TENANCY TIPS:
Rent Increases and rent reduction
** last
updated 06/07/09 **
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Rent
increases are limited by law to the term of the lease or a maximum of once
every 12 months...and 8 weeks notice in writing is required.
Excessive rent increases can be
disallowed...
........ and rent reductions can be ordered.
Rent
Increases
The law in the ACT
Rent
increases are covered by the Residential Tenancies Act 1997 (‘RTA’).
The terms
of every tenancy are set out in the RTA and are known as the ‘standard
terms’. Regarding rent increases, the standard terms specify that:
·
The
landlord (or agent) must give the tenant 8 weeks notice in writing of their
intention to increase the rent. The notice must include the amount of the
increase, and the date on which the increase will occur (cl 38);
·
If
the tenant believes the increase is excessive they may apply to the ACT
Civil and Administrative Tribunal (ACAT) for a rental rate review (this
process is detailed below);
·
If
the tenant remains in the premises without applying for a review, the
increase takes effect from the date specified in the notice (cl 40); and
·
The
restriction on increases applies provided that at least one of the tenants
remains in occupation from the time of the last increase (cl 37).
If you don’t receive proper notice
If the
landlord doesn’t give you proper notice, then you may not be obliged to pay
the increased rent (cl 34 states that the amount of rent will not vary except
as provided by the RTA and the tenancy agreement).
You should
write to the landlord before the date of the increase stating that you
do not intend to pay the increase and giving the reason. Be sure to keep a
copy of the letter as evidence in case there are legal proceedings at a later
stage. The landlord may try to assert you are in arrears if you don’t pay the
increase.
If you have
already paid the higher rent you can make an application to ACAT for the
difference to be repaid. Note that ACAT could decide to correct a
defect and change the date that the increase takes effect.
Can the
bond be increased as well?
No.
Standard term cl 15 says that only one bond is payable on any one tenancy
agreement.
RTA section
20 specifies that a landlord may only require or accept as bond an amount not
exceeding the first 4 weeks of rent payable under the tenancy agreement.
This means
that the original amount of bond cannot be increased during the tenancy.
However, if
you enter into a new fixed term agreement for the same premises and the original
bond is released, then you could be asked to pay a new bond at the
increased amount.
Are there
any limits on the amount of a rent increase?
Not in the
first instance, a landlord can propose any increase HOWEVER a tenant can
attempt to negotiate a different amount or have the increase reviewed by
ACAT. ACAT can reduce or even disallow the increase.
If you receive
a notice of a rent increase and you believe the increase is excessive, you
should write to the landlord advising him or her that you think the increase
is excessive, giving your reasons, and asking that the increase be lowered or
withdrawn.
If there is
no satisfactory response you should apply to ACAT to have the increase
reviewed.
This
application should be made at least 14 days before the increase is due to
take effect. ACAT will only hear a late application if there are ‘special
circumstances’ - so apply promptly.
At ACAT a
formula linked to a CPI figure is applied to determine the onus of
proof. If the proposed amount is greater than the calculated figure the
landlord must satisfy the tribunal that the increase is justified. If the
increase is less, the onus is on the tenant to satisfy the Tribunal that the
increase is unreasonable (s67).
Before you
challenge a rent increase you should apply the formula to determine a
starting point for negotiations. For more details - the formula, the
CPI figures and examples see Tenancy Tips: Rent Increases: Is my increase
excessive?
Under s68
RTA, in deciding on whether an increase is excessive, the Tribunal will
consider:
(a) The
rent before the proposed increase;
(b) Whether
it has been increased previously in the tenancy and if so, the amount of that
increase, and the period since that increase;
(c) Costs of the landlord in relation to
the premises;
(d) Services provided by the landlord to
the tenant;
(e) The value of fixtures and goods
supplied as part of the tenancy;
(f) The state of repair of the premises;
(g) Rental rates for comparable
premises;
(h) The
value of any work performed or improvements made by the tenant, with
landlord's consent; and
(i) Any
other matter the Tribunal considers relevant
NOTE:
ACAT may allow an increase that brings the premises in line with rents for
comparable premises. However you can still challenge the evidence presented
by the landlord, and produce your own evidence about rental rates for
comparable premises.
NOTE:
If you have valid notice of an increase and don’t pay the increased amount in
accordance with that notice you will be in rent arrears. See Tenancy
Tips: Rent Arrears.
What about GST and rent?
Tenants
cannot be charged GST on rent. If your landlord claims GST on rent you
can make a complaint with the Australian Competition and Consumer Commission,
or the Office of Fair Trading.
Rent
Reductions
Can you
have the rent reduced?
As a tenant
you pay full rent in return for full use and enjoyment of the premises you
live in. However, there are occasions where through no fault of yours, this
use and enjoyment may be diminished. You should not be paying for something
you aren’t getting.
If this
occurs, you should write to the landlord/agent, advising them of the problem
(eg the need for repairs). Request that it be rectified within an
appropriate timeframe and that you be compensated in the form of a rent
reduction. Keep a copy of the letter.
If you
don’t receive a satisfactory response you can apply to ACAT for a rent
reduction. Under s71 RTA, ACAT may order a reduction if it considers your use
or enjoyment of the premises has significantly diminished as a result of:
(a) the loss of any appliance,
furniture, facility or service supplied by the landlord as a result of:
(i) withdrawal of the service etc;
(ii) failure to do repairs and maintenance;
(iii) failure to provide/maintain locks and
security devices.
(b) the loss of the use of part of or
all of the premises; or
(c) interference by the landlord/agent
with your quiet enjoyment of the property. This includes your right to
use the property in reasonable peace, comfort and privacy.
ACAT may
order that the reduction take effect from the day on which your use and
enjoyment diminished. The reduction may remain in force for up to 12
months (RTA s 71(3)). The order can also be ‘retrospective’, meaning you will
receive the difference between the full rent you have already paid, and the
reduced amount (s 71(4)).
There are
no rules or formulas to determine how much you should be compensated.
As each case is different, you must be able to show how you have calculated
your claim, i.e. proportion of rent vs impact of loss.
This is a summary of your rights and
responsibilities.
If you have a specific
problem, you should seek more detailed advice.
The
information provided is based on the current state of tenancy law and details
may change.
Tenancy Tips © 2009 Tenants' Advice Service
The support of the ACT Government through the Dept. Justice & Community
Safety is gratefully acknowledged
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