Home Leases: it's time for a national rental agreement to get renting off the rails

Snug calls on Australian State Governments to harmonise residential rental leases nationally to simplify renting for renters and owners, enable ease of compliance and encourage innovation in housing.

In this article, Snug lists 17 key lease terms that should be standardised and introduces the concept of Home Leases which provides progressive homeowner benefits.

Before the rental reforms are legislated, let’s rethink rental reform and get it right for both renters, owners and agents.

Renting reform heading down the rails

You may have heard the phrase ‘rail gauge’ in conversation because it caused Australia a lot of headaches in the world of transport. Rental reform continues to head down the same track.

Here’s a little extract from Wikipedia…

Rail gauges in Australia display significant variations, which has presented an extremely difficult problem for rail transport on the Australian continent for over 150 years. As of 2014, there is 11,801 kilometres (7,333 mi) of narrow-gauge railways, 17,381 kilometres (10,800 mi) of standard gauge railways and 3,221 kilometres (2,001 mi) of broad gauge railways.

In the 19th century, each of the Colonies of Australia adopted their own gauges. However, with Federation in 1901 and the removal of trade barriers, the short sightedness of three gauges became apparent. It would be 94 years before all mainland state capitals were joined by one standard gauge.

It seems rental reform will continue with the Aussie rail gauge problem.

European Rental Works in Europe, We Need Something Unique

We often hear about the ‘gold standard’ of many European countries who’s lease terms make renting a home equivalent to owning a home.

The European rental standards enable very long term leases with significant rights for renters. You can install your own kitchen and stay for generations with low rent increase. That’s great in situations were the investors are large corporations with very patient capital.

In Australia, we have predominantly private individual investors who have shorter investment horizons and possibly higher target rates of return (rent net of operating and capital expenses).

Recent rental reforms announced in NSW, Victoria and soon to be Queensland will lift the Aussie standard from a relatively low base to better support renters, especially those in a more vulnerable position.

Standardisation will enable personalisation

Keep it simple - we live in an increasingly mobile and connected world. Renters move interstate for work and family. Investors buy property interstate to access diverse and affordable opportunities. Simplicity is well understood.

Enable compliance - it’s near impossible for someone in the rental market to understand their full rights and obligations when engaged with renting, and even more so as they move interstate.

Enable innovation - complex interstate rental regulations hamper innovation in housing. The cost of complying while trying to create more personalised experiences for renters and owners is bogged down with the myriad of variances.

17 lease terms that should be standardised

Term Introduce standard 6 month, 12 month, 2,3,6 and 12 year terms
Rent increases Frequency aligned with the lease term with standard indexation to CPI, and reviewed to market every third year
Pets Standardise the basis for authorising pets
Modifications Standardise the modifications permitted over the lease term, with longer leases allowing more modifications
Repairs Standardise the type and value of repair the tenant may initiate and seek reimbursement
Termination Standardise the terms around “no grounds eviction”
Break Fee Standardise the calculation of break fees
Notice period Standardise the notice period under fixed and periodic
Fair wear and tear Define “fair wear and tear” to reduce disputes
Condition reports Standardise the provision of condition reports
Smoke alarms Standardise when a smoke alarm compliance report gets done
Right of entry Standardise the basis and timing for entry eg. 14 days prior to end of lease or if selling the property.
Electronic signatures Enable e-signatures for all rental agreements (lease, condition report, forms)
Professional cleaning Standardise on what basis requiring professional cleaning is permitted eg. if pets occupy the property
Personal information Standardise the collection and management of personal information
Domestic Violence Standardise the basis for which termination and waiver of liability is permitted in domestic violence situations
Minimum Standards Standardise the minimum standards eg. water must be connected

Progressive benefits with Home Leases

Snug believe in Home Leases that provide renters with progressive benefits to experience a home like an owner would.

We think the longer your lease commitment, the greater the homeowner-like benefits. Incentives for property owners to offer longer leases might include land tax concessions and renters may be required to maintain minor low cost items related to usage eg. simple plumbing and electrical repairs.

A renter signing a 12 month lease should not have the right to make the same modifications to a property as renter signing a 12 year lease. For example, a renter might wish to paint the walls yellow and the cost of refurbishment and rectification for the owner may be reasonable after 12 years but not after 12 months.

The Council of Australian Governments should coordinate alignment of lease terms. Snug invites renters, owners, agents and the PropTech industry to rally around national leases.

Join the campaign for a national standard of rental agreement, let’s get renting off the rails and enable national innovation in housing to create models suitable for the ageing and millennial population particularly.

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