Residential Tenancy changes – A new landscape for Landlords and Tenants

The Residential Tenancies Amendment Act 2020 came into force on 12 August 2020.  It changed the landscape for Landlords and Tenants in New Zealand by amending the Residential Tenancies Act 1986 (“the Act”).  Whether you’re a Landlord or Tenant, here’s how the changes affect you.

Change in three stages

The changes to the Act occur in three stages:

• 12 August 2020 – the first stage came into effect;

• 11 February 2021 – the second stage comes into effect; and

• 11 August 2021 – the third stage comes into effect.

Stage 1 – already in force

The first stage implemented two key changes:

• Rent increases are limited to once every 12 months (rather than every 6 months); and

• Confirmed that transitional and emergency housing (whether funded by the government or under a special needs grants programme) are exempt from the Act.

Stage 2 – from 11 February 2021

The second stage implements the most significant changes to the residential tenancies landscape.  The key changes are:

• Granting tenants security of rental tenure:

• Landlords can no longer end a periodic tenancy without cause by giving 90 days’ notice.  To end a periodic tenancy, Landlords will need to apply to the Tenancy Tribunal for an order based on the following grounds:

• existing grounds, such as rent arrears, damage, assault and breaches of the tenancy agreement; or

• the Landlord has issued the tenant three notices for separate anti-social acts during a 90-day period; or

• the Landlord has given notice that a tenant was at least five working days late with rent payments on three occasions during a 90-day period; or

•  the Landlord will suffer greater hardship than the Tenant if the tenancy continues;

• Landlords must give more notice to exercise existing rights to terminate periodic tenancies:

• 63 days’ notice is required if the owner of the property needs it as their principal place of residence or for occupation by employees or contractors; and

• 90 days’ notice is required if the property is to be sold, extensive alterations are to be made, or if the property is to be demolished.

• Fixed-term tenancy changes:  All fixed-term tenancies become periodic at the end of the fixed-term unless the parties agree otherwise, the tenant gives 28 days’ notice or the Landlord gives notice to terminate (on the grounds for terminating a periodic tenancy described above);

• Tenants can make minor changes: Tenants can ask Landlords for permission to make changes to the property and Landlords cannot decline if the change requested is minor.  Landlords have to respond to a Tenant’s change request within 21 days;

• Rental bidding banned: Properties for rent cannot be advertised without a rental price and Landlords cannot encourage or invite prospective Tenants to bid on the rent (pay more than the advertised rent);

• Assignments: Tenants may request to assign a tenancy and Landlords must consider every request.  Requests for an assignment cannot be unreasonably declined and provisions in tenancy agreements that prohibit assignment have no effect;

• Tenants’ privacy and access to justice strengthened: Tenants who are wholly or partly successful in Tenancy Tribunal claims can have their names suppressed, preventing Landlords from publicly blacklisting them.  Name suppression can also be ordered by the Tenancy Tribunal if the interests of the parties and the public interest warrant it;

• Fibre broadband: If a Tenant requests that fibre broadband be installed, Landlords must agree to do so if it can be installed at no cost to them unless limited exemptions apply;

• Keeping written records: It will be unlawful to fail to provide a written tenancy agreement and Landlords must retain and provide new types of information relating to the tenancy;

• Tenancy Tribunal jurisdiction changed: The Tenancy Tribunal’s jurisdiction is expanded so it can hear cases and make awards of up to $100,000 (up from $50,000); and

• Enforcement strengthened: The Ministry of Business, Innovation and Employment has been given new powers to take action against Landlords and Tenants that fail to meet their obligations.

Stage 3 – coming 11 August 2021

The changes implemented by stage three, which may come into effect earlier than 11 August 2021 if the Government decides to do so, are:

• Physical assault: Landlords will be able to issue a 14-day notice to terminate a tenancy if the Tenant has assaulted the Landlord, a member of their family or the Landlord’s agent, and the Police have charged the Tenant in relation to the assault; and

• Family violence: Tenants who have experienced family violence will be able to cancel a fixed-term or periodic tenancy with two days’ notice and without financial penalty, provided they give evidence of the violence suffered.  If they are the only tenant under a residential tenancy, the tenancy will cease.

Our thoughts

The changes to the Act reflect changing attitudes to property ownership and tenants’ rights, in part due to the ongoing housing crisis and declining home ownership rates.  The result is certainly a rebalancing of the rights and obligations as between Landlords and Tenants, with the clear aim of giving Tenants greater security.

While Landlords may be unhappy and uncomfortable with the removal of the power to terminate periodic tenancies with 90 days’ notice, the risks of having an unsatisfactory Tenant remain in a property can be managed in most cases.  Greater due diligence of prospective tenants and proper management during a tenancy should identify any potential issues early so that they can either be avoided or addressed.  If the worst really does happen, the Act still provides mechanisms for removing a Tenant, albeit that these are more cumbersome and may not prevent loss in the interim.

In our view, many of the other changes in the Act are sensible and in most cases, issues will be able to be addressed by clear and open communication between Landlords and Tenants.  While media reports suggest Landlords are panicked or frightened by the changes, we expect that experienced and professional Landlords will learn the new rules and adapt their existing processes to meet them.  Those Landlords who do not wish to take on the perceived risk created by the changes in the Act may decide to sell up, but hopefully they’re aware of the need to give greater notice before they do!

If you have any questions about the changes to the The Residential Tenancies Amendment Act 2020, or if you require assistance with your property matters, please contact Sarah, Jono or Amanda.