Special conditions regarding rent

Examples of unenforceable rent clauses include:

• An increased rent amount or fee is payable by the tenant if they fail to do something (eg, pay the rent on time).
• If the tenant misses a rent payment, they must pay all the rent owing up until the end of the tenancy.
• A 10% rent discount is available if tenants pay on time. 
• An extra rent payment is required to pay the landlord’s insurance or rates.

For more examples see unenforceable and unlawful conditions.

A tenancy agreement must not state that the tenant is liable to pay extra rent, or accelerated rent (future rent), or a penalty or particular sum of money, if the tenant breaches the agreement. This includes not putting the tenant in the position that failure to do something will mean paying a higher rent. These kinds of clauses have no effect (s 32(1) RTA).

The rationale behind this is that landlords should not inappropriately try to control their tenants’ behaviour by offering to reduce, or threatening to increase, rent. For the same reason, tenants must not stop paying rent to try and make the landlord do something, or not do something. 

These kinds of clauses and conditions are inappropriate and there are clear laws about what to do if a tenancy agreement is breached. There are also rules about when rent can legally be increased and who is responsible for maintenance and repairs.  

Where the tenancy agreement offers a discounted rent rate or other benefit to the tenant on the condition that they don’t breach any term of the agreement or any other legal requirement, the law says the tenant is automatically entitled to the discounted rent rate or other benefit (s 32(2) RTA). This means that the 'conditional' nature of the discount is of no effect. This does not prevent a landlord and tenant agreeing on a temporary rent reduction for a specific period or event (see rent reductions). 

Sometimes a tenant and landlord may negotiate for the tenant to do something for the landlord rather than paying part or all of the rent. This is usually where a tenant works informally for a landlord and is treated as “in-kind” rent. If the arrangement is simple and clearly documented, and there is a benefit to the tenant, then being able to pay some of their rent “in-kind” may be useful, but entering this kind of arrangement should be approached with caution.

More often than not the landlord gets more advantage out of these types of arrangements, eg, because they get the benefit of the work done, and get this done at a rate that may be less than they would otherwise have to pay, and they pay less tax because they are receiving less rental income.

These situations can also get complicated when the expectations of the parties don’t line up and there is conflict about whether the task carried out to cover the rent “in-kind” has been satisfactorily fulfilled. If the landlord has regular work they would like the tenant to carry out, it is more appropriate to deal with this as a separate employment agreement so that there is transparency about meeting minimum employment standards. It also means the rights and obligations of each party are clear if disputes occur or circumstances change.

Landlords have responsibility for certain outgoings on a property, including insurance for the premises, rates and body corporate levies (s 39 RTA). The landlord cannot charge the tenant for these outgoings as additional rental costs. If they do attempt to pass these charges directly on to the tenant then this is something the tenant can challenge. In reality however, the landlord is likely to already be factoring these expenses into the rent for the property. Further information about responsibilities for outgoings can be found here.