New Zealand is about to go through the biggest reform of its tenancy laws in 35 years. The reform includes some changes that may need some financial planning for landlords. If you are a rental property owner or considering moving from short term to long term rentals – read on to find out more.
Staged process
The process has been divided into three key stages.
Phase 1 came into force on 11 August 2020. The following changes were included:
- Transitional and emergency housing is exempt from the act
- Rent can only be increased every 12 months. This is a change from every 180 days (or 6 months) and applies to any notices given from 12 August 2020.
Phase 2 is coming into effect on 11 February 2021 and there are multiple changes to tenancy legislation.
Eviction and tenancy agreements
Not providing a tenancy agreement in writing will be an unlawful act and landlords will need to retain and provide more information.
Landlords will no longer be able to evict tenants with 90 days’ notice, unless they have specific grounds to do so. This includes wanting to use the house themselves or for a family member, or if the property is being sold. To evict problematic tenants the landlord must provide evidence of three separate anti-social events in a 90-day period or prove the tenant has been more than 5 days late with rental payments 5 times in a 90-day period.
There are some exceptions to protect the landlords, including if the tenant is more than 21 days late with rent or if the tenant has caused, or threatened to cause, significant damage, has used the house for illegal activity or abandoned the house.
All fixed-term tenancy agreements will convert to periodic tenancy agreements unless agreed with both parties.
Rental prices
All rental properties must be advertised with a price tag. Landlords are not allowed to encourage or invite prospective tenants to bid on the rental price. The tenants can choose to offer a higher price, but the landlord must not instigate this.
If a tenant wishes to assign responsibility for the property to another party the landlord must have reasonable grounds to refuse.
Modification
Another section of the reform focuses on allowing tenants to make the property more like a home.
Tenants can request that fibre broadband be installed, and landlords must agree, so long as it comes as no extra cost to them. The request can only be denied if it compromises the weather tightness or structural integrity of the property; it is against body corporate rules; or the landlord plans to undertake extensive renovations within 90 days of the installation.
Tenants may also request to make minor changes to the property, such as installing curtains or a baby gate. Landlords are unable to decline the request if it is small and can be changed back by the end of the tenancy. A landlord can request the change to be carried out in a certain way.
Tenancy tribunals
A suppression order can remove names and identifying details from published Tenancy Tribunal decisions if a party who has applied for a suppression order is wholly or substantially successful, or if this is in the interests of the parties and the public.
The Tenancy Tribunal can hear cases and make awards up to $100,000. This is a change from $50,000.
The Ministry of Business, Innovation and Employment (MBIE) will have new measures to take action against parties who are not meeting their obligations.
Key financial implications of the reform
If you are a landlord already, or own a short term rental property, like Airbnb, and are considering moving this to long term rental, you will need to consider:
- Increasing rental prices to cover costs can only be done every 12 months. Consider the implications this will have for your financial planning, including renewal of mortgages or renovations that may need to be carried out.
- Evicting problematic tenants is likely to be a more complicated and longer process. A review of the financial implications of this would be worthwhile.
- How you advertise the rental price.
Still to come
In addition to the above there will be more changes in August 2021 relating to tenants who are experiencing family violence and if tenants physically assault a landlord.
If you would like to some help to manage your finances related to your investment property, get in touch.
More about the tenancy law changes