Finalising a property rental agreement includes a lot of twists and turns, as landlords and tenants need to agree to various terms regarding who pays what, and one of the main expenses that cause confusion when it comes to who shoulders its burden is the council rate.
The problem with this bill is that there’s no specific law that details who pays council rates, whether it’s the landlord or tenant, and that’s where this guide comes in handy.
In today’s article, we’ll help you navigate the technical and legal aspects of council rates and explain both the landlord and tenant’s responsibilities towards it.
A Brief Overview of Council Rates
Before diving into the details of this guide, you should first understand what council rates are and what they cover.
In Australia, local councils and municipalities are responsible for collecting a variety of taxes, including property taxes. One of those taxes is called the “council rate”.
The money the local government collects through this channel is mainly used to fund various essential public services as well as programs and infrastructure projects.
This includes building new facilities like parks, waste collection, maintaining public roads, and more.
One thing to note here is that the council rate is different from the land tax, which is an annual tax that only the landowners are obligated to pay to the state.
Different states may have different calculation methods to estimate the council rate for a property.
However, it’s fairly established among different states, including Queensland, to calculate the council rate based on the value of the property in question.
In other words, higher-value properties will typically pay higher council rates, regardless of their utility charges and consumption.
One of the easiest ways to estimate your council rates and find out more information about how to handle it is through professional property management agencies such as Rent360.
They can also connect landlords with legal guides during rental to handle various property tax payments.
Who Is Legally Responsible for Covering Council Rates?
In Australia, the default legal responsibility for covering council rates generally falls on the owner of the property at the time the rate notice is issued. This is regardless of whether the owner occupies the property themselves, rents it out, or leaves it vacant.
However, there are some exceptions and specific situations where the responsibility for council rates might shift to the tenants instead. Here are some different situations and exceptions to consider:
- If a tenancy agreement specifies that the tenant is responsible for council rates, the tenant would be legally obligated to pay them. However, even in these cases, the ultimate legal responsibility might still rest with the property owner.
- If the landlord is only renting out a part of their property, they’re typically the ones responsible for paying council rates. In that case, landlords can include some of the council rate expenses as a part of the rent.
In other words, the legal responsibility to pay council rates heavily depends on the tenancy agreement, as it will usually include details about the party responsible for paying them.
Are Council Rates Connected to Rental Rates?
The simple answer to this question is yes. There’s typically a connection between rental rate and council rate, although that connection is not direct.
As previously established, council rates in Australia are usually based on property value, and so are rental rates. For that reason, it’s common for properties with higher rental rates to also have a higher council rate.
Additionally, since council rates are a significant expense for landlords, they often factor them into the rent they charge.
Further information on this can be obtained by speaking with a property manager, who can also advise on whether they need to be licenced to manage properties or not.
Who Is Responsible for Paying Utility Bills?
Unlike council rates, utility bills are usually the responsibility of the occupant of the property.
As such, in the case of a rental agreement, it’s usually the tenant’s responsibility to pay for such fees, which cover water rates and connection fees (especially excess consumption) as well as the supply of electricity.
That being said, similar to council rates, the party responsible for paying utility bills depends on the tenancy agreement.
What Happens If a Tenant Doesn’t Pay Council Rates?
The consequences of a tenant not paying council rates in Australia can vary depending on the details of the tenancy agreement and who was named responsible for the payment of council rates.
If the tenant was partially or fully responsible for paying the council rates as per the agreement, and failure to pay is considered a breach of the contract.
This could lead to potential eviction from the property. Depending on the landlord might pursue legal proceedings against the tenant as well.
Important Tips to Keep in Mind About Council Rates in Rental Properties
Now that you know more about council rates and who should be paying them in the case of rent, here are some essential tips to consider in that situation:
Ensure a Clear Disclosure Statement for Council Rates
Ambiguity can lead to disputes in the case of disagreement. For that reason, it’s essential for both the landlord and tenant to state who is responsible for paying council rates in the tenancy agreement.
Paying Council Rates is a Good Asset While Applying for Rent
If you’re applying for a highly competitive rental property, consider offering to pay the council fees partially or fully.
This can encourage landlords to consider your application over other potential tenants, as proactivity is one of the main aspects landlords look for in a tenant.
Different Rules May Apply to Commercial Lease Agreements
While council rates are usually the landlord’s responsibility in residential rental agreements, it’s typical for tenants to handle these expenses in commercial ones.
However, this is also subject to change depending on the lease agreement, so you still have to keep that in mind.
Final Thoughts
There you have it! A brief guide that explains council rates and who is responsible for paying them within a rental agreement.
As you can see, while it’s typically the landlord’s responsibility to handle these expenses, the lease agreement plays a significant role in determining who should pay for them.
In the end, always remember that clear communication, accurate documentation, and a fair approach are essential for maintaining positive relationships between landlords and tenants.