NSW Residential Tenancy Law Reforms Now in Effect: What Property Developers and Investors Need to Know

Key Takeaways

• ‘No Grounds’ evictions have been abolished. Landlords must provide a valid reason with supporting evidence to terminate tenancies.

• Rent increases are capped at once every 12 months, even when leases are renewed.

• Pet requests are streamlined – Landlords have 21 days to respond to the Tenant’s request, or approval is automatic; unjustified refusals can be challenged.

• Fee-free rent payment options are mandatory – at least one electronic method (e.g. direct transfer) must be offered without extra charges.

• Non-compliance penalties are significant, including fines up to 650 penalty units for unlawful termination.

• Developers and investors must review tenancy procedures to ensure projects and property management practices remain legally compliant.

• Further reforms are coming later in 2025, including portable bond transfers and enhanced tenant data privacy protection.

Background

As of 19 May 2025, major reforms in NSW’s residential tenancy laws are now in force, with further measures expected later this year. These changes significantly reshape the residential tenancy landscape – impacting landlords, property developers and investors alike. Staying compliant is not only a legal obligation but also key to risk mitigation and tenant retention. Below is a summary of the important changes.

1.    No Grounds Evictions Abolished

Landlords can no longer terminate leases without a valid, legally permitted reason – this applies to all residential tenancy agreements, fixed-term or periodic.

Permitted grounds for termination include:

• Breach of lease (e.g. non-payment of rent, property damage).

• Sale of property requiring vacant possession.

• Landlord or immediate family moving in (with a 6-month minimum stay).

• Major renovations or demolition making continued occupancy unviable.

• End of an affordable housing arrangement.

Key requirements for Landlords:

• Must provide evidence supporting the reasons for termination. From 01 July 2025, landlords must register the reason for termination with the NSW government.

• Re-letting restrictions apply for a certain period depending on the reason the lease was terminated by the landlord.

• Breaches of these rules can incur penalties of up to 650 penalty units.

Implications for Developers:

• Redevelopment timeline needs to incorporate the new notice and evidence requirements.

• Terminating tenancies for renovations or redevelopment now requires strict justification and planning.

2.    Rent Increases Limited to Once Every 12 Months

To address rental affordability, rent increases are now capped at once per year, even if a new lease is signed.

Important Points for Investors:

• Applies to both fixed-term and periodic leases.

• The 12-month cap is retrospective – renewing a lease does not reset the timeline.

• Landlord must provide proper written notice and comply with notice periods.

What this Means for You:

• Annual rent reviews must be more strategic and well-documented.

• Predictable rent growth may require adjustments to yield forecasts.

3.    Simplified Pet Approval Process

The new laws encourage more pet friendly rentals while protecting landlord’s rights in specific scenarios.

New Rules

• Tenants can submit a standard pet request form.

• Landlords cannot refuse the tenant’s request without a valid reason or impose unreasonable conditions.

• Landlords have 21 days to respond, or approval is automatically granted.

Valid Reasons for Refusal

• The property is not suitable (e.g. no secure fencing).

• Conflicts with strata by-laws or council regulations.

• Landlord resides on-site and objects.

• Anticipated damage which may exceed the rental bond.

Landlords Cannot

• Charge additional pet rent or bond.

• Refuse a pet request without proper justification.

Tip for Developers

• Consider designing pet-friendly features in new builds (e.g. fencing, durable flooring) to increase market appeal.

4.    Fee-Rent Payment Options Required

Landlords must now offer tenants at least one electronic rent payment option that does not incur additional charges – such as direct transfer or Centrepay.

What’s Required:

• No extra fees or surcharges for rent payments.

• Payment options must be accessible and straightforward.

Why it Matters:

• Non-compliance could result in financial penalties or disputes with tenants.

• Streamlining rent collection process supports both compliance and tenant satisfaction.

5.    Further Reforms Coming in Late 2025

Additional changes are expected later this year, including:

• Portable Bond Scheme: Allowing tenants to transfer their bond from one rental property to another without a large upfront outlay.

• Stronger Data Privacy Protections: Tighter controls over how agents and landlords collect store and use tenant information.

What Property Developers and Investors Should Do Now

• Review Lease and Eviction Procedures: Ensure all termination processes are legally compliant and evidence based.

• Adjust Rent Increase Schedules: Implement clear internal systems to track the 12-month increase rule.

• Update Pet and Payment Policies: Standardized pet application processes and ensure rent payment methods are compliant.

• Plan Ahead for Redevelopment: If your project requires vacant possession, factor in extended notice periods and re-letting restrictions.

These reforms reflect a broader policy shift towards tenant protections and housing stability. Proactive compliance will protect your investments, improve tenant relations and reduce the risk of costly disputes or delays.For more information on how the rental law changes may apply to your projects, please contact one of our people.

Eollyn Cortes 0478 727 395

Sagang Chung 0431 435 333