The NSW Parliament has passed the Residential Tenancies Act 2010 which is expected to commence in January 2011. The supporting Regulation hasn’t been finalised and this will of course affect the application of the new Act, but some changes are already known.

The Act will provide that a residential tenancy agreement can provide for a ‘break fee’, that is the amount that a tenant is liable to pay as compensation for termination of a fixed-term agreement. The break fee can only be six weeks rent in the first half of the fixed term, and four weeks rent in the second half.  The landlord cannot pay the tenant six weeks rent and tell them to get out early so this protection is not unlike the cooling off period in conveyancing matters, where the Purchaser can rescind on payment of financial penalty but not the Vendor.  Here the Landlord is bound to the fixed term (so long as the tenant complies with the essential terms of the tenancy) but the Tenant can get out of the fixed term if they pay a financial penalty.

If the agreement is a periodic agreement (i.e. after  the fixed term), the landlord must give a 90 day notice to terminate the tenancy, so landlords will need to plan further ahead under this new Act. However the Act will also provide that if a landlord issues this notice, and that notice is valid under the Act, then the Tribunal must terminate the tenancy.  Under the old Act there was a discretion, so hopefully this allows some certainty.

These are only some of the changes, and the Regulations will also have an impact when they are finalised.