the tenant then being able to provide their 14 days notice as the end date nears. This situation is forcing many investors to make the more viable and certain decision two and a half months out of the lease by stating to tenant (agents carrying out this task on their lessor’s behalf and instruction) that ‘ the offer of another fixed term at the end of the current fixed term expiry is now before you. If the offer is not accepted within the next week, regrettably find enclosed a Form 12 Notice to leave to end the lease without grounds on the end date of the agreement. (The time frames are examples only however do mirror many practices now in the industry as there is little choice for investors who are left in the most unfortunate situation).
What are the advantages and disadvantages of this provision?
REAL ESTATE EXCELLENCE RESPONSE
• Disadvantages
o As stated above in earlier responses, confusion, angst, pressure, disputes, break leases increase, bond disputes, people forced to make a decision about their future in an unreasonable time frame.
• Advantages
o No advantages of this provision for any party has been identified
How would you improve the current provision?
REAL ESTATE EXCELLENCE RESPONSE
• Most certainly a successful outcome is for either party to provide the other with 4 weeks (28 days) notice to leave on or before the end date of a fixed term agreement. It is reasonable to concede that all parties (tenants and lessors) are far better placed 4 weeks (28 days) (or around 5 to 6 weeks) prior to the end date of a fixed term to make a fair judgement about their short term future. It is also considered reasonable that tenants would have knowledge of what their intention were at least 4 weeks (28 days) out as most people would be considering transport, schools and other necessary arrangements and changes needed if they were to move house at this time.
• This would also allow for reasonable and realistic time frames for agents to negotiate with the tenants if necessary on behalf of the lessor client.
• Should this reasonable change occur and the amendment made to allow for the 4 weeks (28 days) for either party for termination without grounds, Real Estate Excellence will certainly be advocating for the industry to change lease renewal procedures to start at around the 7 to 8 week stage of the end of fixed term (which was how the past practices were carried out as most tenants were provided for best practice around 28 days notice even when the provision was 14 days notice pre RTRA Act 2008 commencement)
• The 4 weeks (28 days) strongly recommended time frame is also encouraged due to the current provisions in the RTRA Act (section 329) which allow for a termination for contract of sale for periodic tenancy being the 4 weeks. This will provide for ‘some’ uniformity and alignment of dates/days/weeks which does lead to confusion within the industry.
Can you provide any brief case examples that illustrate the issues from your point of view?
REAL ESTATE EXCELLENCE RESPONSE
• There are many specific ‘general dispute examples’ that could be cited in this part of the submission however they are all very similar and it is hoped that the above examples are considered sufficient to assist the questions asked. It must be noted that many of the ‘general dispute examples’ that the industry is experiencing (and both tenants and lessors also greatly suffer from) are simply due to the 2 months without grounds provision and the unreasonable and unrealistic time frames imposed on people about their houses (investments) and their homes.
Real Estate Excellence will continue to assist the Industry in the required education, best practice and compliance issues relating to the RTRA Act. Thank you to the RTA for the opportunity to provide this submission on behalf of Real Estate Excellence Members, Clients and the Real Estate Industry. If the RTA have any further questions or require any further assistance, please contact the writer of this submission. It is hoped that the unintended consequences of the two months without grounds provision introduced on 1 July 2009 through the RTRA Act are quickly amended by the Queensland Government to allow for reasonable and realistic procedures and legislative framework to assist all stakeholders (industry, tenants and lessors) to move forward in harmony.
Yours sincerely
Stacey Holt
Director, Real Estate Excellence Academy Pty Ltd
Sent via email - stacey.holt@realestateexcellence.com.au
0423 018 539
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