Radical tenancy reforms now law

Wednesday 5 August 2020

Shock and dismay. That’s what landlords around New Zealand are feeling after Parliament passed the Government’s controversial tenancy law reforms into law late Wednesday.

By Miriam Bell

It’s not just that they believe that some of the reforms contained in the Residential Tenancies Amendment Bill skew the relationship in favour of tenants and erode the rights of landlords.

It’s also that many feel the Government has maintained an anti-landlord stance – and not listened to their feedback or taken it into account – since the proposed reforms were first announced two years ago.

That feeling was given added emphasis by the fact that Associate Housing Minister Kris Faafoi threw an additional, unannounced supplementary order paper into the mix at the last minute.

The SOP introduced further reforms intended to provide greater support for victims of family violence, additional protection for landlords assaulted by tenants, and to bring the timeframe for limiting rent increases to once a year forward.

But there was no time left for any sort of response. The Government’s determination to ensure the reforms were passed before the election meant the Bill was debated under urgency this week, Parliament’s last sitting week.

While landlord advocates waged a long, hard campaign against the proposed reforms, holding out hope till the last that NZ First might vote against its coalition partners, that did not happen.

Despite expressing reservations about the reforms, NZ First voted to pass the Bill and it made it through its second and third readings unscathed, with 63 (Labour, Green and NZ First) MPs in favour and 55 (National and ACT) against.

That means it will now no longer be possible for landlords to issue 90-day “no cause” termination notices and fixed term tenancies will automatically rollover to periodic tenancies on expiry unless otherwise agreed.

Rent bidding has been outlawed, rent increases have been limited to once a year (as opposed to every six months), and landlords are required to allow tenants to make minor alterations to a rental property such as baby-proofing, hanging pictures, and earthquake proofing.

Provisions to improve compliance have also been introduced.

The Ministry of Business, Innovation and Employment has new tools to deal with people who are not meeting their obligations and the Tenancy Tribunal can now award compensation or order work to be done up to $100,000 (up from $50,000).

These are big changes. In fact, they constitute the most significant overhaul of tenancy law since 1986 and landlord advocates are not happy about them.

NZ Property Investors Federation president Andrew King says the passing of the reforms, which he describes as outrageous, was a sad day for landlords – and tenants.

He says the Government has completely disregarded all the feedback provided to them by property professionals to go ahead and do what they wanted in the name of providing greater security of tenure for tenants.

“Getting rid of ‘no cause’ termination notices will give security of tenure to the small number of anti-social tenants – about 3% each year – who receive them.

“It won’t provide any more security of tenure to good tenants whose tenancies come to an end because a property is being sold, renovated or moved into by the landlord themselves.”

Instead it will now just be harder for a landlord to remove a disruptive and anti-social tenant from their rental property, which will also cause problems for neighbours and other tenants.

Likewise, the automatic rolling over of fixed term tenancies into periodic tenancies will give tenants greater rights over the tenancy of a property than the property owner and will have unintended consequences, King says.

“The impact on the student rental market will be substantial. It will throw current renting practices into chaos, reduce available student accommodation because others may move into student areas as houses become available outside term times and could lead to rent increases.”

He says the reforms will result in many landlords leaving the industry and that means fewer rental properties, higher rents and tougher tenant selection processes.

However, Minister Faafoi says the reforms modernise New Zealand’s out-dated rental laws and align them with present-day realities for the around 600,000 households which rent.

“The Government considers that every New Zealander should have a safe, warm, dry home to call their own – including if they are renting.

“Renters should be able to put down roots in their community and not face the stress of continually having to find a new home.”

Faafoi says the reforms get the balance right, correct problems in a proportionate way, place reasonable requirements on both landlords and tenants, and will endure changing market characteristics.

The bulk of the reforms will come into effect in six months to give tenants and landlords time to prepare for the new rules.

But the 12-monthly limit on rent increases will come into effect earlier in a bid to help tenants who are struggling financially as a result of Covid-19. Rent increase notices given from the day after the legislation gets Royal assent will have to comply with the 12-month rule.

Going forward, National Party leader Judith Collins has told media they will repeal the tenancy law changes if elected.

Meanwhile, King recommends that landlords should join a property investors association and learn how to select tenants properly because the ramifications and costs of getting it wrong have increased significantly.

Read more:

Key reform will only protect bad tenants 

RTA reforms pile pressure on landlords 

Select Committee green lights tenancy law reforms 

Opposition to RTA overhaul rages 

Comments from our readers

On 6 August 2020 at 1:09 pm briarhurst said:
I'll be selling up. As a landlord I'm disgusted the law will allow tenants to have more rights than me ...the owner...Not worth it.
On 6 August 2020 at 1:25 pm briarhurst said:
I'll be selling up. As a landlord I'm disgusted the law will allow tenants to have more rights than me ...the owner...Not worth it. I'll let the government find more housing, they can deal with lousy tenants
On 6 August 2020 at 4:01 pm Dr Bones said:
We are selling up too. Our tenants trashed our house by failing to take a reasonable "duty of care" and failing to inform us of ongoing damage (or any damage for that matter). By lying at a tenancy tribunal hearing they were awarded $3000 for a claim that we had not provided smoke alarms. We had the required alarms in place, we told the truth, they lied, but the "adjudicator" sided with them. Its a money tree folks. Lie to the Tribunal if you are a tenant, hope for a compliant Adjudicator and thousands will plop into your lap, in exchange for very little effort on your part. Just like that. Of course we are applying for a rehearing. But we doubt that it will change anything. Ever noticed how few rehearing applications have been declined lately? We have.
On 6 August 2020 at 11:36 pm Peter L said:
So its OK for those who sell food to low-income families to increase their prices as and when they need to. And its OK for those who sell clothing to low-income families to increase their prices as and when they need to. But its not OK for those who sell accommodation to low income families to increase their prices as and when they need to . Why is that?
On 17 August 2020 at 11:58 am HelpBizgrow said:
We have moved to 1 year tenancies 4 years ago managed by a professional property managers and have not had any vacant days. Leases are renewed 2 months before expiry or new tenants lined up both at agreed current market rents. Tenants email us direct on any problems the see and we have the option to use our contractors without calls in the night. The current tenancy rolled over to periodic because they were building their own house and with covid this has happened twice with one rent review. I support the new laws and advocated for them as I have known of one tenant given notice 3 times in a year and landlords re-let, obviously to increase rent more frequently. As a landlord with integrity I would support the European system of long term leases but happy with what we now have if we landlords can lift the quality of our properties and work with tenants as though it is their home. Property for 120 years, like quality company shares, do not go down in value.

Sign In / Register to add your comment

Property News

Covid be damned – the market is booming

Those who were anticipating a Covid-prompted housing market collapse got it wrong with the latest REINZ data revealing strong growth in prices and sales.

House Prices

High demand keeps pushing prices up

Treasury might be expecting house prices to fall - but market data suggests otherwise, with Trade Me Property’s August data the latest to show rising prices and high demand.

Commercial

Augusta Capital takeover bid now unconditional

ASX-listed Centuria Capital has declared that its takeover of New Zealand property funds manager Augusta Capital is now unconditional, as it has secured nearly 66% of Augusta’s shares.

Mortgages

What the Reserve Bank's latest move means for housing

The Reserve Bank’s programme to lend directly to retail banks could be ready soon. If it is, that’s likely to mean lower interest rates on loans – and more support for the housing market.

Site by PHP Developer