The moment you've been waiting for...
On 17 February 2020, the New Zealand Labour-led Coalition Government released the proposed changes to the Residential Tenancies Act 1986.
For those of you that don’t fully understand what this piece of legislation is, it is the law governing the letting and on-going rental of an investment property in New Zealand. The legislation covers everything from what information must be recorded on a Tenancy agreement to what security money is permitted for collection at the beginning of a Tenancy.
Back in 2019, the Government announced that a raft of changes would be proposed and likely enacted prior to the 2020 General Election. The changes outlined in that announcement were “the removal of the 90-day no cause termination”, “banning rental bidding”, “increasing notice periods on sale or owner moving in” and more…
With the release of the draft legislation yesterday we now know exactly what is being changed and the change is significant. Numerous sections have been amended and there are additions such as the “3 strike anti-social notice” that will have a profound impact across the industry.
Probably the most contentious issue is the removal of the 90-day “no cause” termination and replacement of that legislation with the “3 strike anti-social behaviour” policy.
This change has been well documented and outlines a specific process that must be followed such as written documentation that is provided to the Tenant of each anti-social event, followed by requirement to issue a 90-day notice within 28 days of the third documented breach.
Further restrictions such as Section 3 specify limitations:
Pecuniary Penalty Orders:
The changes introduce a new $50,000 penalty for Landlords that own or manage more than 6 rental properties in New Zealand.
Here’s a quick extract of this section:
Mandatory rental receipts and written tenancy agreements:
The proposed changes will make written tenancy agreements mandatory. No longer will it be acceptable to enforce a “verbal” tenancy agreement through the Tenancy tribunal.
Likewise, providing a tenant with receipts for payments made to the Landlord will become a requirement and a Landlord that breaches that provision can be subject to a fine.
Expansion of Tenancy Compliance powers:
The proposed changes will also grant the Tenancy Compliance team additional powers such as the ability to issue infringement notices for infringement offences, improvement notices and enforce undertakings.
What we’ll likely see is a more proactive approach from the compliance team in ensuring that all rental properties are up-to-standard and where they aren’t, the cumbersome process of issuing charges through the Tenancy Tribunal is negated and replaced with the Compliance team’s ability to issue infringements and fines on their own.
The cost of being a “bad landlord” is going to be significant. The cost of being a “bad property manager” is going to be event greater.
The proposed changes to legislation are going to reshape our rental industry and what we’re going to see is an increase in management by property management companies. Private Landlords aren’t going to risk dealing with the significantly larger unlawful acts and penalties as well as additional penalties that could make or break an investors investment.