What is the talk all about? What is “No-Grounds Eviction”?
There are two types of leases available to renters and landlords: fixed-term leases, where the tenants sign a lease for a specified time, and periodic or rolling leases, which have no specified end date. Many fixed-term agreements become rolling leases automatically once the fixed term has expired. While landlords can issue a “No-Grounds Eviction” to tenants on rolling leases at any time, the law prohibits them from issuing no-grounds evictions to tenants on fixed-term leases before the end of the lease.
Under current law, landlords in NSW are able to terminate Periodic Leases / Rolling Leases, at any time without reason. The only requirement is that the Landlord give the tenant 90 days’ notice.
Both Labor and the Coalition went into the 2023 state election promising to ban this type of eviction. Many months later, the government has yet to put forward new legislation. Greens MP Jenny Leong this year introduced a private member’s bill to outlaw No-Grounds Evictions but neither the government nor the opposition supported the bill.
As we all wait for New Legislation to take place in NSW in relation to No-grounds Eviction of tenants in the rental market, we should also stop to consider what this actually means to the investor who is supplying the much-needed property for tenants to lease. We take note, with great interest and empathy that understandably, there is passionate responses from all in question. As in any story, there are so many sides, some unseen and others refused to be seen. But we can but try, to stop to understand everyone’s point of view.
Several real estate bodies have expressed concern that the ban will deter investors from entering the market, reducing rental supply and making “the dire situation for renters even worse”.
“The cruel irony for tenants is that every time you make residential property a less attractive investment, the more you drive investors away, and the less homes there are to rent,” said Tim McKibbin, CEO of the Real Estate Institute of NSW with whom Morton are a Member.
His view was echoed by Ben Kingsley, chair of the Property Investors Council of Australia, who prophesied a dire future for the NSW rental market once the ban takes effect.
“Governments and politicians are naïve if they don’t think that some reforms to the current tenancy laws put tens of billions of annual investment dollars at risk in the private rental sector being spent in their state or territory – money that […] adds critical supply to the rental pool,” Kingsley said.
As Australian National University economist Peter Martin AM previously noted, a slowdown of investor activity does not necessarily tighten rental demand.
“If higher rates force some landlords to sell, and they sell to other landlords, the number of properties for rent won’t change. If those landlords sell to owner-occupiers who would otherwise rent, they cut both the number of rental properties and the number of renters,” Martin explained.
Instead of worsening conditions for renters, Owen stated that the no-grounds evictions ban will likely have an opposite effect.
“Ending ‘no grounds’ evictions will support greater security of tenure for tenants. While this will come at the cost of flexibility and potential rental income gains for landlords, reducing the power imbalance for tenants is unlikely to have a substantial impact on investor activity or rent values,” she concluded.
The matter was referred to a committee for inquiry that will report back to parliament in September. Fair Trading Minister, Anoulack Chanthivong, said the government was committed to reform but wanted to ensure it got the new legislation right. “What we want to do is take a considered and methodical approach to ensure the policy and the regulations that we table in the parliament are balanced and they’re fair,” he said. “The last thing we want to do is make things worse for renters and scare away investors.”
Thank you for being a landlord, and rest assured we are there for you along the way.
Always happy to hear from you if you have the time.
Keep well, stay safe with my warm regards.
Betty Drennan
Director & Head of Property Management
0407 408 099