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Simon Corbell warns tenants they may be liable for lost rent in a declining market

Date

Henry Belot

A slump in the ACT rental market and increasing vacancy rates has led to a number of Canberrans being hit with unexpected costs when they break their residential lease.

With property owners increasingly forced to lower rent to entice replacement tenants, the blunt message from Attorney-General Simon Corbell is that it's up to the present tenants to pay the difference.

Under the Residential Tenancy Act, tenants could be reimbursing the owner for up to 25 weeks after they terminate their lease, plus the cost of readvertising the property until a new tenant is found.

Although the situation has existed since 1997, the declining rental market has thrust it back into the spotlight.

An ACT Tenants Union spokeswoman said enquiries about breaking a lease were one of the top two categories of enquiry, particularly in relation to advertising costs and rental payment.

She said many Canberrans were unaware of the provision, leading to confusion and surprise when they terminated their lease and found themselves suddenly paying double rent. 

''It’s a strange situation where the market is both beneficial for tenants but also has difficulties for tenants, particularly if they are made redundant in this current job market,'' she said. 

According to June quarter figures released by Australian Property Monitors, the median weekly rent for houses in the ACT fell by 6.3 per cent to $450.

The average weekly rent for units in Canberra fell by 6.1 per cent to $385, which meant units transitioned from being the third most expensive in the country during April to among the cheapest.

Real Estate Institute of the ACT chief executive Ron Bell said declining rental prices in Canberra have only recently been felt by real estate agents and owners. 

''Twelve months ago people were just walking in and saying 'I can’t afford this' and then walking straight out – there was quite a lot of that,'' he said.

Australian Property Monitors Domain Group senior economist Andrew Wilson believes Canberra’s rental woes are due to subdued housing conditions that may continue to exist for some time.

''There’s a consistency about the fall over the year for both houses and units, and I do think it’s just generally a lack of demand for rental properties in Canberra,'' he said.

''I think that does reflect what is an underperforming local economy concerned about job security.''

The Attorney-General's clarification comes just one month after the ACT government announced a wide-ranging review of the Residential Tenancy Act 1997, which was welcomed by the Tenants Union and remains open for community input until September 12.

Mr Corbell said the existing legislation ensures ''lessors are only able to recover what they would have received under a lease agreement if the tenant had not terminated it, and then only up to a maximum amount of 25 weeks' rent plus costs of readvertising''.

In a discussion paper accompanying the announcement of the review, the ACT government indicated public service job cuts in coming months may further increase the vacancy rate in the ACT. 

Tenants Union of NSW policy officer Ned Cutcher said tenants in NSW face the same possibility of being held liable for rent lost, although this was uncommon given the state of the real estate market in Sydney.

But Mr Cutcher said a review of the NSW Residential Tenancies Bill in 2009 introduced an opt-in break-fee provision to allow tenants to break a lease more easily and be spared from a number of administrative fees.

The ACT Tenants Union spokeswoman said such arrangements could be considered as part of the ACT government's review into the tenancies act.

Mr Corbell said anyone with concerns regarding the arrangements between tenants and owners could make a submission to the government review.

30 comments so far

  • Perhaps CT could also look into why Housing ACT has not reviewed its tenants' rents this year in a dropping rental market? Are they trying to artificially maintain the 'paper value' of their assets? Certainly they are ripping their own tenants off.

    Commenter
    Mardi
    Location
    Tuggeranong
    Date and time
    August 21, 2014, 7:24AM
    • Isn't rental for public housing determined by income?

      Commenter
      Catherine
      Date and time
      August 21, 2014, 11:13AM
    • All govie houses have an assessed 'market rent'. However, household income is assessed and some tenant households get a rebate on the assessed 'market rent'. Note, this is 'household' income (ie including the money your kid earns at Maccas). However the maximum rent paid where the household income is over the threshold for a rebate, is the assessed 'market rent'. Tenants have not been advised of the assessed market rent this year. While those on rebates are unaffected, the tenants who pay full market rent are paying more than the properties are worth at present because no assessment has been made this year.

      Commenter
      Mardi
      Location
      Tuggeranong
      Date and time
      August 22, 2014, 12:37PM
  • But we we're told by all the specialists that property is solid, never goes down, land shortage, better build quality and so on. What happened? Were all the vested interests incorrect? Me thinks so

    Commenter
    data
    Date and time
    August 21, 2014, 8:30AM
    • Canberra isn't like Sydney, Melbourne, etc - it has one main employer (the Federal Government) who I gather employs about 38% of people. Any change in the public service will cause impacts on housing - much like housing in a mining town crashes if the mine closes.

      Commenter
      peter
      Location
      Sydney
      Date and time
      August 25, 2014, 12:17AM
  • Way to Go Simon Corbell, For years renters have been paying off greedy landlords mortgages for them and rents have been rising and rising. Now that there is a turn around in the market renter have to make up for landlords shortfalls? With public service workers being made redundant and the Canberra population soon to shrink as a result, how do you entice people to the ACT to work and live here? Next, everyone will be paying for parking.......Oh wait, it is already happening. Good luck with that!

    Commenter
    Dooli
    Location
    Canberra
    Date and time
    August 21, 2014, 8:34AM
    • Absolute rubbish. A tenant with a 12 month lease is required to pay the agreed rent for the period of the lease - no more in a rising market and no less in a falling market. There is certainty on both sides.

      How hard is that to understand?

      Commenter
      Johnno
      Location
      Canberra
      Date and time
      August 21, 2014, 11:11AM
    • Buy your own, and then you can pay off your mortgage.

      Commenter
      Agent Smith
      Date and time
      August 21, 2014, 12:01PM
    • Greedy landlords? Why greedy? Landlords have their mortgages to pay too. If you don't like it, all I can say is you can agitate for a communist state.

      Commenter
      John
      Date and time
      August 21, 2014, 5:22PM
  • Its the same level of demand, unfortunately all these apartment blocks have come on line at the same time so there is more supply. That is more landlords looking for at the same number of renters...doesnt work so prices are lowered to make your place more attractive than the other places.

    Commenter
    Jane2
    Date and time
    August 21, 2014, 8:41AM

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