What the new policy means?
IMPORTANT NOTE - The NSW Government announced these changes but have since delayed the decision by 1 month, to consider the input from investors. We will update this blog when we know more.
No-grounds eviction changes
From 2025, rental providers will no longer be able to evict tenants with no reason. Tenants can still be evicted for valid reasons which include:
- Breaches of lease by the tenant, including property damage and failure to pay rent
- Sale of the property
- Significant repairs or renovations, with the caveat that homeowners must not relist the property for sale within the next 4 weeks
- Change of use
- Owner intends to move into the property
- Change of eligibility, e.g. if the renter is no longer eligible for an affordable housing program, or is no longer a student
Changes to notice periods
Notice periods for periodic leases will remain the same, with landlords required to give 90 days’ advance warning for evictions with genuine cause.
Those on fixed-term leases of 6 months or more, the termination notice period will be increased from 60 to 90 days.
For fixed-term agreements of under 6 months, the notice period will increase from 30 to 60 days.
Why this doesn't worry me as an investor?
All my investment assets including those in NSW have been hand-picked and they are high quality assets in great locations.
They attract quality tenants and strong rental yields.
We employ great Property Managers who ensure tenants are high quality and that the property and tenants are looked after.
And as a Rental Provider I look after my tenants, showing empathy and always ensuring that the property is well maintained and adheres to the legislation.
So these changes to the law do not concern me.
Nathan Pensini, Head of Property Management at LOVE Property Group had this to say about the proposed changes... "Sometimes a landlord may use the no-grounds eviction for the wrong reason, and so yes it will add a layer of protection for renters.
"These changes may deter some investors but I don’t think it will have a huge impact on investor sentiment, more than deter... it will tidy up the industry which is a good thing for everyone - renters and landlords alike."
How can investors manage the risks?
When investing in property, you do so with an understanding that some things (including government policy and interest rates) are outside of your control. This is a known factor you take at the start.
So what can you control to ensure this policy change has little to minimum impact on you as an investor?
- Buy good, no... GREAT investment assets.
- Look after your property and your tenants; treat them like family or an employee.
- Employ a great property manager who manages the property and tenants very well.
- Abiding by the law, always try to maintain your rent at or close to market rates, but in doing so ensure you continue to maintain and also improve the property so that the tenant sees that any rent increases are tangeable.
- Communication is paramout; ensure you and your property manager communicate well, and ensure you property manager communicates well with the tenant.
Nathan from LOVE Property Group goes on to say.... "At the end of the day, the most important thing is that tenants look after the property and pay rent on time. Tenants also need to be proactive in reporting maintenance issues, and the property manager/landlord should ensure these are fixed quickly. This is by far the best approach to ensure a landlord doesn’t have a need/desire to evict a tenant for a non-valid reason."
Death by a thousand cuts
A concern (for renters and the market in general) of several organisations like PIPA and PICA, and one that I share, is that the combination of this new policy with other policy changes that deter investment, all combined with higher costs of living and increased hold costs for property (i.e. interest rates, insurance, repairs etc.), could result in a reduction in investors which in turn results in a drop in rental supply.
If this occurs, this would put more pressure on the rental market, could drive rents higher and could force more people into homelessness.
Comments from Government and industry experts
Premier Chris Minns said the reforms gave "... both homeowners and renters more certainty." “Bad tenants will still be able to be evicted. We don’t want homeowners to have to put up with bad behaviour,” he said.
PropTrack director of economic research Cameron Kusher said it was unlikely to change the rental market too much. “There’s always a reason why a landlord may want to remove a tenant... they’re just going to have to divulge that reason now,” Mr Kusher said. Mr Kusher said property investors were still likely to invest in NSW despite the reforms.
Homelessness NSW chief executive Dominique Rowe said ending no-grounds evictions was a welcome move. “Stopping no-grounds evictions is a sensible move that will help prevent tenants who have done nothing wrong from being at risk of suddenly losing their housing and facing homelessness,” Ms Rowe said.
The Property Investor's Council of Australia (PICA) said "The introduction of this legislation in its current form, will pose significant existing and future investment risk to the overall supply of private rental in the mix of rental accommodation options in New South Wales going forward. You only need to look at the recent experience in Victoria where significant tenancy reforms, along with higher property taxes have resulted in 15,600 less rental properties in Victoria in the past 12 months along, based on reported Bond registration data."
Further context
This is an emotive issue. I therefore wish to acknowledge that I have never been in the situation where a "no-grounds eviction" was a necessary step for me as a landlord, nor have I been a renter and received this news. I appreciate that in some cases it could be beneficial to the owner of the property to be able to evict for no-grounds under the existing (soon to be old) policy. I further acknowledge that as a renter it could be stressful to receive such an eviction.
