The pendulum of power swings in favour of the tenants
Never before in the short history of our property-owning democratic country has the tenant had so much power. Our current Government has done more for tenants rights than any in living memory. During the last three years of the Labour-led coalition, we have seen a gradual shift in the balance of power, so much so that we may see a new generation of renters that have no desire to own their own homes. This is not a complaint about what the Government has done, it is merely an observation. Once the pending Residential Tenancies Amendment Bill passes and becomes law, tenants will have unprecedented powers to exercise their rights without fear of retribution or retaliation from the landlord.
Now, more than ever, being a landlord is fraught with risk and potential litigation if you do not know what you are doing. Don’t get me wrong, I am all for the protection of tenant’s and I have long argued that every single New Zealand citizen should feel warm and safe in their home regardless of whether they own it or rent it. The ideology of the left seems to want to see the country head towards a German model of renting, where tenants have far greater security of tenure. The average length of a tenancy in New Zealand is just over two years. In Germany, the average length of a tenancy is 11 years whilst approximately half the population happily rent. Germany has rent control legislation and has successfully built enough property to meet demand and as such, has controlled both house prices along with rents.
Many experienced landlords are struggling with this. As the property market shows remarkable resilience post-COVID lockdown, many baby boomers may take the opportunity to sell rather than spend thousands of dollars to make their properties compliant with the Residential Tenancies Act and Healthy Homes regulations. In recent years we have seen the following changes that have impacted negatively on landlords.
- The passing of legislation removing letting fees.
- The passing of the Residential Tenancies Amendment Bill number two. This bill limits the liability of the tenant for accidental or careless damage though more importantly, it gave the Tenancy Tribunal power to refund rent to tenants who are renting unlawful residential premises.
- The removal of negative gearing. This has impacted greatly on smaller landlords who own one or two properties as they no longer have the ability to offset their losses against their own income.
- The passing of the Healthy Homes Guarantee Bill. This is gradually being implemented as landlords must ensure that their rental stock is complying with minimum standards set by the Government.
- The Residential Tenancies Amendment Bill is almost certainly going to become law, giving tenants a raft of tools to protect themselves and greater security of tenure. The removal of the no-cause termination is the most controversial of changes that are being implemented and is probably the single greatest shift in power from landlord to tenant. We will also see an increase in the number of alleged breaches by landlords that tenants can claim through the Tribunal.
Landlords are worrying that tenants will no longer have anything to fear. They will be able to make any number of demands on the landlord. The reality is that little has changed here other than the fear many tenants have had in terms of their security of tenure. Although many tenants groups will continually argue that they are victims, the reality is that they now have plenty going in their favour.
- If a tenant accidentally damages something, they are limited in their liability to a maximum of one excess claim on the insurance or four weeks rent (the equivalent of the maximum bond) whichever is less.
- A tenant does not pay for rates or insurance of the property.
- A tenant does not pay for maintenance on the property.
- The landlord has to maintain the property and if the tenant requests that something gets fixed, the landlord must fix it.
- If the landlord refuses to maintain the property, the tenant can exercise their rights through the Tribunal and seek damages. The landlord may even face work orders from the Tribunal that they must adhere to or face even further sanction.
- The landlord must provide a property that is warm, dry, safe and compliant.
- The tenant can request putting up fixtures and fittings and the landlord cannot deny this request unreasonably.
- And in the very near future, a landlord must have a valid reason to end a tenancy or go through the ordeal of having to remove a tenant through the Tribunal for an alleged serious breach of the Residential Tenancies Act.
- Tenants will also have name suppression on Tenancy Tribunal orders where they have been successful or proven to have done nothing wrong.
As I said earlier, this is not an article about whether these changes are right or wrong. What I do fear however is that many landlords are oblivious to the level of compliance they are required to achieve and risk that they face if they do not. Ignorance is not a viable excuse. There are no longer any shortcuts and there will be well-intentioned landlords who get burnt simply because they were unaware at the level of compliance that they must meet.
The role of being a landlord has never been more complex than it is now. You need to make sure that you have an expert in your corner, keeping you compliant whilst also ensuring that your tenant understands their rights and responsibilities.