With rental property in high demand and the weekly cost of rent soaring across Australia, renters are experiencing a high level of uncertainty surrounding the affordability of housing.
Understandably renters are nervous as we see the cost of living combined with the increased cash rate in Australia potentially forcing rents up however there are only two reasons that a rental provider can issue a rent increase to their renter.
The Rental Agreement has an end date
At First National Real Estate Neilson Partners every member of our property management department is well-versed in the requirements for raising a renter's rent.
The first reason you may be issued with a notice of rent increase is if the rental agreement has an end date. This means the agreement is a fixed-term agreement and most fixed-term agreements go for 5 years or less. If the agreement has an end date rental providers can only increase the rent if the agreement states they can and even if so, it can only occur as often as the rules allow.
- Where the rental agreement began before 19 June 2019 the rent cannot be increased more than once every 6 months
- Where the rental agreement began after 19 June 2019 the rent cannot be increased more than once every 12 months
- There are different rules again if the rental premises is a caravan park or a rooming house
The same rules above apply if a rental agreement is a periodical agreement or a month-by-month agreement. Periodical agreements usually start after a fixed-term lease ends.
61 Strong Drive, Hampton Park is one of the few rentals on the market for $400 or under
The fixed-term Rental Agreement is longer than 5 years
The second reason that a rental provider can increase the rent at their investment property is that the fixed-term rental agreement is longer than 5 years. This is called a long-term rental agreement, or long-term lease.
In a long-term rental agreement, the rent may not be increased more than once every 12 months, and this is only if the agreement states so.
Are rental increases legal?
Although it may seem unjust to the renter when a rental provider issues a rent increase, if they are served correctly under the Victorian Residential Tenancy ACT and in accordance with the above rules then they are in fact legal.
What happens when a Rental Provider increases a Renter's rent?
Your Property Manager will begin looking at a rent increase 3 months before the rental increase is due.
They will consult with the rental provider and advise them accordingly. If an increase is to be issued, your property manager will prepare a Rental Market Report containing evidence of current market trends and price index and then issue the renter with a rental increase notice.
The notice is served no less than 60 days prior to the date the rental increase is due to begin.
How much can a Rental Provider raise a Renter's rent?
The Residential Tenancy Act does not state exactly how much a Rental Provider can raise their rent.
When raising a Renter's rent, a Rental Provider must provide evidence supporting their decision and how they have calculated the rent increase.
How do you calculate a rent increase?
There are 4 common methods for calculating a rent increase. These are:
- The Consumer Price Index (CPI) as provided by the Australian Bureau of Statistics
- The Statewide Rent Index is based on the average rent prices in Victoria. From the current rental trend with Consumer Affairs Victoria, the quarter percentage is 3% for Melbourne and 2.8% for Victoria
- A fixed percentage increase
- A fixed dollar amount
Additionally, a rental provider cannot raise the rent to penalize a renter for any reason i.e. if they have broken the rental agreement. It should also be noted that changes to the renter's bond will not occur when there is a rent increase unless there is a long-term agreement that is being renewed for a further fixed term of 5-years or more.
Should you require further information or are still unclear of your rights as a Rental Provider or renter when it comes to rent increases please feel free to reach out to our friendly team of local and experienced property managers at First National Real Estate Neilson Partners Berwick, Narre Warren or Pakenham who are more than happy to assist with your rental requirements.
