The answer to renters' woes could be as simple as looking at commercial leases, experts say

The biggest bugbear of renters in Australia is the lack of security, but experts say there’s a simple overlooked answer to the problem – making residential contracts more like commercial leases.

The current norm is for 12-month residential leases, after which tenants typically face a rent increase notice and, all things going well, the opportunity to sign up for another 12 months.

But a better arrangement for residential landlords and tenants is commercial-style five-year lease agreements, and the terms that come with those longer rental periods, LJ Hooker head of research Mathew Tiller said.

“Long-term leases allow tenants in the commercial space to put their roots down and go about their business. Residential tenants should have the same option,” Mr Tiller said.

There could also be “options” in residential contracts that could allow tenants to increase the length of the tenancy after two years of tenancy – something that’s already a feature of commercial leases, he said.

This would be attractive to tenants and landlords if considered on a case-by-case basis, LJ Hooker general manager for property investment management Amy Sanderson said.

“It’s all about speaking to the landlord and matching their needs to the tenant’s. A long-term investor will be better served with a long-term tenant,” Ms Sanderson said.

“After a 12-month period, when everyone is happy, it’s worth having a conversation about a longer-term lease with set rental increases for how much and when it will be.”

But there are far more features than just the length of tenancies that could be borrowed from commercial leasing to suit residential tenants, Malcolm Gunning, owner of commercial and residential-focused Gunning Real Estate said.

“Rent increases could be limited to [inflation], or up for an open market review after three years. That’s what happens with retail leases,” Mr Gunning said.

There could also be more scope for long-term residential tenants to have more control over their homes.

“When you’re on a business-to-business lease, you’re effectively dealing with a shell. If you’re doing a fit-out you have a ‘make good’ clause, so if you paint and put carpet down, it requires pre-consent and the owner has the right to ask for it to be taken down at the end of the tenancy.”

For residential tenants “some smaller internal works could be considered, such as bookshelves and fans”, he said.

Despite the potential benefits of introducing some of these commercial lease-style features, Tenants Union of NSW senior policy officer Ned Cutcher doesn’t “believe the hype”.

One feature of commercial leases is for tenants to undertake the maintenance and repairs of a property themselves – something that is currently the responsibility of residential landlords, he said.

And any improvements a tenant might want to undertake to a home might not be practical, or could see tenants paying substantial sums to restore the home to pre-let conditions.

“A commercial lease is usually a business who will fit out the property in a certain way to suit their business needs, and commercial properties are designed in a way to facilitate this. That is not the case for residential properties,” he said.

Instead, the “simpler and better way” to provide more stability to tenants was to tackle the issues with the current legislation.

“The first is getting landlords to relinquish their trump card – no-grounds evictions. They don’t often use it, but the fact they have it leaves tenants less likely to raise concerns, such as maintenance, repairs or arguing a rent increase.

“Looking at commercial leases doesn’t change the current status quo.”