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Should You Let Your Tenants Make Unit Improvements?

male painter using paint brush

It’s expected that some tenants will want to make changes to your rental property, either to update it or to better suit their personal style or needs.

Common unit alterations that tenants make to a rented property include:

  • Repainting walls
  • Replacing flooring
  • Updating light fixtures
  • Changing carpets
  • Installing internet cables
  • Changing bathroom sinks

When you allow tenants to put their own stamp on a rental unit, you help them feel more at home. This might keep a tenant happy and might convince them to renew their lease year after year.

A tenant making unit improvements and alterations might also benefit you, as the landlord. Your property gets updated at the tenant’s expense or a negotiated cost for you.

Unfortunately, there are some pitfalls you should consider when a tenant offers to make improvements to your rental property. A tenant might go for DIY improvements, which can result in unfinished or subpar work that will cost you to rectify.

Additionally, a tenant making changes to a rental property can lead to financial disputes. This might happen in cases where landlords and tenants disagree on who should pay for the alterations.

Let’s say you had agreed with a tenant that they could install new bathroom sinks and deduct the cost from the following month’s rent.

But upon inspecting the finished product, you realise that the sinks were poorly installed… plus they’re an ugly green colour that doesn’t go with the rest of the apartment.

As if that’s not enough, the tenant presents you with a bill that accounts for almost all of their monthly rent!

Do you go back on your word and have the tenant pay for the improvements or absorb the cost to keep your tenant happy?

If you’re wondering if you should let tenants make improvements on your property, read on.

What Does the Law Say?

According to the law, a landlord is entitled to receive a clean and undamaged property at the end of a tenancy.

Some unapproved improvements to a rental property could be classified as damage. In such cases, the tenant is liable to pay for their removal.

Whether the tenant is allowed to make improvements on a property might also depend on the lease period.

Short-Term Lease (Up to Five Years)

A tenant on a short-term lease is not allowed, without the landlord’s consent, to install any fixtures or make any alterations, renovations or additions to the rental house.

But if the landlord consents to any improvements, they’re not compelled to refund any costs to the tenant.

If a landlord learns that the tenant has made unapproved improvements, they may serve the tenant a Notice for Breach of Duty to Tenants of Rented Premises, which requires them to:

  • Return the rental property to its condition pre-installing the improvement, or 
  • Pay the landlord an amount equal to the reasonable cost of restoring the rental property to its condition before the improvement.

In case the tenant doesn’t comply with the notice, the landlord may apply to their territory’s Tribunal for a compliance order.

Unless there’s a written agreement to that effect, a tenant should remove all alterations and restore the premises to their original condition at the end of their tenancy.

Long-Term Lease (More than Five Years)

A long-term lease often requires the landlord and tenant to agree to some alterations upfront when negotiating their terms.

This permits a tenant to make some improvements without first having to consult with the landlord.

If the tenant wants to make any alterations not pre-approved in the lease, they must get the landlord’s written consent. 

When the Landlord Refuses Consent

It’s within a landlord’s rights to refuse consent to any requested modification to their rented property.

However, if the tenant feels there are no legitimate reasons for the refusal, they can apply to the Tribunal for a ruling on the matter.

You must not unreasonably refuse consent to a tenant making modifications to the rental premises.

It is reasonable to refuse to consent to changes if:

  • The property has heritage protections that would be violated by the requested alterations. 
  • The requested modification involves structural changes to your property (such as knocking out a wall).
  • The modification isn’t consistent with the nature of your property (such as installing modern fixtures in a heritage property).
  • The modifications would be non-compliant with legislative requirements. For instance, if the tenant wants to install security screens on windows when the legislation requires windows to be easily opened for emergency evacuation. 
  • The requested alterations will adversely affect the rental property’s value. 
  • The property is about to be sold and the buyer isn’t aware of the requested changes.

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Improvements That Don’t Require Permission

Not every minor modification to a rental property needs to be discussed with and approved by the landlord.

There are many products which can be installed and uninstalled without causing damage to the property.

Alterations which don’t need pre-approval include:

  • Temporary adhesive tiles: they allow tenants to change floors and walls, and at the end of tenancy, the tiles can be easily removed by heating them using a hairdryer
  • Temporary wallpaper
  • Temporary window films and safety devices for small children
  • Installing security features
  • Connecting phone lines or pay television
  • Replacing an old toilet seat
  • Adhesive wall hooks and hangers
  • Changing unattractive light fixtures with attractive, temporary ones
  • Installing  temporary “built-in” shelves
  • Changing a showerhead

Generally, anything that can be easily removed or uninstalled at the end of the tenancy will be okay.

Documenting Alterations

For both the landlord’s and tenant’s benefit (and to avoid disputes), it’s important to properly document approved modifications.

Outline the modifications, who pays for them and whether the tenant is responsible for reversing the modifications before leaving.

Modifications to Accommodate Disability

Tenants with a disability might require certain modifications such as taps, handrails, or lever taps.

These alterations are necessary to make the property safe and accessible for a disabled tenant.

You don’t have to fund these modifications. The National Disability Insurance (NDIS) may fund such alterations.

However, you must provide the tenant with a written agreement before any modifications can be installed.

When a Tenant Makes Unapproved Modifications

If you realise a tenant has made modifications without your permission, what should you do?

You need to act. The property is your investment, even though it’s the tenant’s rented home. You should protect your investment from being tampered with.

You should:

  • Send the tenant a letter or an email to let them know that you’re aware of the unapproved alterations and that they’re violating the lease.
  • Let them know the consequences of the unapproved modifications.

You might still be okay with the changes. If so, let the tenant know they don’t have to restore the property to its original condition.

However, also add that you won’t compensate them for unapproved improvements, even if they add value to the property.

What if you don’t like the changes?

  • Tell the tenant to restore the property to its condition before the unapproved modifications.
  • If they defy your request, you can remove the modification and deduct the cost from the security deposit.
  • If the tenant refuses to cooperate, you can evict them from your property for breaching their lease.

Removal of Modifications

At the end of tenancy, the tenant is allowed and required to remove any fixtures they installed in the property at their own cost.

However, they should notify the landlord or property manager of any damage that the removal might cause. The tenant should pay for the cost of repairing any such damage or repair it themselves to the landlord’s satisfaction.

If the landlord paid for the fixtures, the tenant isn’t allowed to remove them without consent.

The landlord can apply to the Tribunal to stop and prevent the removal of fixtures or damage caused by the removal of fixtures.

In case a tenant fails to remove a fixture before handing back the property, they cannot come back to claim it later. It no longer belongs to the tenant and becomes part of the property.

Bottom Line

Tenants have unique needs and personal styles. It is, therefore, not surprising that many will want to make changes in their rented home to suit their preferences.

As the landlord, it’s always a great idea to include relevant clauses in your tenancy agreement.

You can create a digital lease agreement through Lodge, Australia’s leading property self-management site. Lodge enables you to conduct the whole process online; record lease details, e-sign, send and store the lease on your Lodge account.

In addition, Lodge helps you to:

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