Sneaky loophole hidden in NSW rental rule change

Huge changes are coming for renters in one Aussie state, but a hidden loophole means thousands could still lose out under the new ban.

NSW is just days away from banning a hated rental tactic used by real estate agents, but a hidden loophole means renters could still lose out under the changes.

From Saturday, December 17, the controversial practice of ‘rental auctions’ will be banned across NSW.

This means it will be illegal for real estate agents and landlords to advertise a property for rent with a price range, to have offers open to negotiation or ask for offers over a certain price.

The change, which was announced on Monday, brings NSW into line with Victoria, Tasmania and Queensland where rules have already been put in place to combat this dodgy tactic.

However, there is a loophole in the new rule that means thousands of renters will continue to be priced out of the already competitive market.

Under the new rules, “unsolicited proposals” will still be legal, meaning applicants can still offer a rental price higher than advertised in order to beat out other renters.

Minister Customer Service Victor Dominello said he knew there was “no perfect solution” for the problem, but the ban coming into effect on the weekend was about “taking the hard edge off”.

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There is a loophole hiding in the NSW’s government’s new rental bidding ban. Picture: NCA NewsWire / Gaye Gerard

He said the government also had to take into consideration the needs of investors who may be struggling to pay their mortgage following months of rate rises.

“We also have to balance the fact that a whole lot of people went into the market last year, bought a property as their nest egg, interest rates are going up and they need to service that,” he said.

Renter advocacy organisation, Better Renting, hit out at the new rules, claiming rent bidding will continue to happen behind the scenes.

“NSW government getting attention today for ‘banning’ rent-bidding. In fact they will keep rent-bidding, only banning *solicitation*,” the business said in a Twitter post.

“It’s not nothing ⁠- but to make a real difference, governments need to stop lessors from accepting rent bids.”

Leo Patterson-Ross, the head of the NSW Tenants’ Union, told The Guardian that just banning the soliciting of rental bidding is not enough, and the government instead needs to ban real estate agents from accepting higher rent offers all together.

“If we only address the [soliciting], the experience from these other states and territories tells us that we have not addressed rental bidding and it will continue,” he said.

“We’d really like to see a restriction on accepting a rent over the advertised price so you can negotiate down if you’ve pitched too high but you can’t bid up.”

From Saturday, if any prospective tenant is encouraged by an agent or landlord to up their rental offer then they can report it to NSW Fair Trading.

Fines for breaking the new rental bidding rule range from $5500 for an individual and $11,000 for a corporation.

Experts have warned more needs to be done to protect renters.

NSW Labor Leader, Chris Minns, said if his party was to come into power in the state then they would focus on establishing a rental commissioner to oversee the sector.

“That’s what is in place in Queensland and Victoria,” he told 2GB.

Mr Minns also said Labor would look into introducing a portable bond scheme.

He said this would allow renters to “move to a second property, or a third property and use your existing bond as that collateral if you like and not have to dip into your savings or even go into debt in order to cover that cash flow issue.”

“And the last thing is you’d introduce legislation to outlaw secret bidding in NSW. As you said, agents and some landlords induce a bidding war, which is really pricing out many regular renters,” he said.

In September 2022, the median rental price in Sydney was $650, which is a 14 per cent increase on the median price of $570 that was in place the same time last year.

“I know a lot of friends and acquaintances, whether they are nurses, or firefighters or paramedics, who just can’t afford to live and work in Sydney in particular and who are moving to other jurisdictions, Queensland and Victoria, and are now working in their systems and we need them to stay here,” Mr Minns said.