The Government’s controversial tenancy law reforms will be coming into force next year, despite strong opposition from landlord and property groups.

The changes are designed to bring the Residential Tenancies Act 1986 up-todate, to “modernise our rental laws and align them with present-day realities for the around 600,000 households which rent in New Zealand,” said Kris Faafoi, Associate Minister of Housing, in a statement. “Renters should be able to put down roots in their community and not face the stress of continually having to find a new home.”

What Are The Changes To Tenancies?

The changes under the new Act, in summary.

• Landlords can no longer terminate a tenancy without cause using a 90-day notice.

• For periodic tenancies, a 14-day notice can be issued if the tenant assaults the landlord, owner, landlord’s family member or agent and the police have laid a charge against the tenant. The tenant can challenge the notice in the Tenancy Tribunal.

• A periodic tenancy can be terminated with a 63-day notice if the owner or a member of the owner’s family is moving in, or employees or contractors of the landlord need to move in.

• A periodic tenancy can be terminated with a 90-day notice if the property is being sold, extensive alterations are being undertaken, it’s being demolished or converted to commercial premises.

• The landlord can apply to the Tenancy Tribunal to end a periodic tenancy if they’ve had to issue three notices for anti-social behaviour in a 90- day period or there have been three five-day rent arrear incidents within a 90-day period.
• Fixed-term tenancies convert to periodic tenancies at the end of the fixed term unless either party gives notice or the fixed-term agreement is extended.
• Tenants experiencing family violence can withdraw from a tenancy without financial penalty; they need to give two days’ notice and provide evidence.
• Landlords must not decline requests for minor changes the tenant wants to make – for instance, installing a baby gate, safety latch, doorbell or new curtains.
• If a tenant requests fibre broadband and it comes at no cost to the landlord, the landlord must agree.
• Rental bidding is not permitted.
• Rent reviews are limited to once a year.

• Suppression orders can remove identifying details from Tenancy Tribunal decisions.
• Landlords must not unreasonably decline requests to assign a tenancy.
• New types of information must be provided to tenants.
• Penalties have increased by 50% to 80%; improvement notices can be issued that carry penalties if not complied with.
• The Tenancy Tribunal has broader jurisdiction and administrative powers.
• The RTA does not apply to transitional and emergency housing. You can visit Tenancy.govt.nz for more details on these changes. The changes come into force on either February 11 or August 11, 2021.

Why Are Landlords Unhappy?

Many of the day-to-day changes are ones which landlords are happy to accept – tenants installing baby gates and fibre; annual rent reviews rather than six-monthly ones; no rental bidding.

However, two of the changes have caused real dismay: The removal of the no-cause 90-day termination notice and the requirement that fixed-term tenancies roll on to periodic tenancies at the end of the term.

“The change to the 90-day rule, where you can’t give notice to a tenant for damaging a property or antisocial behaviour, limits the options for an investor to protect their property,” says Bindi Norwell, CEO at REINZ. “It’s now an arduous process to provide evidence, the Tenancy Tribunal can take months due to the backlog, and by then the damage is done. This means landlords might be extremely risk averse now.”

Tenancy groups framed the 90-day notice as a tool that was being misused to throw good tenants out for no reason, says Andrew King, NZPIF executive committee member. But he says only 3% of tenants were issued with 90- day notices each year – and now it will be much harder to remove antisocial tenants. Landlords will need evidence of antisocial behaviour, which will likely require neighbours to provide three written statements within the 90 days. If the tenant is scaring the neighbours, the neighbours may be unwilling to speak up: “The neighbours are going to suffer more than the landlord,” says King.

The change to roll fixed-term tenancies on to periodic ones will be particularly tricky for those landlords who operate in the student market.

Students traditionally rent a house for one year and then leave, but now they can continue the tenancy if they’re not ready to move out. If that happens, the flat is not available for incoming students, “and then the landlord has missed the boat,” says Norwell. “It provides a lack of certainty and being able to plan effectively around the cycles – landlords will need to change their strategy.”

These two changes aim to give tenants more security of tenure, but inevitably diminish a landlord’s autonomy over their property.

“It demonstrates the unbalanced nature of the Act when you can have an agreement that a tenancy ends on a certain date, but if a tenant wants to continue after that, they have more rights than the owner,” says King. “I think it is unjust that the owner of a property which is a huge investment – has no control over it anymore.”

What About Rent Arrears?

Some landlord bodies are also unhappy with the change to the way rent arrears must be managed; the new system has been interpreted by some as permitting two weeks’ unpaid rent every 90 days. However, lawyer and property management consultant Scotney

Williams, director of Tenancy.co.nz, says he sees the new system as being beneficial to landlords.

Currently, tenants are given a 14-day notice of arrears to start the process
of collecting the money or removing
the tenant, and to show the tenant that
their non-payment has been noted.
Williams says it’s not uncommon for
tenants to wait until day 13, then pay
the arrears, so the landlord can’t take
any further action, “then they’ll start the
process all over again of not paying rent.
Tenants are smart, they are aware of the
parameters and they make the most out
of it.”

’You’ve got to treat them likena customer and look after them. People think, “It’s my house first, the tenant comes second,” but it’s the tenant’s home first and some people forget that’ DAVID FAULKNER

Williams says that under the new rules, the tenant can be issued a note after just five days telling them that their non-payment has been noted. Once three of those notices are accumulated in any rolling 90-day period, the landlord can apply to the Tenancy Tribunal within 28 days to have the tenancy terminated.

‘It’s not going to be that bad’

Some landlord advocates are definitely getting too worked up about the changes, says David Faulkner, director of RealiQ. He says the 3% rate for the use of 90-day notices is an underestimate because it only applies to periodic tenancies; when landlords don’t want a tenant to continue after a fixed-term tenancy they simply don’t renew.

“Landlords feel their property rights are being taken from them,” Faulkner
says. “You have a baby boomer generation who have done what they want with property for a long, long time.”

He says older landlords need to take a different approach to their tenants:

“You’ve got to treat them like a customer and look after them. People think, ‘It’s my house first, the tenant comes second,’ but it’s the tenant’s home first and some people forget that.”

His biggest concern is that there’s no provision in the new laws for quick access to the Tenancy Tribunal. Particularly with an antisocial tenant, there needs to be a hearing within 10 days, similar to what’s provided if your tenant abandons your house.

Antisocial Behaviour Remains A Sticky Problem

Faulkner’s not alone in feeling that antisocial behaviour presents the biggest hurdle for landlords. Norwell describes this change as “just bad”, and King suspects the Government hasn’t realised “what a can of worms they’re opening.” From a legal perspective, Williams says antisocial behaviour is “a really unpleasant and difficult area of law to manage”. He says if the police or noise control are involved three times in a rolling 90-day period that should be sufficient to demonstrate a problem.

Without the authorities being called in, however, you’ll need an independent witness – probably a neighbour. Should the landlord advise a nervous neighbour to call the police?

“If [the behaviour is] enough to cause alarm, distress or a nuisance, the police would be justified in being called; once they’ve been called there’s some evidence.”

An Undeniable Shift In Favour Of Tenants

This latest round of tenancy law reforms marks another step toward the Government’s goal to lift the standard of rental properties and landlording in New Zealand. Compliance is more complex and costly than it’s ever been, and King says the pattern of increasing rents, strongly evident over the past six years, will continue as the supply demand equation gets thrown further out of balance. NZPIF surveys show 20% of landlords are considering selling their properties – “Whether or not that happens, we’ll see.”

For Faulkner, that’s not necessarily a bad outcome: “It’s time for the old-time landlords to move on. We need a new approach to renting: thinking more about the quality of the property rather than chasing the dollar. Build to rent, long term rentals and professional ownership … sustainability and energy efficiency.

“If you’re really upset about this, sell your property and put your money somewhere else. It’s not going to stop me from investing in property.” ■

Tips For Landlording Under The New Rules

What can you do, as a landlord, to successfully navigate the new rules? Our
experts have some tips.
• Consider using a property manager – it’s their job to stay on top of all 52
unlawful acts in the legislation as well as any new regulations. “A property
is a large asset and you want to make sure it’s protected,” says Norwell.
“When it comes to understanding the ins and outs of the legislation, doing
due diligence and reporting requirements for Tenancy Tribunal, it’s best to
have it in the hands of a professional.”
• Vet tenants carefully before signing them up – perhaps at no other point
in the tenancy process do you have so much opportunity to change the
outcome of the tenancy. Take your time when it comes to interviewing,
calling references, making credit and Tenancy Tribunal checks. Don’t make
any promises until you are certain that you are happy with the tenant. You
are better to have your property sitting empty for a few weeks than to be
dealing with a problem tenant in the future. Don’t forget you can pay for a
property manager to take care of this process for you, even if you continue
managing the property yourself.
• Plan ahead – think about when you might sell, what could happen if your
tenant decides to stay and what your long-term plans for the property are.
Williams says landlords will no longer be able to make quick decisions: “You
won’t be able to issue a fixed-term tenancy on a Monday and sell it on a
Friday. The big picture is that landlords need to be planning strategically
years ahead.”