Landlords, tenants beware: Law change due to go back to Parliament next week

KEY POINTS:

• SCOPE OF THE SECTOR
• 270,000 landlords in NZ;
• They own 546,000 rental properties;
• 1.5m+ people in NZ are tenants;
• Rental homes worth about $171b;
• 87 per cent of tenants rent from private sector;
• Median NZ rent $450/week;
• Average tenancy length two years, three months;
• 57 per cent of landlords in business 10 years or more.[Source: NZ Property Investors Federation]

Landlords and tenants need to beware because the law governing rights and obligations could be about to change in the next week.

Kris Faafoi, Associate Housing Minister, this week vowed to overhaul the law before the September 19 election, although he's running out of time.

On Wednesday, the Residential Tenancies Amendment Bill (RTA) was on Parliament's order paper. The House sat from 2pm to about 10pm. But it never came up.

The update was due for its second reading and debate on Wednesday after a select committee reported on it weeks ago.

At the start of question time in the House yesterday, Leader Chris Hipkins confirmed the House would go into urgency on Tuesday next week to pass a series of bills, including the RTA change.

Those in the know expect the issue to come up again on either Tuesday or Wednesday.

The changes have alarmed the NZ Property Investors Federation which strongly opposed it because it swings the law against them.

Faafoi said this week: "It is still the Government's intention to see the RTA reforms passed in the term of this Parliament."

Faafoi vowed to bring in the amendment before September's election. Photo / Mark Mitchell

The federation encouraged its members to try one last-ditch effort to axe the bill, telling them to lobby Greens and NZ First and even Labour MPs.

The change could end of no-cause evictions, meaning landlords' reasons for getting rid of tenants must be far more robust.

But landlords say the law change will make it much harder for them to get rid of unsavoury renters, which will also affect neighbours of bad tenants who will have to put up with them for longer.

The Green Party says it shifts a power imbalance from the landlord to tenants.

At present, landlords can give a tenant 90 days' notice without having to provide a reason and 42 days' notice in some circumstances, such as landlords or their family wanting to move in, or if the property has been sold.

Tenants have to give only 21 days' notice - a nod to the inherent power imbalance in the relationship.

Anti-social behaviour and rent arrears will still be cause for eviction notices but the Government is proposing to require the landlord to apply to the Tenancy Tribunal in such cases.

Ending tenancy agreements

• Now: Periodic or non-time-fixed rental agreements can be ended by landlords within 90 days without any reason or a requirement to tell the tenant why. A landlord must give a tenant 42 days notice if they want to sell or move in a family member. Landlords now must give 90 days notice if they want the tenant out, but don't need to give a reason for the end. That is called no-cause termination.

• Proposed: Will be much harder to evict a tenant and no-cause termination could end. The agreement can still be ended if the landlord proposes to sell but instead of giving 42 days notice, they must now give 90 days' notice. Landlords will be able to give other reasons for eviction but they will need to be real - such as demolishing or changing the premises use. They can end a tenancy if they have given three notices for anti-social behaviour or if the tenant is five days late with the rent three times.

Andrew King, former executive officer of the federation, says if 90-day notices can't be given, antisocial tenants will be hard to evict. The risk will increase "exponentially" and riskier tenants will not get places. Neighbours could be intimidated and threatened "and it will be nearly impossible to remove a tenant". He estimates New Zealand has around 7000 antisocial tenants.

Real Estate Institute chief executive Bindi Norwell has welcomed some of the changes, supporting tenants' right to alter houses and for rent bidding to be outlawed. But she does not support an end to no-cause terminations.

"The proposed changes could incur huge administrative costs and the need for re-education and could lead to more landlords offering shorter tenancies or be deterred from leasing properties at all. Our preferred approach is to provide for higher exemplary damages to penalise landlords who abuse no-cause terminations," Norwell has said.

• Now: If a fixed-term tenancy is going to end - perhaps a year is up - the tenant and landlord must reach an agreement about what happens next. They might agree to extend or renew.

• Proposed: Tenant will get more power and could demand to stay.

King said last year that was unfair and skews the law even more firmly against landlords and in favour of tenants. Landlords get even fewer rights in attempting to control their rental properties and have a say about who lives there and for how long.

Changes to the property
• Now: Landlords must give consent if the tenant wants to install a fixture.

• Proposed: Tenants will get more freedom to change their places, but will need landlord permission. Landlords can only decline applications under certain conditions, for example, if the changes are illegal.

A federation survey showed many landlords were happy for tenants to get vegetable gardens and Sky aerials as of right, but a significant number thought there needed to be conditions.

Change of curtains, picture hooks, shelving, appliances, power points, carpet or lino, paint, pet doors, kitchen cabinets, decks and windows were other aspects the federation asked its members about and where tenants had requested changes to properties.

Norwell said: "The difference between a house and a home is the ability for tenants to make changes to their rental property such as adding a dishwasher, washing machine or curtains."

Rent rises

• Now: Rents can be put up once every six months;

• Proposed: Rents will only be able to rise annually.

King says: "It's annoying. We'd prefer to have more ability to raise rents if needed but it's not the end of the world. It cuts down on our ability to manage the property. We would have to wait an extra six months."

Landlord fines
• Now: The Tenancy Tribunal can make awards up to $50,000 against a landlord.

• Proposed: Threshold is proposed to be doubled to $100,000.

King says: "Landlords will become criminals because the Ministry of Business, Innovation and Employment will issue infringement notices with fines and these will be criminal notices."

Assigning a property to another tenant

• Now: Tenants can ask a landlord if someone else can take over a fixed-term tenancy. Landlords have to agree.

• Proposed: Landlords cannot unreasonably decline a request by tenants to assign a fixed-term tenancy.

King said the federation initially feared tenants could sub-let but was told by the minister an assignment would mean a new tenancy started and "in most cases that's what happens anyway so it should be okay".

Suppression before Tenancy Tribunal

• Now: The Tenancy Tribunal has the right to prohibit the publication of proceedings but the Government sees a lack of clarity in that.

bull; Proposed: Tenants' names can be removed from a Tenancy Tribunal decision.

King said the federation was not too concerned by this change "and as long as the tenant has largely or in full won their case, it does seem reasonable their names don't appear".

Norwell is worried the Tenancy Tribunal workload will increase.

"Of concern is whether the tribunal will have the workforce to deal with the additional caseload that will now need to be seen," she said last year.

"The current wait time for a tribunal hearing is around six weeks and our concerns is that this could stretch out even longer, causing further damage to a landlord's property in the meantime or further stress for neighbours having to deal with anti-social behaviour."