Following on from my previous blog, the reforms to the Residential Tenancies Act continue.
The Residential Tenancies Amendment Bill (No 2) is currently before Parliament and makes three groups of amendments to the RTA which relate to:
- liability for damage to rental premises caused by a tenant
- and tenancies of rental premises that are unlawful for residential use.
In August 2018, the Ministry of Business Innovation and Employment released Reform of the Residential Tenancies Act 1986 Discussion document (“2018 Discussion Document”). Submissions on the proposed changes closed in October 2018.
Of particular interest are the following proposed changes to the RTA
- removing the ability for landlords to end periodic agreements without providing the tenant with a reason (“no cause terminations”); and
- extending the notice periods landlords must give tenants under a periodic agreement for other matters from 42 to 90 days.
My tenanting experience dates back almost two decades. The tenancy landscape back then was very different from today. “Back in the day” renting was considered a temporary step in everyone’s journey towards home ownership. Now, due to skyrocketing house prices, homeownership is becoming an impossible dream for many New Zealanders. One-third of New Zealand households (including 43% of children) are now living in rental homes. It is the trend towards tenancies becoming permanent housing that has prompted the 2018 Discussion Document. The aim of the proposed reforms in the 2018 Discussion Document is to provide security for tenants. To make them feel more at home while balancing this with the landlord’s interests.
‘No cause terminations’
The first change noted above aims to remove the no cause terminations currently available to landlords under the RTA. No cause terminations give landlords the ability to terminate a periodic tenancy at any time without the need to justify the termination. The government sees this as a disadvantage for tenants. No cause termination provisions may lead to reluctance among tenants to raise concerns about the condition of the property. They may be averse to seeking repairs or exercising other rights under the RTA. The government is of the view that tenants deserve to know the reason for termination, including if the tenants are not meeting their obligations.
The advantage of the no cause termination is that it is easier than proving the breach by tenants. Breaches like damage to the property are easier to prove. Proving that a tenant has been acting in an anti-social way towards neighbours, however, can be difficult. Neighbours may fear retaliation and be reluctant to provide a formal complaint, for instance.
Extending notice periods
The second proposed change aims to extend the notice period for terminating periodic agreements from 42 days to 90 days. These are in circumstances where the landlord requires the property for the use of a family member, employee or if they wish to sell the property. For those wishing to sell the property, this would extend the settlement period by three months. Although this is not unusual in conveyancing practices, it is on the longer side. Especially if the property is being bought with the intention of being owner-occupied or if the vendor wants a quick settlement.
Can our MPs find the balance between security for tenants and landlords interests? Recent changes have tended to favour the interests of the tenant. It seems likely, given other policy changes we are seeing, that this will continue.
Overseas experience shows that longer-term tenancies can also be advantageous for landlords. Of course that presupposes the rental property is a true long term capital investment. We have faith in landlords recognising that the new environment and a focus on longer-term tenancies can have other advantages. For example, tenants could be more invested in looking after their rental property and fewer vacancies (with less associated cost) would be expected. If I was a landlord, that might be a new area on which to focus, albeit a longer-term contract might require other considerations in the tenancy agreement.
We wait to see what will transpire from the 2018 Discussion Document.