Changes to the Residential Tenancies Act

The NSW Government has amended the Residential Tenancies Act to protect tenants in the event their landlord has defaulted on the loan and the lender is granted judgment for possession. The changes effect loans where judgment for possession was entered after 19 June 2009.

The newly inserted s 71A requires a lender to give the tenant at least 30 days written notice to vacate before they can take possession of the property. The notice cannot be given before judgment has been entered in the lender’s favour. The legislation is poorly drafted and does not make this clear because it refers to 30 days after the mortgagee becomes entitled to take possession. However, the NSW Sheriff’s Office in connivance with the Supreme Court have taken the view that the 30 days can only begin once judgment has been handed down. This is made clear in paragraph 52 of Supreme Court practice note SC CL 6.

UCPR Rule 16.4(3) and Rule 39.3(2) have been amended so that both the affidavit in support of default judgment and the affidavit in support of the writ of possession must include information about whether or not there is a residential tenant involved. The Sheriff’s Office has adopted the practise of requesting the solicitor provide a copy of the notice prior to appointing an eviction date.

During the 30 days after the notice has been issued the tenant is exempt from paying rent, fees and other charges to occupy the premises, and is entitled to be repaid any rent that had been paid in advance for that period. The purpose of this provision is to offset some of the tenant’s costs in securing new accommodation.

During the notice period the lender is allowed to bring potential purchasers through the property, so long as the tenants have been given reasonable notice of the lenders intention and the times and dates of the inspections are agreed between the lender and tenant. If the tenant was able to find suitable accommodation before the notice expires they may choose to vacate the property immediately, and in that event the lender takes possession earlier.

Occasionally, the lender does not wish to take possession of the property or to sell it immediately. In those circumstances, the lender can either allow the tenant extra time to vacate the property or they can offer the tenant the chance to enter into a new residential tenancy agreement. The lender can push back the date they require the property to be vacated by giving written notice to the tenant.

The amendments also allow the lender to release the rental bond to the tenant whereas previously only the landlord, or their agent was able. This amendment streamlines the process for lenders and benefits the tenant because it means that the bond can be returned to them as quickly as possible after the final inspection has been completed.

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