1.

Changes to the Standard Residential Property Lease

A seminar by Ross McCallum

21 March 2006

McCallum Donovan Sweeney

16 Irwin Street

PERTH WA 6000

Phone: 9325 9353 Fax: 9221 2220

E-mail:

Internet:

kathleen/00106302.doc

1.

Changes to the Standard Residential Property Lease

A seminar delivered by Ross McCallum

of McCallum Donovan Sweeney

THE CHANGES

  1. A new item 8 to the Schedule has been added for the number of car bays allocated with the Premises if relevant. It will assist for strata or apartments with separate parking bays.
  2. Item 9 has been changed to put Fixed Term first and Periodic second. Item 10 now refers to the Rent and how it is payable.
  3. Item 14 now has less space but leaves provision to add an Inventory list.
  4. Item 16 is more specific about the Rent payable at the end of the Fixed Term if the Tenant remains with the consent of the Owner.
  5. The acknowledgement of the documents received by the Tenant at the end of the Schedule now includes in section (3) "Relevant By-laws pertaining to a strata complex, and". This may be the Schedule 1 and Schedule 2 By-laws together with any special By-laws. The Schedule 1 and Schedule 2 By-laws may not be applicable for some stratas if there is a complete set of new By-laws or a Management Statement. Section 42(5) of the Strata Titles Act has a provision that says that any lease is deemed to contain a provision that the Tenant will comply with the Bylaws in force at any time. So the Tenant should have a copy of the Bylaws.
  6. Clause 1.1 - an inclusion has been made that the Premises include the number of car bays allocated to the Premises referred to in Item 8. Item 8 previously did not exist and there was no clause specifically referring to car baysas being part of the leased premises.
  7. Clause 2.1 - this has been shortened to state that the Tenant agrees to pay the Rent punctually on the dates for payment. It previously was longer and repeated what was in clause 1.2.
  8. Clause 2.3 - this has been drafted to deal with dishonoured cheques. This makes it clear that Owners are entitled to recover the costs in relation to a dishonoured cheque.
  9. Clause 2.4- states that if a dishonoured cheque occurs more than once,Agents can refuse to accept cheques as a method of payment. These are new provisions.
  10. Clause 2.5- this deals with water consumption and again makes it clear that the Owner can recover the disbursement charges for water consumption accounts and readings.
  11. Clause 2.6- also makes it clear that at the end of the tenancy, the Agent can obtain a special water meter reading and the Tenant will be liable for that cost.
  12. Clause 2.8- this clause has an addition so that it is not just the Tenant's actions that make the Tenant liable, butthe actions of "the Tenant's visitors and people associated with the Tenant"also make the Tenant responsible for any repairs.
  13. Clause 2.10prohibits certain dogs being kept on the Premises without the written consent of the Owner. Those types of dogs can make the Owner liable under the Dog Act if signs are not erected upon the outside of the Premises. Regulation 6 of the Dog (Restricted Breed) Regulations, 2002 does impose a specific obligation upon the owner of premises at which restricted breed dogs are ordinarily kept. The terms of regulation 6(3) are as follows:

If a sign that conforms to that provided for in the Third Schedule Part III of the Dog Regulations, 1976 is not displayed at any entrance to the premises at which a restricted breed dog is ordinarily kept, the owner of premises contravenes these regulations. [emphasis added]

The type of sign referred to in the Third Schedule Part III of the Dog Regulations, 1976 is a sign that graphically illustrates a vicious dog and has the words "Warning – Dangerous Dog" included. The Regulations also provide specifications as to this type of sign. Those specifications are as follows:

The sign to be displayed at each entrance to premises where a dangerous dog is kept shall –

(a)be a white rectangle measuring 200 mm by 300 mm; and

(b)made of a durable material; and

(c)contain the word "WARNING" in white capital letters 30 mm high on a red rectangular panel measuring 190 mm by 45 mm near the top of the rectangle referred to in paragraph (a); and

(d)contain below the panel referred to in paragraph (c) a red circle 160 mm in diameter containing the black head and neck of a dog 100 mm high wearing the collar provided for in Part 2 of this Schedule; and

(e)contain below the circle referred to in paragraph (d) the words "DANGEROUS DOG" in capital letters 20 mm high.

  1. Clause 2.12 - this clause makes it clear that smoking is not permitted inside the Premises unless agreed with the Owner. Obviously if Tenants breach this clause and it causes damage to the Premises then damages could be awarded for that breach.
  2. Clause 2.13 - previously there was no specific reference in the Conditions as to whether the Premises were furnished or unfurnished. This clause now specifically refers to it.
  3. Clause 2.17 - as I understand it many Agents are not aware whether the Premises have a telephone line or not. Many Tenants these days do not require a telephone line and rely on mobile phones. This clause has been included to make it clear that the Owner makes no representations as to whether there are any telephone lines or internet lines or services to the Premises and that the Tenants need to make their own enquiries. The Tenants can install cables and lines in order to obtain those services provided no damage is done to the Premises and the Tenant pays for those costs. If the Owner consents to the cabling and lines being left at the end of the tenancy then those cables and lines becomes the property of the Owner. If the Owner does not want the cabling or lines then they must be removed at the cost of the Tenant.
  4. Clause 2.20 - this is a new clause that has been added to make it clear that the Tenant is liable for eradicating insects and vermin caused by their actions. That is, being unclean.
  5. Clause 2.21 - floors, walls and floor coveringshave been expanded to include "skirting boards". The Inventory has been added as items to be kept in the same conditions as referred to in the Property Condition Report.
  6. Clause 2.22 - the wording change has been made to make it clearer to tenants who could not understand the word "maintain". The word "keep" has been used instead. That is to keep in good working order all plumbing, gas and electrical installations. There is no real change in the effect of the clause.
  7. Clause 2.23 - this clause follows clause 2.22 and makes it clear to the Tenant that any maintenance or repairs they need to do for gas, electricity, plumbing etc must be referred to the Owner for their approval.
  8. Clauses2.26 and 2.33 - as well as the words "swimmingpool"in these clauses the word "spa" has been included if this is relevant to the Premises.
  9. Clause 2.30 - as well as referring to the Tenant's visitors the words "or people associated with the Tenant" has been included to broaden its effect.
  10. Clauses 2.37 and 2.38 - these two clauses have been negotiated with DOCEP. It is still necessary to provide the required notice as set out in the Act, but the clause now makes it clear that the Tenant agrees that the Owner is entitled to access on a reasonable number of occasions for the purpose of inspections, and sets out the time that the Owner may inspect unless the Tenant advises on reasonable grounds that that is unsuitable. The Agent may enter at the agreed time or nominated time if the Tenant is not home. Obviously exercise care in doing this.
  11. Clauses 2.40, 2.41, 2.42 and 2.43 - these clauses make it clear that:

(a)the Tenant is only given one set of keys;

(b)the Tenant will pay for any additional keys they require;

(c)if the Tenant loses the keys then they are responsible for the cost of the replacement of the keys and for gaining access to the Premises; and

(d)the Owner is only going to replace keys through normal business hours. Agents of course may accommodate a Tenant by providing keys or access outside of normal business hours but the Agentwould not be in breach of the lease if they did not do so.

  1. Clause 3.1 - this clause makes it clear that the Tenant will either pay the water consumption charges or will reimburse the Owner for those charges.
  2. Clause 5.1 - this clause states the statutory position that the Tenant will be liable for any damage and losses that the Owner suffers through a breach of the lease, but the Owner must endeavour to minimise their losses which in legal terms means mitigating its losses. The word "compensation" has been removed from the section at the request of DOCEP on the basis it may indicate a penalty or something more than damages and losses. The deletion of compensation has no real effect. The previous clause had words "the Owner reasonably suffers in accordance with law". This wording has been changed to improve it.
  3. Clause 6.1 - reference is made to the Rent stipulated in Item 16 of the Schedule to be paid at the end of the holding over term. Previously this referred to "not less than" which was vague and unclear and may not have been valid.
  4. Clause 7.1 - reference is made to section 18 of the "Ending a Tenancy" booklet. Section 14 of the Residential Tenancies Regulations 1989 requires the prescribed form set out in Schedule 2 of the Regulations (and allowed under section 88(2)(3) of the Residential Tenancies Act) to be given to a Tenant before entering into a lease. The reference in clause 7.1 of the lease is therefore a reference to the Schedule 2 statutory notice that is required to be given to every Tenant. If not given to a Tenant then the Owner commits an offence and is liable for a penalty. This section alerts the Tenant to the termination provisions in that notice.
  5. Clause 7.3 - this clause has been amended to make it clear that any differences between the Property Condition Report at the commencement of the tenancy and the end of the tenancy are the Tenant's responsibility except in the case of fair wear and tear. The previous clause just said that the Tenant paid damages for a breach but did not say what was or was not a breach.
  6. Clause 7.5 - this requires the Tenant at the end of the tenancy, to keep the pool cleaning equipment in a locked area of the Premises. Obviously to avoid theft.
  7. Clause 7.6- states that the Tenant must obtain a certificate from a professional pool operator that the pool equipment is in good working order and in a hygienic and safe condition. It would be prudent to remind the Tenant of this coming in to the end of the lease.
  8. Clause 7.9 - this clause makes it clear that the Tenant remains liable until they return the keys, whether the Tenant has vacated or not. This may be difficult however, if you take back possession.
  9. Clause 7.10 - the Tenant must pay the cost of the keys at the end of the lease if they cannot or do not provide them to the Agent, and the Agent obtains a replacement set. The lease ends when the replacement set is obtained.
  10. Clause 8.2 - a definition has been included of "Keys", and it refers not just to ordinary keys but also electronic keys and car park keys or access.
  11. Clause 8.5 - is merely stating that any reference to an "item" is an item in the Schedule.

These changes have been driven by the REIWA Property Management Chapter in an effort to improve the Standard REIWA lease. Co-operation and liaison on these changes have also occurred with DOCEP.

Sales of Properties that are Leased and Managed

Some Selling Agents do not get involved or are not too concerned in relation to the management of a property that they are selling.

In the 2002 General Conditions of Sale, clause 6 makes it clear that there are certain requirements to be met in relation to a sale. These conditions require greater liaison between the Selling Agent and Settlement Agent on one side and the Managing Agent on the other side. A number of issues have arisen in relation to sales of property where the Selling Agent has enquired of the Managing Agent as to what are the terms of the lease.

As a Managing Agent, you need to protect your back. It would be prudent to put the summary of the terms and conditions, to the Selling Agent.

For instance a number of incidents have arisen where a Selling Agent has asked what the length of the term of the lease is and has been advised by the Managing Agent. What has been neglected to be asked and neglected to be given is whether there is an option to extend the lease. Some Selling Agents seem to be of the opinion that an "option" is an option that can be exercised by either party and is not binding on the Owner. This of course is not correct. Ifan option has been granted by the Owner it binds the Owner to that further term if the Tenant exercises it.

Once a sale has occurred it is important for the Managing Agent to be able to provide to the Seller's Settlement Agent for Settlement:

1. clause 6.9(a)(1) and (2) - provide the lease or if oral, a written summary of the lease terms and conditions;

2. clause 6.9(a)(3)- provide a statement for the adjustment of rental which needs to show when the rental has been paid up to, and whether it is in advance or arrears. If at Settlement there are any arrears of Rent those are to be pursued by the Seller against the Tenant and that provision is included in clause 6.9(b) of the 2002 General Conditions to allow that to occur;

3. clause 6.9(a)(4) - if there is a Property Condition Report then that also needs to be provided to the new Owner at Settlement.

4. clause 6.9(a)(5) - if there is a Tenant Bond, then it is to be paid to the Buyer or transfer the rights in the Tenant Bond to the Buyer;

5. clause 6.9(a)(6) - it is also necessary for the Tenant to be advised of the change of ownership and who they should pay the rent to after Settlement. This should be done by the Settlement Agent but often it is overlooked.

Recent Important Decision for Managing Agents

In the Queensland Full Courtdecision of Gration v C Gillian Investments Pty Ltd, late last year, the Court analysed a claim by a tenant against the landlord when the tenant was injured when the front stairs gave way due to wood rot. Other steps had been repaired previously due to wood rot problems. The Court held that:

  1. The landlord had to satisfy himself regarding the condition of the premises at the commencement of the tenancy, to make certain that the premises were in good repair.
  2. The landlord could not rely on the fact that the previous tenant had not raised any defects in the condition of the premises.
  3. Liability for a defect does not arise if it is not able to beascertained after taking reasonable steps to make sure that the premises are in good repair at the commencement of the tenancy.
  4. Reasonable steps mean as safe for the tenant's habitation as reasonable care and skill on the part of anyone could make them excluding defects which could not have been discovered by reasonable care or skill.
  5. The landlord's obligation included a duty to inspect the premises to ascertain the state of repair of the premises at the commencement of the lease.
  6. There is no obligation on the landlord to provide premises in a state of perfect repair.
  7. The landlord is not necessarily liable for all injuries or damages caused by a latent defect in the premises. To be liable the landlord must have knowledge of the defect or be reasonably expected to possess such knowledge. The age, character and locality of the house must be taken into consideration in determining the defects of which a landlord must reasonably be aware.
  8. A landlord's duty to the tenant is to provide premises that are reasonably fit for habitation as a domestic residence.
  9. A step had been replaced previously which should have alerted the Owner to possible problems with the other steps.

In this case the Court believed that it was reasonably foreseeable that there would be progressive deterioration in the wooden steps from wood rot and the obligation to have the steps inspected by someone with experience in home maintenance was required to be reasonable care by the landlord.

In the High Court case of Jones v Bartlett(the WA case where a boy ran into an internal plate glass door that met old not current Australian Standards) the judges said that the landlord's duty to the tenant at common law did not "exceed the content of statutory requirements in various Australian jurisdictions". The judges defined the common law duty as:

1.Broadly, the content of the landlord's duty to the tenant will be the same as with a requirement that the premises be reasonably fit for the purposes for which they are let, namely habitation as a domestic residence.