New rental laws will have unexpected outcomes

Thursday 6 August 2020

Watch out – some of the tenancy reforms now set to become law will have unintended consequences and cause more harm than good, REINZ is warning.

By The Landlord

The Government’s Residential Tenancies Amendment Bill, which is intended to increase security and stability for tenants, passed its final reading in Parliament last night.

But property professionals are joining landlords to warn that while the Bill might achieve some positive things for tenants, the changes to rental law will have some unexpected outcomes.

REINZ chief executive Bindi Norwell says that in a recent survey around half of landlords and investors (46.3%) said it is likely or highly likely they will sell their rental property if removal of the right to issue a 90-day notice went ahead.

“Given we already have a shortage of quality rental stock across the country, this is problematic as it will further reduce the pool of rental properties available and likely push up rents even further.

“With median rents in Auckland having risen 9.8% in the last 3 years (from $510 to $550) and in Wellington by 20.2% (from $420 to $505), it will be interesting to see how much higher rents go as more landlords withdraw from the market.”

On top of this, tenants without an “excellent” rental history may now find it even harder to successfully secure a rental property than they already do, given how hard it will now be to remove tenants who end up significantly in arrears, she says.

“This is especially true, considering landlords will need to apply to the Tenancy Tribunal to terminate the tenancy therefore, extending the average timeframe to resolve claims and extending backlogs further.”

“Both REINZ and the New Zealand Property Investors’ Federation who represent a significant portion of landlords across the country have warned this would be a likely outcome as landlords and property managers seek to take a more risk averse approach to selecting tenants.”

However, REINZ does welcome some of the positive provisions in the reforms. These include the banning of rent bidding, limiting rent increases to once a year and enabling tenants to make minor changes to a rental.

Norwell says they are also broadly supportive of the changes introduced in a supplementary order paper at the last minute.

These include allowing victims of family violence to end a tenancy with two days’ notice, allowing landlords and property managers to terminate tenancies with 14 days’ notice if a tenant physically assaults them and the extension of the time the Tribunal can hear cases via phone/video conference.

The bulk of the reforms are set to come into effect in six months and REINZ will actively support its members nationwide with implementing the changes in due course, Norwell adds.

Read more:

Radical tenancy reforms now law 

Comments from our readers

On 6 August 2020 at 11:22 am Lordy said:
So to my mind the best way around this nasty piece of anti land lord legislation is when signing up a new tenant only do that for 3 months, if they turn out to be a good tenant sign another 3 month term, if they are not a good tenant then the 3 month lease applies.
On 6 August 2020 at 11:35 am Lordy said:
To my mind one way around this anti landlord legislation is, when signing up a new tenant only do so for a 3 months lease, if the tenant turns out to be a good tenant sign them up for a further 3 months term, if they turn out to be not so then terminate the lease as its written.
On 6 August 2020 at 12:16 pm cafeg said:
We really need to get rid of this government. If National gets in they will reverse these stupid law changes !!
On 6 August 2020 at 3:50 pm cafeg said:
Check your insurance policy. Some have limits on the minimum rental terms before coverage especially for drug contamination with initial tests and 3 monthly inspections.
On 6 August 2020 at 9:32 pm davidho said:
I have been a responsible landlord with several properties in Auckland for 20+ years and see no problem with the proposed changes and I have also been involved in the budgeting sector for 7 years. I have seen the affects of aggressive rental increases on families and also the 90 day clause was a cause of grieve with families,schools,etc. Providing long term reasonable cost rental houses should not be too much to ask from a sector which has seen good mainly tax free capital growth over the last 5 years. So called professional property managers paid by the landlord are mostly responsible for aggressive rental increases and have in my view contributed to the imbalance between tenant and landlord . I have found self managing rental properties far less stressful and have always achieved good tenant relationships . The industry is probably better off without the quick buck type operators and see how they go getting 80% loans to gear up on a volatile share portfolio and then watch the daily fluctuation in their fortunes !
On 8 August 2020 at 2:57 pm 172008 said:
Whilst davidho is clearly coming from a humanitarian angle and is to be applauded we also need to remember that being a landlord is a business. Too often the media and governments expect landlords to be mindful of their tenants difficulties. I too have been a landlord for over 20 years and have found the majority of tenants to be well intentioned people. Those that were not were a nightmare to evict, the Tenancy Tribunal is hopelessly tenant centric and the process has cost my a great deal of money. If the government wants to secure tenants rights then it needs to be the guarantor for them both in terms of rent and property damage. The article is right, landlords will sell and compliance costs will soar. Rents will be even more unaffordable and those most at need will be left homeless.
On 20 August 2020 at 12:00 pm Property Leader said:
I too have been a landlord for 30+ years housing those the government fail to help. I am worried about the new 28 day notice provisions that tenants must now give. This new provision will hurt both landlords and tenants. Not called for I say.

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