A Whole New World For Landlords (And Tenants)
On 11 February 2021, the most significant changes to Residential Tenancies Act 1986 (“Act”) came into force. These are on top of the changes which took effect from 12 August 2020 and further changes will take effect from 11 August 2021. These changes have and will change the nature of the residential tenancy relationship between landlords and tenants. We have set out below a summary of the changes:
From 12 August 2020
- Landlords can only increase rent once every 12 months. This is a change from the previous position under the Act where landlords could change rent once every 180 days. But for fixed term tenancies, landlords can only increase the rent if the tenancy agreement expressly permits this. Tenants must be provided at least 60 days’ prior notice of increase of rental and the notice must state the date the increased rent is due.
- Transitional and Emergency Housing - Any accommodation provided for the purposes of transitional and emergency housing funded by the government or is in part of a special needs grants programme is exempt from the Act.
From 11 February 2021
- Landlords no longer have right to end a periodic tenancy for no reason. This is a significant change in that landlords previously had the right to terminate a tenancy without reason provided they gave 90 days’ notice. Landlords must now rely on other provisions contained in the Act and provide the correct form of notice and notice periods if they wish to end a periodic tenancy.
- Right to end tenancies limited and notice periods increased - Landlords can only end tenancies for the following reasons (by providing the applicable notice periods):
- 63 days’ notice is required to be provided to a tenant if:
- If a landlord or a member of their family is moving into the property within 90 days after termination date, for at least 90 days,
- If the property is normally used as an employee accommodation and is needed again for that purpose (this must be stated in the tenancy agreement),
- 90 days’ notice must be provided to a tenant if:
- If the landlord is putting the property on the market within 90 days after the termination date,
- If the property has been sold and the new buyer does not want any tenants,
- If there are any changes to the property (i.e., the property was bought for the use of nearby land for a business activity and is required to be vacant for that purpose (to be stated in the tenancy agreement)),
- If the property is being converted from residential to commercial use, for at least 90 days,
- If extensive renovations are to be carried out making it impractical for the tenant to live there,
- If the property is being demolished.
- Landlords can also apply to the Tenancy Tribunal to terminate a periodic tenancy if:
- they have issued three valid notices to a tenant for anti-social behavior in connection with the tenancy, within a 90-day period. They must apply to the Tribunal within 28 days after the third notice was given. Some examples of anti-social behavior may include harassment and intimidation, assault, noise nuisance or deliberate property damage; and
- if the tenant has been in rent arrears for at least five working days on three separate occasions, within any 90-day period. The landlord must have given the tenant written notice on each occasion and the landlord must make an application to the Tribunal within 28 days after the third notice was given.
- Fixed-term tenancies converting to periodic tenancies - Fixed term tenancies cannot be used to get around the restrictions to terminating a tenancy. This because all fixed-term tenancy agreements will automatically convert into period tenancy agreements unless:
- The landlord gives notice using the reasons listed in the Act for terminating a periodic tenancy, or
- The tenant gives notice (for any reason) at least 28 days before the end of the tenancy, or
- Both landlord and Tenant agree to extend, renew, or end the fix-term tenancy before it expires.
For fixed term tenancies entered into before 11 February 2021, if the term of the tenancy is less than 90 days, then at the end of this period the tenancy will end, and the tenant must vacate the property by the date. If the fixed term is longer than 90 days, then at the end of the fixed term, the tenancy will automatically convert into a periodic tenancy. If either the tenant or landlord does not want the fixed term to convert into a periodic tenancy, they will need to provide at least 21 days’ notice.
- Tenants’ right to terminate periodic tenancies - the notice period for tenants to terminate a periodic tenancy has now increased from 21 days to 28 days. Tenants may issue this notice to their landlord for any reason, and do not need to provide a reason to the landlord.
- Tenants right to make minor changes - Tenants can now also ask their landlords to approve minor changes to the property and landlords must not decline the proposal if the change is minor. Landlords can set reasonable conditions on the tenant’s request but must make a decision within 21 days of the request. “Minor change” is defined to include any fixture, renovation, alteration, or addition to the property that has low risk of damage to the property, which can be easily reversed, does not pose a risk to health and safety, and does not compromise the structural integrity, weathertightness or character of the property.
A lot has been said in the media about the fact that this gives tenants make changes such as paint the walls a colour that is quite different to the existing colour. Firstly, this might not be considered a minor change given the current colour of the walls. Secondly, the landlord has a right to impose reasonable conditions – e.g., a requirement to use a professional painter, to repaint the wall in their original colour at the end of the tenancy, and the bond could be used if there is a failure to comply. We urge landlords and tenants to come to a compromise so that a fair and reasonable outcome can be reached between themselves.
- No rental bidding - Rental properties cannot be advertised without a rental price listed, and landlords cannot invite or encourage tenants to bid on the rental. Every advertisement must have a clear price of rent listed on it; but this does not stop a potential tenant on making a higher rental offer than what is advertised as long as the landlord does not request the higher price.
- Assignment of Tenancy - Landlords must now consider all requests from its tenants to assign their tenancy and must not decline unreasonably. Previously, tenancy agreements either prohibited assignment altogether, or stated that they will be considered on a case-by-case basis. Landlords can however include reasonable conditions when giving consent for assignment. This does not apply to any tenancies granted before 11 February 2021, if the tenancy agreement prohibits assignment. Landlords may recover reasonable expenses occurred during the assignment process but must first provide the tenant with an invoice containing a breakdown of the costs.
- Installation of Fibre - Tenants can now request in writing to their landlords to install fibre broadband, and their landlords must agree to do so if it can be installed at no cost to them. This is unless installation would compromise the structural integrity, weathertightness or character of the property, installation would breach any regulations, the landlord intends to being or take material steps towards extensive renovations or repairs within 90 days of the tenant’s request and installation would affect those works, or the landlord applies to the Tenancy Tribunal and it decides they do not have to install fibre. Landlords have 21 days to respond to the tenant’s request for fibre installation.
- Landlords to retain information - If a landlord does not provide a signed tenancy agreement in writing to a tenant, they will be committing an unlawful act and an infringement offence. Landlords must keep the following documents during the term of the tenancy and for 12 months after the end of the tenancy:
- Any variations to the tenancy agreement, reports of inspections carried out by or for the landlord during the tenancy, records of any building work for which building consent is required, prescribed electrical work, sanitary plumbing, gas fitting or other maintenance or repair work carried out by or for the landlord during the tenancy, any reports or assessments by a tradesperson of work that is carried out or required in relation to the landlord’s compliance of section 45 of the Act (such as cleanliness, repair, smoke alarms, healthy home standards, buildings, health and safety, water supply), specific records relating to the landlord’s compliance of healthy homes standards, any advertisement before the start of the tenancy and any notices and correspondence between the landlord and tenant or prospective tenant in relation to the tenancy.
- Enforcement measures - MBIE as the tenancy regulators will now be able to use four new enforcement measures. These are:
- Enforcement undertakings – a binding agreement between MBIE and the landlord or tenant as to how the landlord or tenant will rectify the breach, payment of any monies owed, remedying any harm caused or take action to prevent the breach from reoccurring.
- Improvement notices – a notice issued by MBIE for a breach, or likely breach of the Act or tenancy agreement. Failing to comply is an unlawful act and may result in a penalty. The notice may include non-binding recommendations and failing to meet those recommendations will not be considered an unlawful act.
- Infringement notices – a notice issued by MBIE to a landlord that has committed an offence. This notice will include what, when and how payment will need to be made.
- Pecuniary penalties – if a landlord of six or more tenancies or a boarding house has intentionally failed to meet their obligations in relation to key provisions of the Act, the MBIE can seek pecuniary penalties up to $50,000 for cleanliness, maintenance, provision of smoke alarms, ensuring the premises of the tenancy comply with healthy home standards or other building, health, and safety regulations, terminating a tenancy without grounds, or issuing a retaliatory notice.
- Tenancy Tribunal Awards quantum increased - The Tenancy Tribunal will now be able to hear claims from landlords and tenants up to the value of $100,000 and make awards up to $100,000. This has changed from the previous $50,000 threshold.
From 11 August 2021 – further changes to the Act
- Family Violence - Tenants experiencing family violence will be able to terminate a tenancy without any financial penalty imposed on them. Family violence is defined under the Family Violence Act 2018 as physical abuse, sexual abuse, or psychological abuse between persons in a family relationship. More details will follow closer to the time, but tenant’s will have the right to leave a tenancy quickly by providing their landlord with a family violence withdrawal notice.
- Physical Assault - A landlord will be able to issue a 14-day notice to their tenant terminating the tenancy if the tenant has assaulted the landlord, the owner or a member of their family, or the landlord’s agent, and the Police have laid a charge against the tenant in respect of the assault.
The long list of changes to the Act have the potential to radically change the way landlords, tenants and property managers manage their relationships. If you are a landlord, tenant or potential tenant seeking to enter into a residential tenancy and would like further information on your rights and obligations, please contact one of our Property Experts.
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