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The tenancy agreement

You’ve found a place, put in an application, and now you’ve been offered a tenancy. If you accept, you will enter into a residential tenancy agreement.

Am I covered by the Act?

The Residential Tenancies Act 2010(NSW) (the RT Act 2010) defines a residential tenancy agreement as ‘an agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence’ (section 13(1)). This is a broad definition. Its key elements are:

  • ‘for value’ – in most cases, this means money (rent), but it is possible to have an agreement where you provide for labour as the thing of value given to the landlord (section 9);
  • ‘a right of occupation’ – whether ‘exclusive occupation’ or not (section 13(3)(a));
  • ‘residential premises’ – this means ‘premises used or intended to be used as a residence’ (section 3), and includes a part of premises (for example, a single room in a house); and
  • ‘for the purpose of use as a residence’ – you can use the premises for other purposes (for example, running a business), as long as the predominant purpose is use as a residence (section 7(h)).

If your rental arrangement fits this definition – and most do – it is a residential tenancy agreement for the purposes of the RT Act 2010. There are no formal requirements to be met, such as having the agreement in writing or using special wording. (Note: there is an exception in the case of share housing – see below and the section on Share housing.)

Notwithstanding the broad definition, the RT Act 2010 also expressly excludes some agreements and premises from coverage. Table 2.1 summarises the exclusions and extracts relevant wording from the RT Act 2010 and, in some cases, the RT Reg 2010.

Table 2.1. Exclusions

Exclusions

How the exclusion is worded

‘Protected tenancies’

‘premises to which the Landlord and Tenant (Amendment) Act 1948

applies’ (s 7(a))

Aged care

‘premises used to provide residential care or respite care within the meaning of the Aged Care Act 1997of the Commonwealth’ (s 7(b))

Serviced apartments

‘buildings or parts of buildings used to provide self-contained tourist and visitor accommodation that are regularly cleaned by or on behalf of the owner or manager’ (s 7(c))

Hotels and motels

‘premises used as a hotel or motel’ (s 7(d))

Backpacker hostels

‘premises used as a backpackers’ hostel’ (s 7(e))

Hospitals and nursing homes

‘ a hospital or nursing home’ (s 7(f ))

Clubs

‘any part of a club used for the provision of temporary accommoda- tion’ (s 7(g))

Business premises

‘premises used for residential purposes, if the predominant use of the premises is for the purposes of a trade, profession, business or agriculture’ (s 7(h))

Holiday parks

‘occupation agreements to which the Holiday Parks (Long-term Casual

Occupation) Act 2002applies’ (s 8(1)(a))

Retirement villages

‘residence contracts within the meaning of the Retirement Villages Act

1999’ (s 8(1)(b))

Boarders and lodgers

‘an agreement under which a person boards or lodges with another person’ (s 8(1)(c))

Refuge or crisis accom- modation

‘an agreement under which a person resides in refuge or crisis accom- modation provided by a public authority, a council or another body or organisation that is wholly or partly funded by the Commonwealth or the state, or an agency of the Commonwealth or the state’ (s 8(1)(d); Residential Tenancies Regulation 2010, cl 14)

Crown lands

‘leases and licences under the Crown Lands Act 1989, the Western LandsAct 1901or the Crown Lands (Continued Tenures) Act 1989’ (s 8(1)(e))

Sale agreements

‘an agreement for the sale of land that confers a right to occupy residential premises on a party to the agreement’ (s 8(1)(f ))

Mortgage agreements

‘an agreement that arises under a term of a mortgage and confers a right to occupy residential premises on a party to the mortgage’ (s 8(1)(g))

Holiday agreements

‘an agreement made for the purpose of giving a person the right to occupy residential premises for a period of not more than 3 months for the purpose of a holiday’ (s 8(1)(h))

Company title schemes

‘an agreement that arises under a company title scheme under which a group of adjoining or adjacent premises is owned or leased by a corporation each of whose shareholders has, by virtue of his or her shares, an exclusive right to occupy one or more of the residential premises’ (s 8 (1)(i))

99-year leases

‘an agreement having a term, together with the term of any further agreement that may be granted under an option in respect of it, that is equal to or exceeds 99 years’ (s 8(1)(j))

Equity purchase agreements

‘equity purchase agreement means a series of agreements that include a residential tenancy agreement and provide for:

(a) the initial purchase by the tenant, as a tenant in common, of not less than 20 per cent of the owner’s interest in the residential premises, and

(b) the further purchase by the tenant, from time to time, of a greater percentage of the owner’s interest in the premises’

(RT Reg 2010, cl 13)

Heritage properties

‘residential premises that comprise, or are part of, a heritage item … if the landlord is the Crown, a public authority or a council’

‘heritage item means:

(a) premises that are listed on the state heritage Register kept under the Heritage Act 1977, or

(b) premises that are the subject of an interim heritage order or heritage agreement under that act, or

(c) premises that are identified as items of state or local heritage significance under an environmental planning instrument, or

(d) premises that are vested in, or controlled or managed by, the historic houses Trust of new south wales’

(RT Reg 2010, cl 16)

‘Trial’ residential park agreements

‘residential premises that are premises to which the Residential Parks Act 1998would apply but for the operation of clause 4 of the Residen- tial Parks Regulation 2006’ (RT Reg 2010, cl 18)

Life tenancies

‘residential premises that are subject to a life tenancy … life tenancy means a legal or equitable right of a person to occupy residential premises as a tenant for life’ (RT Reg 2010, cl 19)

Residential colleges and halls of residence

‘residential premises used, or intended for use, principally as a residential college or hall of residence for students of an educational institution … if:

(a) they are located within the institution, or

(b) they are owned by the institution, or

(c) they are provided for that use by a person or body that provides the premises under a written agreement with the institution to provide accommodation to students of the institution’

‘educational institution means premises used for education, being: (a) a school, or

(b) a tertiary institution that provides formal education and is constituted by or under an act’ (RT Reg 2010, cl 20)

Note that some share housing arrangements are excluded where they do not comply with certain formalities set out at section 10 of the RT Act 2010 – this is discussed further below and in the Share housing section. Note also that premises covered by the Residential Parks Act 1998 are excluded from most, but not all, parts of the RT Act 2010: Parts 8 (rental bonds), 9 (powers of the Tribunal) and 11 (residential tenancy databases) apply.

Some of these exclusions are discussed further in the sections on Share housing, Marginal rental and Other types of tenants. For practical purposes, keep in mind that the large majority of rental arrangements in New South Wales are covered by the RT Act 2010 and, in particular, that agreements entered into through real estate agents are nearly always covered by the RT Act 2010 (only a small number of agents deal with boarding, lodging and share housing arrangements).

The standard form of agreement

The RT Reg 2010 sets out a standard form of agreement; all residential tenancy agreements under the Act are required to be in the standard form. This means that in most respects other than the rent paid, the address of the premises and the parties’ names, one residential tenancy agreement looks a lot like any other.

Occasionally landlords (particularly self-managing landlords) will use a residential tenancy agreement they themselves have drafted from scratch, or use a form of agreement for another jurisdiction downloaded from the internet. These agreements often include terms that are quite different to those prescribed by the Act, and may describe themselves as being other than residential tenancy agreements (a ‘licence agreement’ is a common example). Some state expressly that the RT Act 2010 does not apply.

These forms of agreement do not get landlords out of being covered by the RT Act 2010. If your agreement is in substancea residential tenancy agreement, and it is not one of the sorts of agreement excluded from the Act (by sections 7, 8 or 10, or by the RT Reg 2010), you’re covered, regardless of the formof any document you may have signed.

Written agreements and oral agreements

Under the RT Act 2010, tenancy agreements may be written or oral, or partly written and partly oral – so you can have a valid tenancy agreement on the basis of a conversation and a handshake (there is an important exception to this in relation to share housing – see below). You are, however, entitled to have the agreement made in writing (section 14), and to be given a copy (section 28). It is the landlord’s responsibility to prepare the written agreement; if they do not, you can apply to the Tribunal for an order that your landlord put the agreement in writing (section 16).

Note that if you sign a residential tenancy agreement, and give it to the landlord or agent for the landlord to sign, and they fail to do so, the agreement is deemed to be signed when they accept rent from you or otherwise perform part of the agreement (for example, give you the keys to move in) (section 17).

The RT Act 2010 further provides that where an agreement is not in writing, you will effectively have the benefit of a fixed term agreement for six months: that is, the landlord is not allowed to give a termination notice without grounds, and cannot increase the rent (section 14(3)). (You, however, can still give a termination notice as if it is a periodic agreement.)

Share housing and written agreements

Unlike other tenants, occupants of ‘shared households’, as defined at section 10 of the RT Act 2010, must observe certain formalities in order to be covered by the Act.

For the purposes of section 10, an occupant of a shared household is defined as ‘a person who occupies residential premises that are subject to a written residential tenancy agreement, is not named as a tenant in the agreement and who occupies the premises together with a named tenant’. If you are moving into a vacancy in an established share house, or if for some other reason you are not party to the agreement between your housemates and the landlord, you will probably fit the definition of ‘an occupant of a shared household’ and be subject to section 10.

This means that if you want to be covered by the RT Act 2010, you will need to have a writtentenancy agreement with a named tenant (making you their sub-tenant), or receive a transfer of a tenancy from a named tenant (making you the co-tenant of any remaining named tenants). Otherwise, section 10 provides that you are not covered by the Act.

See the section on Share housing for more, and section 10 of the RT Act 2010, and the section on Other types of tenants for more on agreements that are not covered by the RT Act 2010.

This is new

The Residential Tenancies Act 1987 made no special provisions relating to ‘shared households’. Under that Act, occupants of share housing could be tenants covered by the Act, or lodgers excluded from the Act, depending on a range of factors – not just whether they had a written agreement or transfer.

Additional terms

The standard form of agreement contains all the terms required by the RT Act 2010 to be in the agreement.

As well as containing all the required terms, the standard form of agreement from the RT Reg 2010 includes a number of additional terms that may be struck out, depending on what you and the landlord agree. These additional terms include terms relating to:

  • Break fees;
  • The keeping of pets; and
  • Where pets are allowed, a term relating to cleaning and fumigation.

Many agents use a version of the standard form of agreement published by the Real Estate Institute of NSW (REI).

Some landlords and agents also devise their own additional terms, which they add as a list – sometimes a long list – at the end of the agreement. Additional terms may be valid, provided they are not inconsistent with the RT Act 2010 and the standard terms it provides. Many commonly-used additional terms simply restate terms that are already in the standard form of agreement. Additional terms that purport to limit or vary landlords’ obligations under the RT Act 2010 (that is, ‘contract out’ of the Act) are prohibited and void: they cannot be enforced (section 219(1)). Also, certain additional terms are expressly prohibited under section 19 of the RT Act 2010. These are:

  • The tenant must have the carpet professionally cleaned, or pay the cost of such cleaning, at the end of the tenancy (but note: such an additional term is allowed if the landlord permits the tenant to keep an animal on the premises (section 19(3));
  • The tenant must take out insurance;
  • The landlord is exempt from liability for any act or omission by the landlord, the landlord’s agent or any person acting on behalf of the landlord or landlord’s agent;
  • If the tenant breaches the agreement, the tenant is liable to pay all or any part of the remaining rent under the agreement, increased rent, a penalty or liquidated damages; and
  • If the tenant does not breach the agreement, the rent is or may be reduced or the tenant is to be or may be paid a rebate of rent or other benefit.

Note that in the (very unusual) case of an agreement with a fixed term of 20 years or more, the RT Act 2010 does allow some contracting out (section 20).

Fixed term and periodic agreements

Your tenancy agreement will either be an agreement for a fixed term or a ‘periodic agreement’ (sometimes called a ‘continuing agreement’ or, less accurately, a ‘month-to-month’ agreement). Most tenancy agreements begin as fixed term agreements, usually with a fixed term of six or 12 months. After the end of the fixed term, the agreement automatically becomes a periodic agreement – though you may, if both you and the landlord agree, enter into another fixed term.

During the fixed term, the landlord is restricted from increasing the rent: it can be increased during a fixed term only if the agreement sets out the amount of the increase or the method for calculating the increase (section 42(1)) – and in practice, very few agreements do this. Also, both you and the landlord are restricted from terminating the agreement during the fixed term: in particular, neither party can give a termination notice, without grounds, for a date before the end of the fixed term. Otherwise, your rights and obligations under fixed term and periodic agreements are the same.

Long fixed terms

There are special provisions for tenancy agreements with longer than usual fixed terms. Under tenancy agreements for a fixed term of more than two years, the rent may be increased (whether or not the amount or method of calculation is set out in the agreement), but not more than once in any 12-month period (section 42(2)). Under tenancy agreements for a fixed term of 20 years or more, otherwise mandatory terms may be varied or excluded, and otherwise prohibited terms may be included (section 20). Finally, tenancy agreements for a fixed term of 99 years or more are excluded from the RT Act 2010 (section 8( j)).

Also, tenancy agreements for a fixed term of three years or more should be registered on the title of the property. This protects the fixed term from being voided in the event of the property being sold. Tenancy agreements for a fixed term of three years or less automatically have this protection (Real Property Act 1900(NSW), section 42(1)(d)).