UNDERSTANDING RENT INCREASES

Rent increases are a natural part of the rental market and often stem from various factors, including changes in market demand, property upgrades, and the overall cost of living.

However, as responsible property owners, it is essential to abide by the residential tenancy laws and adhere to specific guidelines to protect your interests and maintain a positive landlord-tenant relationship.

FIXED TERM AGREEMENT TO FIXED TERM AGREEMENT

When considering a rent increase from one fixed term agreement to another, it is essential to be aware of the legal requirements outlined in section 91 of the RTRA Act. Unlike rent increases in periodic agreements, no specific notice period is legally required for a rent increase when moving from one fixed term agreement to another. However, it is considered best practice to provide tenants with as much notice as possible to ensure open communication and a smooth transition.

Please note that the standard two months’ written notice for a rent increase applies only to periodic agreements (periodic to periodic) or in cases where the original fixed term agreement includes a clause allowing for rent adjustments during the tenancy. In such cases, the rent can be increased after a specified period, usually not earlier than 12 months, as mentioned in the special terms of the agreement.

For example
if a 24-month fixed term tenancy includes a special term stating that rent will increase at the 12-month mark, compliance requires providing the tenant with two months’ written notice of the upcoming rent increase at the ten-month point of the 12-month tenancy, as specified in the special term.

It’s important to note that the rent will only increase when transitioning from one fixed term agreement to another if the tenant signs the new agreement (Form 18a).

If the tenant does not sign the agreement, the rent remains unchanged, and the lessor has the following options:

1. The fixed-term agreement automatically transitions into a periodic lease, and then two months’ written notice for a rent increase is required. It is essential to give the two months’ notice when the agreement is already in the periodic stage; if given while the agreement is still in the fixed term, it is not valid, as the notice period starts when the agreement becomes periodic.

2. Once the agreement is in the periodic stage, the rent will increase automatically after two months, provided that written notice has been given to the tenant during the transition. However, please note that periodic tenancies are not common and may not always be in the lessor’s best interest.

3. In the event of the fixed term agreement’s end, a two months’ written notice to leave must be given to the tenant. This notice can be provided up until the day before the fixed term agreement’s end date. If the fixed term agreement is set to end on the agreement’s end date, the two months’ written notice must be given before the end date. Please be aware that the two months’ written notice to end the tenancy cannot be given if the agreement is already in the periodic stage and is only applicable to fixed term agreements.

4. Negotiate a new fixed term lease with an increased rent with the tenant during the periodic stage, without the requirement for a notice period. However, tenants cannot be compelled to enter into a fixed term agreement if they are on a periodic agreement and may choose not to accept the offer of entering into a fixed term lease.

FIXED TERM AGREEMENT TO PERIODIC AGREEMENT

If a tenant is currently on a fixed-term tenancy, and the tenancy is transitioning to a periodic arrangement, it is important to adhere to section 91 of the RTRA Act, which requires two months’ written notice to be given to the tenant for a rent increase to take effect. During this two-month period, the rent increases without the need for a new written agreement.

Most property owners find periodic tenancies less favourable, and we aim to ensure that lessors understand that periodic tenancies can only be ended with specific legal reasons (grounds) as set out in the Act.

It is crucial to note that the two months’ written notice period can only begin from the day after the fixed term ends, as stated in section 91, since the notice period applies to periodic tenancies. If the two months’ written notice is given during a fixed-term agreement, it is not valid, as the agreement is still in the fixed term stage and not yet periodic.

PERIODIC AGREEMENT TO PERIODIC AGREEMENT

If your tenant is currently on a periodic tenancy and the agreement is intended to remain periodic, it is essential to comply with section 91 of the RTRA Act when implementing a rent increase. In this scenario, you must provide the tenant with two months’ written notice of the upcoming rent increase, as outlined in the Act. The rent increase will take effect after the two months’ notice period without the need for a new written agreement.

By adhering to the RTRA Act and providing the required notice period, you can ensure a smooth and compliant rent increase process within a periodic tenancy agreement.

PERIODIC AGREEMENT TO FIXED TERM AGREEMENT

For a periodic tenancy that is being negotiated to transition into a fixed term agreement, there is no specific legal requirement for a notice period regarding a rent increase. This process is considered a negotiation and best practice rather than a legal obligation. It’s crucial to recognise that tenants cannot be compelled to agree to an offer to enter into a fixed term agreement and have the right to decline such an offer.

However, if the tenant does not agree with the proposed agreement and the rent increase offer, property managers should promptly inform the lessor of the situation and present the available options. Seeking the lessor’s instruction, preferably in writing, is essential. One option could be to provide the tenant with the required two months’ written notice for a rent increase, maintaining the tenancy as periodic.

In conclusion, when transitioning a periodic tenancy into a fixed term agreement, the process involves negotiation, and tenants cannot be compelled to accept a rent increase or enter into the fixed term agreement. Property managers should promptly communicate with the lessor in such situations to decide on the appropriate course of action, ensuring compliance and transparent communication throughout the process.

OVERVIEW:

NEW AGREEMENTS

The Lessor and Tenant can agree to a rent increase at the end of a fixed term agreement by entering into a new agreement. However, it must be at least 12 months since the last rent increase. There is no requirement to serve a notice about the increase.

If a new agreement is not signed, the agreement becomes periodic (with the same terms and conditions as fixed term tenancy agreement). The rent can be increased by giving at least two months’ notice prior to or on the commencement of the periodic agreement.

FIXED TERM AGREEMENTS

Rent cannot be increased during a fixed term unless it is stated in the tenancy agreement and all of the following occurs:

• the agreement states the rent will be increased
• the agreement states the new amount (or how it will be worked out)
• the Lessor gives the Tenant at least two months’ notice in writing, and
• it has been at least 12 months since the tenancy started or since the last increase.

PERIODIC AGREEMENTS

Rent can be increased if it has been at least 12 months since the current rent amount became payable and the property manager/owner gives the tenant or resident at least two months’ notice in writing for general tenancies.

If there is a fixed term agreement in place which is to become a periodic agreement, then two months’ notice in writing can be given prior to or on the commencement of the periodic agreement. However, the rent increase can only take effect at least two months after the commencement of the periodic agreement.

91 Rent increases

(1) This section applies to increases in rent for the following —

(a) a periodic agreement;

(b) a fixed term agreement, during the term of the agreement.

(2) If the lessor proposes to increase the rent, the lessor must give written notice of the proposal to the tenant in the way required by this section.

(3) The notice must state —

(a) the amount of the increased rent; and

(b) the day from when the increased rent is payable.

(4) The day stated in the notice must not be earlier than the later of the following —

(a) 2 months after the day the notice is given to the tenant;

(b) the end of the minimum period before the rent may be increased under section 93.

(5) Subject to an order of a tribunal under section 92, the increased rent is payable from the day stated in the notice, and the agreement is taken to be amended accordingly.

(6) However, the increased rent is payable by the tenant only if —

(a) the rent is increased in compliance with this section; and

(b) the increased rent is not payable before the end of the minimum period before the rent may be increased under section 93; and

(c) the increase in rent does not relate to —

(i) compliance of the premises or inclusions with the prescribed minimum housing standards; or

(ii) the keeping of a pet or working dog at the premises.

(7) Also, the rent under a fixed term agreement may not be increased before the term ends unless—

(a) the agreement provides for a rent increase; and

(b) the agreement states the amount of the increase or how the amount of the increase is to be worked out; and

(c) the increase is made under the agreement.

(8) This section applies subject to section 93.

93 Minimum period before rent can be increased

(1) A lessor or lessor’s agent must not increase the rent payable by a tenant under a residential tenancy agreement less than 12 months after —

(a) the day of the last increase for the agreement; or

(b) if there has not been an increase for the agreement, the first day the tenant was required to pay rent under the agreement.
Maximum penalty—20 penalty units.

(2) If at least 1 tenant’s right to occupy the same premises is continued across 2 or more residential tenancy agreements, subsection (1) applies as if the agreements were a single residential tenancy agreement.

(3) For subsection (1), it does not matter whether or not the lessor or agent who increases the rent is the same person as the lessor or agent who last increased the rent.

(4) Nothing in this section prevents the lessor or agent from giving notice of an increase in rent within the 12 months mentioned in subsection (1) provided the increase does not take effect until the end of the 12 months. 

(5) This section does not apply if —

(a) the lessor is the chief executive of the department in which the Housing Act 2003 is administered, acting on behalf of the State; or

(b) the lessor is the State and the tenant is an officer or employee of the State; or

(c) the lessor is the replacement lessor under a community housing provider tenancy agreement.

(6) In this section—

increase includes purportedly increase.

CHANGES TO LEGISLATION

As you may already know, there has been an unexpected and unprecedented development overnight with the Labour Government successfully passing the rental increase law changes in Parliament. The new legislation is set to take effect from 1st July.

The Palaszczuk Government has passed legislation to limit rent increases to once a year to give a fairer go to Queenslander renters.

Amendments to the Residential Tenancies and Rooming Accommodation Act 2008, through the Local Government Electoral and Other Legislation (Expenditure Caps) Amendment Bill 2022, will limit the frequency of rent increases from every six months to once a year for residential tenancies and rooming accommodation agreements.

These amendments will bring Queensland into line with other Australian jurisdictions and balance the rights and interests of Queenslanders who rent, and property owners and investors to maintain rental supply.

It was one of several housing policy reforms to come out of the Government’s Housing Roundtable.

The Parliament also passed legislation setting caps on electoral expenditure for local government in Queensland, bringing the sector into line with a similar rules for state electoral spending and delivering on a State Government 2020 election commitment.

The caps will apply for the March 2024 Local Government elections.

Further information on Local Government electoral expenditure caps is available here.

Quotes attributable to Deputy Premier Steven Miles:

“For most households, rent would be the biggest single expense in their household budget.

“The Government is taking immediate action to support renters now.

“The majority of landlords do the right thing, but talking immediate action will protect Queensland renters from landlords who aren’t operating fairly.

“Electoral expenditure caps will ensure there is a fair opportunity for anyone to participate in local government elections.

“We already have so many great councillors who are dedicated to their local communities and this change means more Queenslanders will have the best representation on their councils, as well as the opportunity to stand for election.”

Quotes attributable to Housing Minister Leeanne Enoch:

“With more than one third of Queensland households renting, it’s vital that renters get a fair go.

“As we seek to modernise Queensland’s tenancy laws, we are determined to strike a fair balance which protects the interests of both renters and rental property owners.

“Acting quickly to limit rent increases is a critical government response to community concerns about the impact of current market conditions and cost of living pressures on renting households in Queensland.

“Taking this action will build on the Queensland Government’s record to improve protections in Queensland’s private rental market through strong, balanced rental law reform.

“In addition to protecting the rights of renters and rental property owners, our rental law reform agenda seeks to improve stability in the rental market.”.

OVERVIEW:

1. New legislation has been passed by State Parliament limiting the amount of times a landlord can raise rent to once a year

2. The annual limit on rent increases will apply to all new and existing tenancies from 1 July 2023 onwards

3. In addition, caps on electoral spending for all participants in Queensland local government elections has also been passed

ARTICLE INFORMATION:

Media Statement from The Queensland Cabinet and Ministerial Directory

Published Tuesday, 18 April, 2023 at 06:35 PM

Link: https://statements.qld.gov.au/statements/97585