The ‘No-Cause’ termination of a tenancy. Is it already history?
So much has changed in the last few months. No one could have foreseen the impact that COVID-19 would have on the world. A fast response by our Government has certainly meant that we have not faced the same fate as many countries have with only a handful of New Zealand cases in comparison. However, the wider economic challenge has only just begun.
From a renting point of view, we have had to adapt to a raft of changes at very short notice. The level of disruption that the lockdown caused has been substantial and at a frustrating time. However, one must acknowledge that at the time, the changes were necessary to prevent the movement of people and keep tenants safe in their bubble.
The Government raced through a new piece of legislation known as Provisions relating to the outbreak of COVID-19 into the Residential Tenancies Act. This was introduced to protect tenants from upheaval and movement so they could remain in their bubbles without the fear of being evicted, even if they struggled with rent payments as their income and circumstances changed. Overall, the Government did as well as it could under extreme circumstances and at the time, nobody could foresee how bad the outbreak and crisis were going to be.
The legislation introduced two key points.
- The inability of landlords to give tenants notice to end the tenancy.
- The introduction of legislation that prevented landlords from increasing rents for a period of six months
The bill was passed and became law on the 26th of March and is in place for a minimum period of three months though the Government can extend this legislation for a maximum period of six months if necessary. Now that the immediate medical threat has subsided, the prospect of that happening looks highly unlikely.
Whilst all of this has been going on, the Government has controversially continued to progress the contentious Residential Tenancies Amendment Bill through Parliament even though most bills have been put on hold during the pandemic. This bill has been hotly debated with the main debate being focused on the removal of the 90-day no-cause termination.
Historically, landlords have been able to use this to give tenants notice without having to give them a reason. From a tenant’s point of view, this legislation is unfair. Tenant groups will argue that many tenants are scared of exercising their rights through fear of retribution from the landlord who will simply give notice if a tenant becomes too demanding.
From a landlord’s point of view, the current legislation gives landlords protection. If an anti-social tenant is problematic and causing disruption to the neighbourhood, using the 90-day no-cause is a safe and simple way of moving a ‘bad tenant’ on. The alternative is to go through the Tenancy Tribunal. The issue with this is that the amount of time it can take to get your day in the Tribunal can be months rather than weeks. Even then, there is no guarantee that you are going to get a desired outcome as you need to have sufficient evidence and that is not always going to be easy. Then, you still have to continue to manage the property and the tenant. That could be awkward and potentially even dangerous as emotions can get the better of people.
The proposed legislation changes will also mean a potential end to the fixed-term tenancy as you can only end a fixed term tenancy through mutual agreement. If the landlord does not want to renew the lease, then the tenant must agree or it will continue as a periodic tenancy. This could potentially play havoc with the student market.
I am speculating here, but I wondered why the Government was so determined to push this bill through, even though every other bill felt like it had been put on hold. Tenancy reform is important, nobody is denying this, but is it really essential in a period of crisis?
There is a possibility that the bill may pass before the end of the emergency legislation that is currently in place to protect tenants during the COVID-19 lockdown. As stated earlier, you can no longer give a tenant notice. If the amendment bill becomes law as the emergency legislation ends, then landlords will no longer be able to give tenants notice without a valid reason. Those reasons are as follows.
- The landlord reoccupies the premises. Period of notice, 63 days.
- The landlord acquires the premises for employees. Period of notice, 63 days.
- The landlord will put the premises on the market for sale within 90 days of the termination of the tenancy. Period of notice, 90 days.
- The property sells giving the purchaser vacant possession. Period of notice, 90 days.
- The premises undergo extensive alternations and refurbishment. Period of notice, 90 days.
This means that any potential problems that you face with your tenants will need to either be resolved through negotiation or you will have to take your chances with the Tenancy Tribunal. If the tenant is acting in an anti-social manner, you will need to have this documented in writing to the tenant three times over a period of 90 days.
Scotland has recently enacted an extremely similar legislation and early indication is that the issues that many landlords are fearful of are not eventuating however there are issues around student properties where the fixed term tenancy works really well. England and Wales are also looking to pass legislation that protects tenants in such a manner.
For this to work, what needs to happen is a fast, transparent, consistent and robust Tenancy Tribunal process so that bad tenants can be moved on quickly without fear or retribution. As ever, being a landlord is as much about managing people as it is about managing property and having an expert in your corner is invaluable. Most of the issues that arise are through a lack of knowledge and making decisions on emotion rather than fact. Whatever happens in the future, be aware that Tommy’s Property Management have the experts in their corner. Nobody trains more Property Managers nationwide than Real iQ and we have had a proud association with Tommy’s Property Management since its inception.