Finally we get to write about something other than the changing prices of real estate and the challenges this can present for the Aussie first home buyer. We get to explore something other than market fluctuations and predictions, and tackle a topic that doesn't even include the word mortgage.

Unfortunately... it's just a another topic that might make real estate a challenge for people who want to own a property, particularly an investment property.

Splashed all over the TV over the weekend, and the centre of many a morning show panel debate, is the news of proposed adjustments to Victoria's rental laws. With changes that seemingly shift the goal posts on how much control a landlord has over their property, major representative bodies like the Real Estate Institute of Victoria are apparently up in arms.

What are the proposed changes to Victorian rental laws?

The Victorian Government has announced a range of new measures that could really change the face of renting in Victoria. Aiming to even out the playing field for renters, many of whom now rent for longer and may never have the chance to buy, these sweeping changes will provide more rights and freedoms for tenants than ever before.

While there are a range of changes on the table, a taste of what you can expect includes:

  • A ban on rent-bidding. Right now, real estate agents or landlords can list a rental with a price range as opposed to a fixed, advertised rental fee. The purpose of this type of approach in a market of high demand, is to enable landlords to achieve the best price, by encouraging prospective tenants to effectively make an offer or 'bid', with the highest offer more likely to secure the property.

Clearly a system like this can make securing a rental property a bit of a nightmare, in the same sense that buying a house in a high-demand market can be a challenge. It means renters can go to the effort of inspecting the property, filling in the application and even having their references checked, only to find out their offer wasn't the highest and they need to start the process again elsewhere.

On the other hand, like any market, be it real estate or another product, high demand often results in more competition for a product and higher prices. Should renting be any different, especially if more people are starting to look at long-term renting instead of purchasing?

Of note, many an IT start-up has taken advantage of this system, facilitating rental bidding through apps designed to simplify the process. When the new laws are in place, what happens to these businesses?

  • Fewer rental price increases and less capacity to remove a tenant. Another highly contentious change will see landlords restricted when it comes to how often they can raise the rent price. Currently a landlord is permitted to raise the rent every six months, if they see fit. Under the changes, landlords will only be able to raise the rent every 12 months, and the amount of increase has to be 'reasonable'. If a tenant feels the amount is not reasonable, they can launch an appeal with VCAT.

In an attempt to provide more security, the law changes will also restrict a landlord's ability to remove a tenant. Right now, landlords have the right to provide 120 days notice of eviction for no specified reason. In order to evict a tenant, the landlord will, in future, be required to provide a reason listed in the RTA.

Further to this change, the Government has made provisions for longer leases by only allowing landlords to end a fixed-term tenancy with no reason, after the first fixed term period. After subsequent fixed-term periods, the landlord will need a reason from the RTA to end the lease, regardless of the end of the fixed-term period.

  • The blacklist. In most states, real estate agents have access to a 'blacklist' of tenants who have breached their tenancy agreement in the past. This might include tenants who have damaged property or failed to pay rent.

The change in laws will see this concept of a blacklist become more fair, with agents and landlords also subjected to judgement. Those who breach conditions will be placed on a similar list that will be made publicly available, so tenants are aware ahead of time and can avoid landlords who may be difficult or unfair to work with.

Of course, this can also assist landlords, as essentially it provides a list of real estate agents that may have questionable practices and may not be the best choice as the manager of their rental property.

  • Bond cap. In a move to make bond more fair and accessible, the new laws will see bonds capped, generally to a month of rent. According to the Government, this amendment is overdue, as current legislation is out of date.
  • Owning a pet. When new changes come into play, the days of tenants needing to stick to simple pets like gold fish will be behind us. According to the Government's website, tenants will continue to need the landlord's permission to own a pet, but the landlord will not be able to refuse the request unreasonably.

The announcement of this change has already been highly debated, with those for it claiming long-term renters should have the opportunity to own a pet and experience the well-being benefits that can go hand-in-hand with an animal companion. Those against the change, say it should be the landlord's right to refuse pets, especially as pets can cause damage to the property. While current laws aim to ensure a tenant rectifies any damage, including odours, many say this is not enough and can't be clearly enforced to the degree it needs to be.

What do new Victoria rental laws mean for the market?

Given the splash the changes have made within 24 hours of announcement, and the pledge of key industry bodies to 'go to war' with the Government, these changes will be highly contested.

With one in four Victorians renting, according to the Premier, there is no doubt that legislation needs to protect tenants and ensure they have as much capacity as possible to feel secure and to enjoy the premises they live in. By the same token, landlords often invest savings and super into a property which, according to the paperwork, is their property, but ongoing changes do seem to swing in favour of tenants and away from owners.

It's important both parties are protected, as is their investment. If laws swing too far one way, tenants will be left with insecurity and financially at-risk, while a swing too far the other way could see property investment become just too hard for investors, and a move towards other assets or options for improving wealth and locking in future security.