The new tenancy laws in New South Wales (NSW) for 2025 have sparked a lot of discussions. As is usually the case when a government imposes changes that impact a specific industry, lobby groups have sprung to action, declaring why this is a bad idea. While change can be challenging, we don’t believe that all change is inherently bad. Here are some key reasons why we aren’t automatically opposed to these reforms, based on common concerns and perspectives from both tenants and landlords.
Key Takeaways
- Long-Term Planning: Proper portfolio planning can mitigate the impact of notice period changes and the requirement of legitimate reasons for lease termination.
- Rental Increases are Contentious: We argue that the changes aren’t materially different from best practice.
- Quality and Respect: Providing quality properties encourages tenants to treat them with respect, fostering positive landlord-tenant relationships.
Table of Contents
Property Investment is a Long Game
Property investment is typically a long-term commitment and yet this seems to be lost in much of the debate. Particularly in an expensive city like Sydney, landlords accept that they will be out-of-pocket in the initial years of ownership, since interest payments and costs generally add up to more than the income received in rent. This can lead us to focus on the pain we feel in our hip pocket nerve rather than the reason we invested in property in the first place: long term capital growth.
Yes, we could get into the debate about the unfairness of governments imposing more costs and restrictions on landlords while their investment in public housing has steadily declined over the decades. But is this helpful? The fact remains that we have an opportunity to set ourselves up financially due to other government policy (namely tax) that favours investors. We see no point in getting bogged down in this debate, rather we take the silver lining and accept a bit of cloud.
Reasonable Grounds for Termination
The shift from ‘no grounds’ evictions to requiring legitimate reasons for termination has been claimed to remove the owner’s rights to access their own property. In our view, this is a bit of an over-stretch. Yes, it won’t be as simple to get vacant possession as it has been, but you can still gain access for you or a family member to move in, or to renovate it, or to sell it.
The minimum notice period will shift from 30-days to 60-days and in most instances 90-days notice will be required to terminate a tenancy. Whether it’s a 30-day or 90-day notice period, these changes should not significantly impact those who are properly planning their portfolios. Effective planning and management can help landlords navigate these new requirements without major disruptions.
These changes ensure that tenants are treated fairly and that landlords must have clear, justifiable reasons for ending a lease, with strict re-letting restrictions. What it really means is that in a rising rental market, landlords can no longer evict a tenant who can’t pay market rent and then re-advertise the property to get a higher paying tenant.
Sounds fair, however, as one agent with decades of experience said to us, “this will take kindness out of the rental market.” He has a point; it will no longer be prudent to allow a good tenant to pay under market rent. Property managers will need to be vigilant with their annual rental reviews to ensure that the gap between market rent and what tenants are paying never widens beyond what is reasonable and justifiable. These changes come into effect on the 19th of May 2025.
Limited Rental Reviews
For many years it’s been seen as industry best practice to renew leases every twelve months and conduct a rental review as part of that process. For longer leases, a rental increase after the first year could be built into the terms.
Sometimes tenants prefer the flexibility of a periodic lease (otherwise known as going “month to month”) after their initial fixed term lease period has expired. Which often means they’re planning on moving at some point. If they do, your agent will review the market rent as they prepare to re-lease the property. If the tenants stay for another year, your agent will get to review the rent at the end of every 12 month period.
The new law limiting a rental increase to once a year will mandate what has essentially been happening anyway in many agencies. This came into effect in October last year. We believe this law is much better than the one in place in Queensland, where the property can only have one rental adjustment per annum, even if the tenants change.
Difficult Tenants and Poor Quality Properties
We are not blind to the reality that some tenants don’t do the right thing and nor do some landlords. However, there’s a bit of a chicken-and-egg situation here. If landlords provide quality properties, tenants are more likely to treat them with respect. Ensuring that properties are well-maintained can foster a positive relationship between landlords and tenants, reducing conflicts and misunderstandings.
Having an “us or them” mentality can erode trust and cooperation between property managers and tenants. This adversarial approach makes problem-solving more difficult, as both parties become defensive and less willing to compromise. High tenant turnover, costly disputes, and a damaged reputation are common consequences of such a mindset.
When landlords adopt a difficult or adversarial approach, it can exacerbate many of the same issues, making their property manager the meat in the sandwich. This only makes it harder to resolve disputes and maintain a positive relationship with tenants. It can also increase the risk of legal issues, as tenants who feel mistreated are more likely to seek legal recourse.
Laws that protect tenants give property managers the tools they need to advise their owners of their obligations under the law.
Balancing Maintenance Costs and Tenant Rights
We understand that maintenance costs can be a significant burden for landlords. Holding an investment property is expensive, and unexpected maintenance bills can be frustrating. However, it’s also important to recognize why tenants may not sympathize with these costs. Tenants expect safe and habitable living conditions, and it’s the landlord’s responsibility to provide this. By advocating for both parties, we can find a balance that ensures properties are well-maintained without placing undue financial strain on landlords.
Protecting the Margins
We acknowledge that some landlords face challenges with difficult tenants who know how to exploit the system. However we believe that most people are reasonable and decent. The majority of tenants do not destroy property, and most landlords do not force tenants to live in sub-standard accommodation. The stated aim of the new laws is to create a fairer and more balanced rental market.
That said, there is a need to protect those at the margins—for example, landlords who have experienced malicious damage, and at the other extreme, tenants who have suffered from extensive mould and unhealthy living conditions. NCAT is there to deal with these types of circumstances.
Of course, prevention is better than the cure. At Preferental, we assist our landlords in maintaining their properties to a high standard. This is not just so that tenants can enjoy living there, it also preserves the value of their property. We have equally high expectations of tenants to do the right thing. It’s one of the reasons we have an experienced team member conduct all of our inspections, so we can proactively address issues in a timely manner, benefiting both the occupant and the owner.
Overall, while the new rental laws in NSW 2025 bring changes, by understanding and adapting to these reforms, both tenants and landlords can benefit from a more stable and transparent rental environment. We don’t automatically resist these changes because we don’t naturally assume that all tenants are bad and landlords are victims of the system. We can see how they can be incorporated into the professional management of an investment property.