he Minister of Finance announced on 23 March 2020 a freeze of rent increases and an extension of no-clause terminations. This has applied as law through the COVID-19 Response (Urgent Management Measures) Amendment Act.
These measures will support New Zealanders to stay in their rental properties with a six-month freeze on residential rent increases and increased protection from having their tenancies terminated.
The key changes for landlords and tenants to be aware of are:
- There is now a freeze on rent increases.
- A rent increase notice from a landlord will not have the effect of increasing a tenant’s rent, unless the rent increase has already taken effect.
- Tenancies will not be terminated during the lock-down period, unless the parties agree, or in limited circumstances, regardless of when notice was provided.
- Tenants will still be able to terminate their tenancy as normal, if they wish.
- Tenants will have the ability to revoke termination notices that they have already given, in case they need to stay in the tenancy during the lock-down period.
The time frames for the new measures are:
- The measures take effect by Thursday 26th March 2020.
- The rent freeze applies for an initial period of six months.
- The protections against terminations will apply for an initial period of three months.
- At the end of both initial periods, the Government will evaluate whether they need to be extended.
Importantly, where a tenant has symptoms of COVID-19, or is confirmed as positive, this is not grounds for a landlord to terminate a tenancy. Nor is a tenant required to notify their landlord if they test positive for COVID-19. However, we encourage tenants to advise the landlord, if the landlord needs to attend the property while the tenant is self-isolating, for example, if the landlord needs to undertake urgent repairs at the property.
Source: Ministry of Business, Innovation & Employment
The word ‘reasonable’ is found throughout the Residential Tenancies Act 1986 but this can be difficult to navigate because one person’s interpretation of ‘reasonable’ is not the same as another’s. One area that has proven troublesome for landlords and tenants is to establish what is ‘reasonably clean and tidy’ when it comes to vacating a property.
As per section 40 of the Residential Tenancies Act 1986, “the tenant must ensure that the premises are left reasonably clean and tidy and remove all rubbish”.
A recent Tenancy Tribunal case clarified what ‘reasonably clean
and tidy’ means:
The Tribunal stated that “the words ‘reasonably clean and reasonably tidy condition’ do not impose an absolute standard. This standard will vary according to the age and condition of the premises. There is no requirement that each and every individual item in the premises be left ‘reasonably clean and tidy’, only an overall obligation in relation to the tenancy premises. Also, a tenant generally should not be expected to keep the premises any cleaner and tidier than they were at the commencement of the tenancy.”
Harcourts property managers conduct thorough vacating inspections, comparing the in going and outgoing reports to establish the condition of the property when the tenant took possession and when the tenant vacated, using photographic evidence where possible. If some items in a property are not clean when a tenant vacates, a property manager will request that these items are cleaned and if necessary, apply to the tribunal for cleaning costs. We are finding, however, that we may not be awarded the cleaning costs, as the tribunal has stated that there is no requirement for each and every item to be clean.
Landlords should be aware that some Adjudicators are stating that landlords should expect to professionally clean a property between tenancies. We consider this acknowledgement that
‘reasonably clean’ is not actually considered clean enough for the commencement of a tenancy and we tend to agree. To hand over a ‘very clean’ property at the commencement of a tenancy is the best possible start to a trouble-free tenancy. The opposite can also hold true for the beginning of a troublesome tenancy, something good landlords and property managers avoid. Fortunately, many tenants do leave the property in a very clean and tidy state and professional cleaning to take the property from ‘reasonably clean’ to very clean is not always required.
You can view the tribunal case here.
The Government has announced a suite of proposed changes to the Residential Tenancies Act 1986 (RTA). They will be drafted into a Bill to amend the RTA which will be introduced to Parliament in the first half of 2020. The proposed changes are not law yet and are still subject to change.
The key changes for landlords and tenants |
• Landlords will not be able to end a periodic tenancy without a reason, whereas previously landlords were able to issue 90 days notice without disclosing why. The legislation sets out specific reasons that a landlord may use to end a periodic tenancy:
- If the landlord has issued a tenant three notices for separate antisocial acts in any 90-day period and applies to the Tenancy Tribunal to end the tenancy.
- If the landlord has given notice that a tenant has been at least five working days late with their rent payment on three separate occasions within a 90-day period and applies to the Tenancy Tribunal to end the tenancy.
- The landlord intends to make the property available for sale within 90 days of the tenant leaving the property.
- If the property was acquired for a business use other than residential rental accommodation and termination is required for the purposes of the business.
- The landlord intends to carry out extensive alterations or redevelopment at the property and it would be unpractical for the tenant to reside at the property during the process.
- The landlord wants to change the use of the premises.
- The premises are to be demolished.
- The landlord is not the owner of the property and the landlord’s interest ends.
• Fixed-term tenancies will become periodic tenancies at the end of the fixed term. This applies unless the landlord and tenant agree otherwise, the tenant gives 28 days notice which has increased from 21 days notice, or the landlord gives notice using one of the specified reasons listed in the RTA for periodic tenancies (above).
• Notice periods extend from 42 days to 63 days when a landlord or a member of their family requires the property to live in, and they must reside in the property for at least 90 days.
• Notice periods extend from 42 days to 90 days when a property is sold with a requirement by the owner for vacant possession.
• The minimum period between rent increases will be raised from six months to twelve months.
• Tenants must request permission to install a minor fitting and landlords can only decline for specified reasons. Tenants must pay for the installation cost. Landlords can place reasonable conditions around how the minor fitting is installed and tenants must remove the fittings and remediate the property when the tenancy ends if the landlord does not agree to the fittings staying. Minor fittings could be securing furniture or appliances, installing child safe latches or baby gates.
• The Regulator, the Ministry of Business, Innovation and Employment (MBIE), will have new compliance tools to take direct action against parties who are not meeting their obligations:
- Penalty amounts will be increased in line with rental increases since 2006, when the penalty amounts were set.
- Issue infringement notices for straightforward breaches of the RTA.
- Issue improvement notices to correct behaviours where parties have breached the RTA.
• Soliciting rental bids, for example, by advertising a property without a rental price, will be prohibited.
• A party who is successful in the Tenancy Tribunal can have their identifying details removed from the Tribunal’s decision.
• Assignment of lease requests can only be declined if this is reasonable in the circumstances. Landlords must provide a breakdown of any costs, conditions and processes they are applying upon giving a tenant consent.
Harcourts has vast experience and expertise in residential property management and our property managers ensure that they are up to date with changes to the Residential Tenancies Act 1986. We remain committed to protecting our client’s interests and helping them meet their responsibilities under the RTA. Any breaches of the Act by tenants are well documented when they occur, offering protection for landlords.
Help us protect tenants, landlords & property managers
New Zealand is one of the few countries in the OECD that does not regulate its property managers. Property managers are the gatekeepers of housing for some of New Zealand’s most vulnerable residents.
With home ownership at its lowest level in 60 years and the demand for rentals increasing, the Real Estate Institute of New Zealand (REINZ) is calling on the Government to formally review the need to regulate the property management industry, including public consultation, and announce its recommendations for reform before the 2020 election. Harcourts fully supports this initiative
Harcourts and REINZ believe that regulation is necessary to protect tenants, landlords and the reputations of those property managers who are acting professionally.
Why should property management be regulated?
The impact of poor property management practices is often reported in the media and is supported by research carried out by other groups who have called for regulation. Despite these reports, the changes in home ownership levels and demand for rentals in recent years, comprehensive public consultation on the need to regulate property managers has not been undertaken by the government since 2009.
No regulation means:
- Anyone can set up business as a property manager, without any experience or qualifications.
- Property managers don’t have to hold funds in a trust account.
- Property managers don’t have to hold insurance.
- Money collected by property managers can be paid into the property managers personal account.
- There is no compulsory code of conduct for property managers to keep them accountable.
- There is no clear mechanism to remove poor performers from the industry.
- According to liquidators, a property manager allegedly went out of business owing around $358,000 to 67 landlords.
- A property manager allegedly admitted to a Parliamentary Select Committee that she was asking tenancy applicants to provide their bank statements to see where they were spending their money.
- A property manager allegedly charged a tenant $4,140 as bond money and two weeks rent in advance, but failed to refund the amount when the tenancy application was rejected. View the Tenancy Tribunal Order here.
- A property management company allegedly failed to lodge tenancy bonds and provide tenants with compliant insulation statements. View the Tenancy Tribunal Order here.
- A minimum level of education to operate, such as the NZ Certificate in Residential Property Management.
- Ongoing education obligations to ensure that they stay up to date with law changes.
- Police or background checks before operating.
- Tenant and landlord funds held in a trust account.
- A mandatory Code of Conduct or set of standards to keep them accountable.
- Fines or sanctions applied if they don’t follow the Code of Conduct or standards.
Together with REINZ, Harcourts is committed to protecting tenants, landlords and the property managers who do act ethically and transparently, by advocating for the regulation of the residential property management industry.
In response to the property management industry becoming deregulated over a decade ago, Harcourts offices maintained professional standards and our offices continue to hold rental funds in audited trust accounts and hold business insurance that protects our people and clients. Harcourts has its own accreditation programme that ensures our property managers maintain a high level of service and attend Harcourts and industry training annually. Harcourts also supports our property managers who are working towards the NZ Certificate in Residential Property Management (level 4).