Introduction to rent
Rent is the amount paid by a renter to a rental provider to occupy rented premises and to use the facilities and services. Residential rental properties must be advertised for a fixed price (s 30F Residential Tenancies Act 1997 (Vic) (‘RT Act’)). Advertising a property without a price is an offence (s 30F RT Act).
Rent is payable in the manner, if any, specified in the rental agreement; rent accrues daily (ss 39, 42 RT Act). A rental provider or agent cannot force a renter to pay rent be a means that would incur additional fees or costs.
A rental provider or agent must:
- not make a renter pay rent by cheque or other negotiable instrument that is post-dated; and
- ensure that there is a way to pay rent reasonably available to a renter, which has no additional costs (other than bank or bank account fees); and
- allow a renter to pay rent by Centrepay or electronic funds transfer (reg 19); and
- give a renter information about the costs they may incur by using any payment before they consent to using that payment method (s 42 RT Act).
The rent payment method can be changed during the rental agreement if both parties agree(s 42(6) RT Act).
A rental provider, agent or anyone else must not charge for the first issue of a rent payment card or for establishing and using direct-debit facilities for rent payments (s 51(3) RT Act). It is also a prohibited term of an agreement to require a renter to use the service of a third-party service provider nominated by the residential rental provider (other than an embedded network) (s 27B, reg 11(g)). This may include third-party rent collection services.
The RT Act does not limit the amount of rent payable by a renter. However, a rental provider must not require a renter to pay more than two weeks rent in advance if rent is payable weekly (s 41). If rent is paid monthly, the rental provider must not require a renter to pay more than one month rent in advance, unless the weekly rent exceeds $900 (s 40, reg 17).
In exceptional cases, a renter or rental provider may argue that rent can be made-up of non-monetary ‘payments’ (e.g. work done on a property). However, the party arguing that work undertaken was in lieu of monetary rent needs to prove that this was the case, and that both parties agreed to this agreement.
Where rent is paid in person, the person receiving the payment must issue a receipt immediately (s 43(1)(a) RT Act). A renter should never pay rent in cash unless they are given a receipt, especially if they do not have the rental provider’s address and a copy of some sort of identification.
Where a renter pays rent by any other method and requests a receipt, a receipt must be issued within five business days (s 43(1)(b) RT Act). The person receiving the rental payment must sign the receipt (s 43(3)).
If rent is not paid in person and a receipt is not requested, a record of the payment must be kept for 12 months or until the renter requests a copy, whichever is earlier (s 43(2) RT Act). If the renter requests a copy, it must be provided to them within five business days (s 43,(2A)).
Where the rental provider refuses to issue a receipt, the renter can make a general application to VCAT under section 452 of the RT Act to require receipts or the production of a rental ledger.
It is an offence for a rental provider or their agent to fail to comply with these requirements (see ‘Offences under the Residential Tenancies Act’ in ‘Hearings, appeals and offences under the Residential Tenancies Act‘).
Rent increases: Periodic agreements
Currently, there is no cap on how much rent can be increased. However, rent must be increased as set out in the RT Act. This provides that if a renter gets a Notice of Increase, and believes the increase is excessive, they may challenge the increase. The assessment to determine whether a rent increase is excessive is free.
Further, if a rent increase is not done correctly, as set out in the RT Act, the rent increase may not be effective. Increased rent paid after receiving an invalid Notice of Increase may be refundable (s 39 RT Act). This can be back-dated by six years to apply to invalid rent increases from the time of the claim (s 5 Limitation of Action Act 1958 (Vic)).
Rent increases: Frequency
Rent for all periodic rental agreements started from 19 June 2019 can be increased once every 12 months (s 44(4A) RT Act). For existing periodic rental agreements that started before 19 June 2019, the rent can be increased every six months until the rental agreement ends or a new fixed-term agreement is entered into for the same premises (cf sch 1, cl 16).
However, CAV takes the position that it does not matter when the periodic agreement started; rent cannot be increased more than once every 12 months if a renter has a periodic agreement. If a renter receives a Notice of Proposed Rent Increase – and it is less than 12 months since they last received a Notice of Proposed Rent Increase – it is recommended the renter challenges the notice by applying to CAV to review the increase.
Rent increases: Fixed-term agreements
A rental provider cannot increase the rent during the course of a fixed-term rental unless the rental agreement allows for a rent increase during the fixed term (s 44(4) RT Act).
From 29 March 2021, if a new fixed-term rental agreement includes a rent-increase term, the agreement must also provide:
- the amount of the rent increase, and that the rent is not increased by more than that amount;
- the method by which the rent increase is to be calculated, and that the rent is not increased more than that calculation method allows (s 44(4) RT Act).
Renters should be wary and seek advice before sign-ing a rental agreement with rent increases ‘built in’. If there is a clause allowing rent increases during the fixed term that meets the requirements of the RT Act, the rental provider can increase the rent in accordance with that clause and the RT Act.
If a fixed-term rental agreement includes a rent-increase term, and a renter entered into that agreement before 19 June 2019, the rent cannot be increased more than once every six months (cf sch 1, cl 16). However, as soon as that fixed-term period ends, and the rental agreement converts to a periodic agreement, the ‘window’ for rent increases expands to not more than once every 12 months (s 44(4A) RT Act).
If a fixed-term rental agreement includes a rent-increase term, and a renter entered into that agreement from 19 June 2019, the rent cannot be increased more than once every 12 months (s 44(4A) RT Act).
The rental provider is also still required to provide proper notice, in order for any rent increases ‘built in’ to a fixed-term agreement to be valid (s 44(1) RT Act).
Where a renter has an existing rental agreement and they enter into a rental agreement for a further fixed term, which increases the rent for the property, the renter can challenge the rent increase on the basis of failing to comply with the RT Act (s 44) (see Shafer v Bourke (Residential Tenancies)  VCAT 874 (11 June 2015)).
Notice of proposed rent increase
A rental provider must give at least 60 days’ notice – in writing, in the proper form – of a rent increase (s 44(1) RT Act). The notice may only provide for one rent increase (s 44(2)).
The notice must inform the renter of:
- the amount of the proposed increase;
- the method by which the increase was calculated;
- the renter’s right to apply, within 30 days, to CAV to investigate the rent increase (s 44(3) RT Act).
Any rent increase notice that does not comply with these requirements is invalid. The renter does not have to pay the increase and may seek reimbursement for any rent paid in accordance with an invalid rent increase (which can be applied for no more than six years after the increase). Currently, there is no guidance on the meaning of a valid ‘method’ of increases as it is not defined in the RT Act. Whether an arbitrary increase is an ‘invalid method’ will be the subject of future case law.
Is the rent increase excessive?
If a renter believes the proposed rent is excessive, they can make a free application to the Director of CAV to investigate and report as to whether this is so (s 45(1) RT Act). The application must be made within 30 days of receiving a Rent Increase Notice (s 45(2)).
A renter can apply to CAV by letter or they can use the ‘request for repairs inspection’ form or the ‘rent assessment’ form available from CAV. The renter can provide reasons with the application for why they believe the rent is excessive. Unfortunately, these reasons must be related to the market and the property only; CAV does not consider the renter’s circumstances (including any hardship). Complaints may relate to the state of repair of the property, or if amenities or services provided at the start of the tenancy have been reduced or withdrawn.
A CAV inspector must carry out the investigation and give a written report about the rent to the renter and rental provider (s 45(3) RT Act). The report will state whether or not, in the director’s opinion, the rent is excessive. The report will also include a statement about the renter’s right to apply to VCAT to challenge the rent increase (s 47(3)). The report must take into account the considerations listed in section 47(3) of the RT Act.
Rent increases: Application to VCAT
Once a renter receives the director’s report, they may apply to VCAT for an order that the rent or proposed rent increase is excessive (s 46(1) RT Act). This VCAT application must be made within 30 days of receiving the inspector’s report (s 46(2)t).
A renter can also apply to VCAT if they believe the rent increase is excessive, without receiving a report from the director if they haven’t received the report, and the application is made 30 days after the notice of rent increase has been given (s 46(3) RT Act). Permission from VCAT to make an application without the director’s report requires the renter to show why they did not apply for an assessment from the director within 30 days of receiving the Notice of Rent Increase.
The application to VCAT should request an order declaring the rent or proposed rent to be excessive. A copy of the director’s report must be attached to the application (r 8.07(1) VCAT Rules). If there is a report from the director, VCAT must take the report into account (s 47(2) RT Act). VCAT and the renter are not bound by the report, and submission may be made but it is a heavy burden to show the director’s report is incorrect. When determining whether the rent or proposed rent increase is excessive, VCAT consider factors such as the rent of comparable properties, the condition of the premises, the cost of goods and services provided by the rental provider or renter, work the renter has done to the premises or facilities, and any changes to the rent and condition of the premises or facilities since the commencement of the rental agreement (s 47(3) RT Act). The renter should obtain as much evidence as possible on the section 47(3) factors before the VCAT hearing.
If the rent increase comes into effect before the VCAT hearing, the renter must pay the increased rent. If the application is decided in the renter’s favour, VCAT can order that the renter be reimbursed any increased rent that has already been paid (s 48 RT Act). If the renter does not pay the increased rent, they will be in arrears and at risk of eviction.
Rent increases: Form 2 long-term rental agreements
Unlike Form 1 agreements, Form 2 rental agreements set out the specific methods by which rent can be increased. Clause 15 sets out the methods: rent must be increased based on CPI, or on the state rent index, or an increase could be a fixed percentage or a fixed dollar amount. Rent increases under these options are still conditional on a Notice of Rent Increase, as described above. A 60-days written notice must be given, rent cannot be increased more than once every 12 months, and rent can only be increased if there is a method for calculating the increase listed in the rental agreement.