Tenancies in divided house

Paul asks:
(updated on Monday, August 21st 2017)

I own a four bedroom house. It’s a modern house laid out in a way which would allow me to continue to use the lounge, two bedrooms, a bathroom and kitchenette. This leaves two bedrooms, living room, ensuite and main kitchen available to generate income. I plan to install two doors which would separate the two parts giving myself and the other party/ies privacy. We’d share the power/water/internet spaces, but not the kitchen or other rooms.

What is the legal structure of this? Are the people who take the other part of the house my flatmates or boarders? Can I be the owner AND a tenant who signs the tenancy agreement with the other party as flatmates. Or should the other party be tenants with me as the landlord?

It’s possible that two separate singles/couples might take the bedrooms and share the lounge/kitchen I might travel and rent out my part of the house to another party - does this change things? BTW, the house is owned by the Family Trust that I set up in case that has a bearing on this

Our Experts Answer:

Based on the information provided, it is recommended that you contact your local council to discuss the proposed changes to the building to ensure you meet all the legal requirements they have.

Under the Residential Tenancies Act, you must ensure that when you are renting out a self-contained premises, that there is no legal reason or obstruction that would stop it from being lived-in for residential purposes. Further, you must meet all building, health and safety requirements that apply to the premises.

To be considered as a separate dwelling for the purposes of the RTA, the premises must be totally self-contained, with the occupants having exclusive use of their self-contained premises. This includes cooking and bathroom/sanitation facilities. A self-contained premises will be covered by the RTA, as the occupants will not be living with their landlord.

The costs of services such as power and water (known as ‘outgoings’) also need to be taken into consideration if you will be creating a separate self-contained premise covered by the RTA. You can factor these costs into the weekly rent, or install ‘check meters’ that show the actual usage for each of the premises.

If you are unable to split the house due to council requirements and decide to share the whole premises and facilities with others, then this will likely be deemed a flatting situation. Flatting situations are not covered by the RTA.

For more on the rights and responsibilities of landlords and tenants who enter agreements that are covered by the RTA, go to www.tenancy.govt.nz.

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