As the year draws to a close, getting your head around yet more changes to the law doesn’t seem like a really festive thing to do. Unfortunately, the government has decided to signal that more changes are on the way to the Residential Tenancies Act in the New Year. The changes notified will affect landlords and tenants across the country.
It is no secret that rents in Wanaka and Queenstown have increased dramatically over the last few years and it is increasingly difficult, particularly if you have children or pets, to find an affordable property to rent. Anything that can help address that situation I am sure would be welcomed by many.
In announcing the changes, Associate Minister of Housing (Public Housing) Kris Faafoi said “the Government has delivered on its promise to the over one million New Zealanders who now rent to make it fairer and more secure.”
While the changes may benefit tenants, they are likely to have unintended consequences that could make the rental crisis worse, not better.
Key changes
The key changes include:
- Limiting rent increases to once every 12 months.
- banning rental bidding offers by landlords.
- removing a landlord’s right to end a periodic tenancy agreement without cause.
- letting tenants add minor fittings such as brackets to secure furniture against earthquake risk, to baby proof the property, install visual fire alarms and doorbells and hang pictures.
- Improving compliance with the law by increasing financial penalties and introducing new tools to take direct action against parties who are not meeting their obligations.
These changes will be drafted into a Bill to amend the Residential Tenancies Act 1986, which will be introduced to Parliament in the first half of 2020.
What is this all about?
“With more and more people renting, the law should provide enough security to responsible renters to put down roots in their community,” Kris Faafoi said. “Greater security of tenancy and less regular rent increases, coupled with the ability to make minor improvements, mean renters will be better placed to make their house a home.”
These changes are about protecting the consumer because there’s a perception that landlords have too much power and tenants have none. The government wants to give tenants more certainty around the property they are renting, which is a good thing obviously. They are trying to make it harder for landlords to say, "well I don’t like that tenant so I’m going to kick them out."
Implications
In reality, I don’t think many landlords do that very often. From my experience, if a landlord has a good tenant, they move heaven and earth to keep them. The concern is that getting rid of the "no-cause termination" will make it much harder for landlords to evict problem tenants. That makes it all the more important for landlords to be aware of the changes to the rules they have to follow and not assume that they can continue with the way they have done things in the past.
At the moment, if landlords want a property vacant, provided it is a periodic tenancy, they can terminate the tenancy without cause by giving 90 days' notice. Likewise at the moment, if a landlord wants the property for themselves or their family to live in, or for use by an employee if the property is usually rented to employees, or if the property is sold with vacant possession, then 42 days' notice is all the notice that needs to be given. The government changes will remove those notice periods. This will affect when, and how, landlords can sell properties, undertake major renovation work or use their properties.
Landlords will not be able to end a periodic tenancy unless they have a valid reason such as selling the house, doing major renovations, three complaints of anti-social behaviour, or more than three instances of rent being paid more than five days late over a 90-day period.
The government is also extending the amount of noticed the landlord has to give if they want to sell their property or move into it themselves. At the moment it is 42 days but the suggestion is that could be extended to 63 days.
The other proposed law change I suspect many landlords will have an issue with is allowing tenants to add minor fittings. Currently, landlords routinely put restrictions on what tenants can do to their property for good reason: they don't want it damaged. It will be interesting to see how this law change will be policed or interpreted and what work tenants actually undertake. I see arguments where a tenant may consider their DIY effort a job well done, but in the landlord’s eyes it is a costly botch job. Perhaps the holiday period, and all the tinsel going up, is affecting my thinking here.
The doubling of the threshold for damages claims at the Tenancy Tribunal from $50,000 to $100,000 and limiting rent rises to once-yearly, up from six months, seems to be a couple of positive changes.
The government is also aiming to put a stop to the practice where landlords advertise a no-price rental to encourage a bidding war among prospective tenants. Under the law change, tenants can still offer to pay a higher rent than advertised but the landlord can’t "auction" a rental property to the highest bidder.
Overall, let’s hope that these changes don’t make it too hard for landlords to continue to offer rental properties, particularly with the alternative being the short-term rental opportunities offered through AirBnB and other services.
With almost one-third of all New Zealanders now renting, the law changes will impact a large number of people. But it remains to be seen if they will help resolve the housing crisis or improve the situation for renters in Wanaka and Queenstown.
Key take-away
The key thing then to remember here is that there are more changes coming in 2020 and the rental legal framework is changing again. If you are a landlord, you need to bring yourself up to speed with yet more new rules and work out how the changes fit with your rental investment plan.