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Residential Tenancies Amendment
(Long-term Tenancy Agreements)
Bill 2017
Introduction Print
EXPLANATORY MEMORANDUM
General
The object of this Bill is to amend the Residential Tenancies Act 1997
(the Act) to remove the existing restrictions on its application to tenancy
agreements for a fixed term of more than 5 years, and to enable the
prescription in regulations of an optional alternative standard agreement or
agreements containing terms and conditions suited to long-term tenancy
agreements.
Clause Notes
Part 1--Preliminary
Clause 1 sets out the purpose of the Bill, which is to amend the Act to
provide for tenancy agreements for a fixed term of more than
5 years and to make consequential amendments.
Clause 2 sets out the scheme of commencement for the provisions of the
Bill. It provides that--
• the Bill comes into operation on a day or days to be
proclaimed; and
• if not proclaimed earlier, the Bill comes into operation
by default on 1 August 2018.
Clause 3 provides that the Residential Tenancies Act 1997 is referred to
in the Bill as the Principal Act.
581381 1 BILL LA INTRODUCTION 22/8/2017
Part 2--Amendments relating to tenancy agreements
Part 2 contains clauses 4 to 12, which set out amendments to the Act relating
to tenancy agreements.
Clause 4 amends definitions in section 3(1) of the Act.
Subclause (1) inserts a definition of standard form tenancy
agreement into the Act. The expression is defined to mean--
• the standard form prescribed for the purposes of
section 26(1) in relation to a tenancy agreement for a
fixed term not exceeding 5 years; and
• the standard form prescribed for the purposes of
section 26(1A)(b)(ii) in relation to a tenancy agreement
for a fixed term of more than 5 years.
Subclause (2) amends the definition of fixed term tenancy
agreement to insert the words "including, in the case of a fixed
term tenancy agreement for more than 5 years, any extension of
that tenancy agreement exercised in accordance with a term
permitting the extension of that tenancy at the end of the fixed
term". This is intended to avoid any doubt about the status of a
fixed term tenancy agreement for more than 5 years which is
extended in accordance with a term of the agreement.
Clause 5 repeals section 6 of the Act.
Section 6 excludes the application of the Act to tenancy
agreements for a fixed term of more than 5 years. Repeal of
section 6 subjects all tenancy agreements to the Act, regardless
of the length of the fixed term.
Clause 6 amends section 26 of the Act, which relates to the requirement
that written tenancy agreements be in standard form.
Subclause (1) substitutes a new section 26(1). Substituted
section 26(1) provides that a tenancy agreement for a fixed term
that does not exceed 5 years that is in writing must be in the
standard form tenancy agreement prescribed for the purposes of
section 26(1).
Subclause (2) inserts new section 26(1A) into the Act.
Section 26(1A) provides that a tenancy agreement for a fixed
term of more than 5 years must be in writing, and must either be
in the standard form applicable to tenancy agreements for a fixed
term not exceeding 5 years, or an alternate standard form
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applicable to tenancy agreements for a fixed term of more than
5 years.
Subclause (3) amends section 26(2) to insert the words "for a
fixed term not exceeding 5 years" in section 26(2) to restrict the
application of subsection (2) to tenancy agreements for a fixed
term not exceeding 5 years.
Subclause (4) inserts new section 26(2A) into the Act.
Section 26(2A) provides that it is an offence to prepare or
authorise the preparation of a tenancy agreement for a fixed term
of more than 5 years if the agreement is not in either of the
standard forms referred to in section 26(1A). The penalty
associated with this offence is 10 penalty units.
Clause 7 inserts new section 26A into the Act, which relates to prescribed
prohibited terms in tenancy agreements for a fixed term of more
than 5 years. Clause 12 will amend the regulation making power
in section 511 of the Act to enable terms to be prescribed as
prohibited terms for tenancy agreements, or classes of tenancy
agreements, for a fixed term of more than 5 years.
Section 26A(1) makes it an offence to include a prohibited term
in a tenancy agreement for a fixed term of more than 5 years and
provides for a penalty of 10 penalty units.
Section 26A(2) provides that a prohibited term in a tenancy
agreement for a fixed term of more than 5 years is void and
unenforceable.
Clause 8 substitutes new section 27 and inserts new section 27A into
the Act. Section 27 provides for invalidity of certain terms in
tenancy agreements. Section 27A relates to the inclusion of
additional terms in fixed term tenancy agreements of more than
5 years.
New section 27(1) provides that, subject to subsection (3), a
term of a tenancy agreement that purports to exclude, restrict or
modify the application of all or any provisions of the Act to that
tenancy agreement, or the exercise of a right conferred by the
Act, is invalid.
Substituted section 27(2) extends the application of subsection
(1) to terms not set out in the tenancy agreement but incorporated
into it by another term. This provision is identical to existing
section 27(2).
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Substituted section 27(3) provides that subsection (1) does
not apply to terms that may be inconsistent with or vary the
requirements of Part 2 where those terms are in the prescribed
standard form tenancy agreement for a fixed term of more than
5 years.
Substituted section 27(4) provides that a provision in a written
tenancy agreement that requires a party to the agreement to bear
any fees, costs or charges incurred by the other party in
connection with the preparation of the tenancy agreement is
invalid. This provision reproduces existing section 27(3).
New section 27A(1) provides that parties to a tenancy agreement
for a term of more than 5 years may agree to add terms that are
additional to the terms contained in the prescribed standard form
tenancy agreement for that agreement.
Section 27A(2) provides that it is an offence for a person to
include an additional term in a tenancy agreement for a fixed
term of more than 5 years, if that term excludes, restricts or
modifies or purports to exclude, restrict or modify any provision
of the relevant standard form tenancy agreement. The penalty
associated with this offence is 10 penalty units.
Clause 9 inserts new section 34(2) into the Act. Section 34 prevents the
payment of multiple bonds. New section 34(2) excludes tenancy
agreements for a fixed term of more than 5 years in the standard
form tenancy agreement referred to in section 26(1A)(b)(ii) from
this restriction.
Clause 10 inserts new sections 34A and 34B into the Act.
New section 34A provides that an additional amount of bond
may be required by a landlord under a tenancy agreement for a
fixed term of more than 5 years, even though the tenant has
been in continuous occupation of the rented premises, but only
where that tenancy agreement is in the form referred to in
section 26(1A)(b)(ii). The right to require an additional amount
of bond does not apply to a tenancy agreement for a fixed term of
more than 5 years that is in the form referred to in section 26(1).
New section 34A(1) provides that section 34A applies to a
tenancy agreement for a fixed term of more than 5 years that
is in the standard form tenancy agreement referred to in
section 26(1A)(b)(ii).
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New section 34A(2) provides that the landlord may require the
tenant to pay an additional amount of bond if--
• the landlord has given the tenant 120 days written
notice in a form approved by the Director requiring an
additional payment of bond; and
• the additional payment is required by the landlord after
the expiry of a period of 5 years continuous occupation
by the tenant; and
• the term of the tenancy agreement referred to in
section 26(1A)(b)(ii)--
• is extended by a period of at least 5 years
from the expiry of the first fixed term; or
• has an unexpired period of 5 years; or
• commences after a periodic tenancy; or
• commences after the expiry of a fixed term
tenancy agreement, whether in the form
prescribed for the purposes of section 26(1)
or 26(1A)(b)(ii).
New section 34A(3) sets out how an additional amount of
bond under section 34A(2) is to be determined. The amount is
determined by--
• calculating a total amount of bond for the next 5 year
period of the tenancy agreement using the rent payable
at the commencement of that period as a basis for the
bond's calculation; and
• subtracting the total amount of bond currently lodged
with the Residential Tenancies Bond Authority from
the amount calculated as the bond for the next 5 year
period.
An Example following section 34A(3) demonstrates how the
calculation of the additional amount would occur in practice.
New section 34A(4) requires that the tenant must pay the
additional amount of bond on or before the end of the 120 day
notice period referred to in section 34A(2)(a).
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New section 34A(5) provides that the landlord must not require
an additional amount of bond more than once in any 5 year
period of a tenancy agreement to which section 34A applies.
New section 34B(1) provides that a tenant may apply to VCAT
to vary a term in a tenancy agreement that permits the landlord to
require an additional amount of bond or to vary the amount of
additional bond to be paid.
New section 34B(2) gives VCAT the power to make any order
that it considers appropriate if it is satisfied that to not make the
order would result in severe hardship for the tenant.
New section 34B(3) provides that, in making an order under new
section 34B(2), VCAT is to have regard to--
• whether the landlord or tenant are in breach of any other
term of the tenancy agreement or of the Act; and
• the financial circumstances of the tenant and landlord;
and
• the condition of the rented premises; and
• any other matter VCAT considers relevant to the
making of the order.
Clause 11 amends section 94 of the Act, which relates to the right to use
tenancy agreements in rooming houses.
Section 94(1) provides that a resident of a rooming house can
enter into a tenancy agreement with a rooming house operator.
Subclause (1) amends section 94(1) to insert the words "for a
fixed term not exceeding 5 years" to restrict the application of
the section to tenancy agreements for a fixed term not exceeding
5 years.
Subclause (2) inserts new section 94(3B) into the Act.
Section 94(3B) prohibits a rooming house owner and resident
from entering into a tenancy agreement for a fixed term of more
than 5 years.
Clause 12 amends section 511 of the Act, which sets out regulation making
powers under the Act.
Subclause (1) amends section 511(1)(f) of the Act to insert the
words "for a fixed term not exceeding 5 years". As amended,
section 511(1)(f) will authorise a standard form tenancy
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agreement for a fixed term not exceeding 5 years to be
prescribed.
Subclause (2) inserts new paragraphs 511(1)(faa) and (faab) into
section 511 of the Act.
New paragraph (faa) allows regulations to be made prescribing
standard form tenancy agreements for tenancy agreements, or
classes of tenancy agreements, for a fixed term of more than
5 years, including but not limited to--
• terms that are inconsistent with or that vary
requirements set out in Part 2 of the Act (other than
Division 2 of that Part); and
• alternative terms that can be used in standard form
tenancy agreements.
New section (faab) authorises regulations to be made prescribing
prohibited terms for tenancy agreements, or classes of tenancy
agreements, for a fixed term of more than 5 years.
Part 3--Amendments relating to compensation
and compliance
Part 3 contains clauses 13 to 14, which set out amendments to the Act
relating to compensation and compliance.
Clause 13 inserts new section 209AA into Part 5 of the Act.
New section 209AA(1) provides that, subject to section
209AA(2), if a party to a fixed term tenancy agreement for
more than 5 years has breached a term of the tenancy agreement,
the other party may apply to the Tribunal for a compensation
order or a compliance order.
New section 209AA(2) provides that section 209AA(1) does not
apply in respect of an additional term in a fixed term tenancy
agreement for more than 5 years that is included in a tenancy
agreement under section 27A(1). This means that the ability to
apply to the Tribunal under section 209AA(1) will only be in
respect of a breach of a term that formed part of the standard
form tenancy agreement.
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Clause 14 inserts new section 212(1A) into section 212 of the Act.
New section 212(1A) provides that where an application is made
to the Tribunal under section 209AA and the Tribunal is satisfied
that a term of the tenancy agreement has been breached, it may
make all or any of the following orders--
• that the party in breach must remedy the breach as
specified in the order;
• that the party in breach must pay compensation as
specified in the order;
• that the party in breach must refrain from committing a
similar breach.
Part 4--Amendments relating to termination
Part 4 contains clauses 15 to 18, which set out amendments to the Act
relating to termination.
Clause 15 amends section 230 of the Act, which relates to the creation of a
periodic tenancies.
Section 230(1) provides for the automatic creation of a periodic
tenancy following the term of a fixed tenancy agreement.
Subclause (1) substitutes section 230(1)(b) of the Act with the
effect that, where the term of a fixed term tenancy agreement
ends and a tenant continues in occupation of rented premises
otherwise than as a tenant under a fixed term tenancy agreement
or, in the case of a fixed term tenancy agreement of more
than 5 years, otherwise than in accordance with a term in the
agreement that permitted the extension of the term of that
tenancy, the tenant will be deemed to occupy the premises under
a periodic tenancy.
The automatic creation of a periodic tenancy does not occur in a
tenancy agreement for a fixed term tenancy of more than 5 years
as long as continued occupation of the rented premises by the
tenant is in accordance with a term in the agreement permitting
the extension of the term of that tenancy at the end of the fixed
term.
Section 230(3) currently provides that an automatic periodic
tenancy will be on the same terms as the terms of the original
fixed term tenancy agreement. Subclause (2) amends
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section 230(3) to insert the words "in the case of a tenancy
agreement for a fixed term not exceeding 5 years".
Amended section 230(3) limits the application of section 230(3)
of the Act to only tenancy agreements for a fixed term not
exceeding 5 years.
Subclause (3) inserts new section 230(3A), which provides that
the terms of an automatic periodic tenancy arising following
the expiration of the term of a fixed term tenancy agreement
for a fixed term of more than 5 years will be based, as far as
applicable, on the prescribed standard form tenancy agreement
for fixed term tenancies not exceeding 5 years. This amendment
recognises that it may not be appropriate for some of the
provisions of a standard form tenancy agreement for a fixed term
of more than 5 years (and which may have varied requirements of
Part 2 of the Act) to continue to apply where a periodic tenancy
has been created.
Clause 16 inserts new section 237A which provides that if a tenancy
agreement for a fixed term of more than 5 years does not comply
with the requirements of section 26A(1) that it be in writing and
in a prescribed standard form, the tenant may give the landlord
notice of intention to vacate specifying a termination date not less
than 28 days after the date on which the notice is given.
Clause 17 substitutes section 261(3) which relates to the amount of notice
that must be given to end a tenancy at the end of a fixed term
tenancy agreement, to include provision for fixed term tenancies
of more than 5 years.
Section 261 of the Act prescribes the notice period as not less
than 90 days for a fixed term tenancy agreement for a fixed term
of 6 months or more, and not less than 60 days for a fixed term
tenancy agreement for a fixed term of less than 6 months.
Substituted section 261 also includes a notice period of not less
than 90 days or a greater prescribed period for a fixed term
tenancy agreement of more than 5 years.
Clause 18 substitutes section 263(2) of the Act, which relates to the
notice period for a notice to vacate for no specified reason.
Section 263(2) of the Act provides that the notice period must be
at least 120 days. Substituted section 263(2) retains the 120 day
notice period for tenancy agreements for a fixed term not
exceeding 5 years. Substituted section 263(2)(a) provides that a
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period of more than 120 days may be prescribed for fixed term
tenancies of more than 5 years but if no such period has been
prescribed the notice period will be 120 days. Substituted
section 263(2)(b) provides that a period of more than 120 days
may be prescribed for a periodic tenancy agreement referred to in
section 230(3A) but if no such period has been prescribed the
notice period will be 120 days.
Part 5--Repeal of amending Act
Part 5 contains clause 19, which provides for the repeal of the amending Act.
Clause 19 provides that the amending Act is repealed on 1 August 2019.
The repeal does not affect the continuing operation of
the amendments made by the amending Act (see section 15(1)
of the Interpretation of Legislation Act 1984).
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