01 July 2024
Mandatory disclosure of known defects has been a legal requirement for property sales for several years now. More recently, however (as of February 2022, to be exact) this requirement was extended to residential property rentals as well.
Rental agents cannot market a rental property without a Mandatory Disclosure Document on file. However, Jacqui Savage, National Rentals Manager for the Rawson Property Group, says there are still a lot of misconceptions around the purpose and protections afforded by these documents.
What is a Mandatory Disclosure Form (and what is it not)?
“A Mandatory Disclosure Form is basically a summary of a rental property’s current condition, with a list of all known property defects,” says Savage. “It’s compiled by the landlord, to the best of their knowledge. It must be completed and supplied to a rental agent at the time of signing the Mandate Agreement.”
While it’s important to understand what a Mandatory Disclosure Form is, Savage says it’s equally important to understand what it’s not. “These documents are not comprehensive lists of repairs to be rectified by the landlord,” she says. “In fact, landlords are under no obligation whatsoever to remedy anything listed on the disclosure form unless this is specified – and agreed to – in writing.”
Mandatory Disclosure Documents are also not a substitute for a thorough Ingoing inspection by prospective tenants.
“Landlords can only disclose defects that they are aware of,” says Savage. “Given that very few
landlords have personally lived in their rental properties, most rely on feedback from previous tenants or their rental agent about the property issues. Some Landlords do however get outside contractors to do an independent Inspection when required.”
“It’s important to know that a Mandatory Disclosure Form is not a substitute for an ingoing inspection,” Savage adds. “Both ingoing and outgoing inspections are vital – and legally required – elements of the rentals process, and it’s in everyone’s best interests to attend them.”
What should be included on a Mandatory Disclosure Form?
Guidelines state that Mandatory Disclosure Forms should include (but not be limited to) the following:
- Any known, material property defects, such as leaks, damp, or faults in electrical/plumbing/swimming pools/pumps/air conditioning etc.
- Details on any repairs conducted in the last 12 months, or repairs that are still under guarantee/warranty.
- A full list of any items not in working order, including plug points, doors, windows, appliances, security systems etc.
- A list of items that will need to be repaired before occupation.
- Any applicable details of Homeowners’ Associations or Bodies Corporate.
- Whether the property is fitted with a prepaid electricity meter, and details of any outstanding municipal rates and levies.
- The signature of the landlord, tenant, and rental agent (where applicable).
What are the consequences of not having a Mandatory Disclosure Form?
If there is no signed Mandatory Disclosure Form as part of the lease agreement, the law will assume that no defects were disclosed to the tenant. “Both landlords and their authorised rental agents could face serious fines if they are found to have neglected their disclosure obligations,” she says. “The Rental Housing Tribunal takes tenant rights very seriously, and that includes the right to make fully informed rental decisions.”
What are the benefits of Mandatory Disclosure?
The benefits of Mandatory Disclosure are fairly obvious for tenants – no more being blindsided by hidden property defects that could impact your ability to enjoy your rental property.
However, Savage says Mandatory Disclosure Forms also offer benefits to landlords. Benefits that go well beyond merely staying on the right side of the law.
“It’s actually really useful for landlords to have an up-to-date document on their property’s condition,” she says. “It helps budget appropriately for repairs and maintenance, it makes it easier to substantiate rental escalation decisions, and it helps determine the property’s market value and overall investment performance.”
