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David Hargreaves has not changed his view that the Government got things the wrong way around with its changes to the Residential Tenancies Act

David Hargreaves has not changed his view that the Government got things the wrong way around with its changes to the Residential Tenancies Act

Well, the Government has gone ahead with its proposed changes to residential tenancy rules and the expectation is most of these will come into force in six months time.

So, we will find out what happens.

This is a useful summary of the changes.

I've opined on the subject before and my views have not basically changed. I thought and still think that the Government got its emphasis the wrong way around. I think promoting fixed term rentals in the legislation - rather than open-ended ones as it has done - would have been more advisable.

I thought the timeframe for getting the amended legislation through was in any case tight, and it became ridiculously so after the intervention of Covid-19 and the lockdown.

Rushed legislation often comes with a price and I suspect this legislation may yet do so, but clearly this was one of those philosophical 'statements' Labour wanted to make so it pushed ahead regardless and got the legislation through before this Parliamentary term ended.

I've included in the text of this article, directly below, the key points of the legislation as highlighted on the Ministry of Housing and Urban Development's website

Clearly the 'biggie' in the legislation is the removal of the ability of landlords to end a 'periodic' tenancy without a reason, along with the fact that it will now be an automatic process (unless the tenant decides to quit) for a fixed term rental to become a 'periodic' - in other words open-ended - rental agreement.

Things were certainly not ideal in this country in terms of the rental market.

As someone who has rented accommodation a lot (I do now), I have found the prospect of a landlord turfing me out simply because they have a change of mood about their property, well, annoying. It's not ideal.

Something better was needed.

What the Government has done is tilt the playing field far too much in the direction of the tenants, however.

The Government seems to forget that no private individual HAS to provide rental property. They do it for a return. Make anything too difficult and people may just stop doing it - IE renting out property.

The no-reason termination rule did allow landlords the opportunity to move on difficult tenants without having to get involved in unpleasantness.

The new rules requiring landlords to issue three written warnings within a 90 day period before going to the Tenancy Tribunal to get tenants removed for anti-social behaviour are in no way practical. I would doubt whether ONE landlord will even bother trying it.

Resorting to alternatives

In reality, what will likely happen is that if landlords are confronted with tenants displaying ongoing anti-social behaviour the landlords will resort either to selling the property or to say they are going to extensively refurbish the property, thus requiring it to be vacated.

Whatever the course of action though there will be time and cost elements involved.

The other thing to bear in mind about anti-social tenants that landlords might not be easily able to move on is that depending where they are - say it's an apartment building - their anti-social behaviour could result in tenants, good tenants of other apartments moving out. I can tell you I did just that with an apartment I was renting in Auckland several years ago when I had the tenant from hell move in next door (complete with sometime live in girlfriend who would tell him at volume at 2am what she thought of him).

So, potentially one landlord's difficulty in getting rid of an unruly tenant could flow on to effect other landlords, depending on the circumstances.

Undoubtedly the new rules have the potential to increase the administration involved for a landlord and maybe the costs to them. The knee-jerk reaction of landlords may well be to say "rents will go up". Of course, ultimately the market forces would decide whether rentals CAN be increased. If not it's possible some landlords might consider selling if its all too much hassle. 

It is interesting to note what the Ministry of Housing and Urban Development said about costs in its impact statement for the legislation. Here it is verbatim:

Okay, so summing that all up, department officials have identified the possibility of increased costs to landlords, increased costs to tenants AND increased costs to the Government. 

Well, let's hope they are wrong.

These changes will not make the slightest difference for well-heeled tenants that can bring good references with them. The 'normal' situation now is that an occupancy might start with a fixed-term period and then move to a periodical rental. In essence the fixed term can prove to be a trial and then the landlord will happily let that lapse to a periodic tenancy once they see they've got a good tenant. That will all carry on as before.

Where I believe we might see a difference is in tenants that might be seen as more 'marginal', which is harsh to say it, but possibly people on lower incomes, maybe solo parents and so on.

Landlords might now be less prepared to take a 'risk' with any tenants if they feel they could struggle to get rid of them.

Ironically then this legislation - potentially - could have a negative impact on the very people I imagine it is most aimed at helping.

Driven into social housing

I think it's possible we could see some lower income rentals simply removed from the market and the result potentially could be that more people are driven into social housing. 

To go back to the origins of these proposed changes it was clear that the Government first came at these changes with an idea of getting rid of fixed tenancies and replacing them with open-ended tenancies. Period. That was the philosophical standpoint.

However, in the consultation process they got very substantial pushback towards that.

So, they've retained fixed tenancies but have designed the new rules to push as many tenancies as possible into open-ended territory.

Personally, I still think they've got this the wrong way around.

I would like to see a situation where it is more accepted that after tenants have proven themselves to be good ones they get the opportunity to sign up for long rental terms. There's nothing to stop landlords doing that now anyway, I guess, but I don't think this new legislation will encourage such an approach at all.

Unintended consequences?

I still say that rather than trying to get a situation in which the dices are all loaded in favour of the tenants - as they are with the way open-ended rentals will now operate - the better move would have been to encourage agree long term rentals in which BOTH sides are committed.

Anyway, the legislation is now in place and we will see if it works as intended. 

I fear not. And as I say, I fear it will be those that Labour probably most intended to protect that may be the most vulnerable - and that could have ramifications for the state.

I hope the legislation will be monitored closely for any unintended consequences so that changes can be made if need be.

With such hastily introduced legislation the need for scrap and rework always becomes more likely.

They should have waited and considered.

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160 Comments

17
up

I think that there will be an increase in the number of people who rent out their places who do not lodge bonds with the tenancy services. And who are extremely careful about who their tenants are even to the extent that their places are vacant for long periods of time.
I can also see that lots of this will be repealed very soon!
This is undesirable state intervention just like the shower nozzle/ no incandescent light bulb proposals were with Helen Clark.
Oh, and if you can't increase the rent more frequently than once a year, will there be no allowance for it to be reduced more frequently than once a year as well? AKA Wuhan virus associated job losses. Somehow I doubt that. If so, this is horrendously unsymmetrical.

32
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This country has a ruling landlord class. It's about time some of the balance is redressed.

16
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dcnbwz
Clearly you are a renter and never experienced being a landlord to see the other side of the situation.
Passing control of an asset worth over $700,000 with considerable risks for hopefully the $450 per week rent (less expenses and maintenance) being paid is not being in a position of power.
Plenty of instances of tenants giving the two finger salute, creating a bit of mayhem and damage, leaving piles of garbage, and either disappearing or unable to pay the outstanding considerable amount of rent due.

21
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Yea but it must be worth the risk if it's such a popular investment option, right?

YDAB
. . . and clearly a very, very popular choice for many of this site to choose to be a renter . . . and there is the opportunity to be a landlord if they do aspire to be. :)

Bottom line; there is lots of risks and work in being a landlord, and lots of have done well but equally some have faced issues and problems. With gross yields currently less than 5% and downside risks to future property price it is not surprising RBNZ monthly figures show investor activity at a low.

And those yields are propped up via social welfare subsidies, to boot. Indeed it is tough being a property investor in an environment of much central government and bank support.

Dp

I haven't clicked yet what Dp means. Don't Panic?

Rob
Dp = duplicated.
Currently away from home, motel internet connection not 100% and in error comment posted twice.

OH! Thanks
I hope your motel is on the right side of the lockdown checkpoints for you.

14
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...and you realise that for many people, $450 p/w is the bulk of their income, right?
As in, most of the hours they work are for *your* benefit as a landlord?
And they can't just 'get off their butts and buy their own house" because of that?

That's what they invented "social housing" for. it's a shame so many commentators here seem to think it is an obligation of commercial LLs to provide cheap housing. If these commentators are so keen on that idea.. go get a loan -buy a house and provide it at cost to renters.. maybe 300/wk

Brisket
Gross yields around 4.5% (net <3%) plus work and risk they are providing accommodation for a pretty meagre return.
150,000 got off their butts in last three years and became FHB

Which only reinforces that most are in it for the capital gains, ie our housing market has been inflated by speculation! It is indeed a bad investment at those yields, with those risks.

Brisket
Agreed. Yields for work and risk are not great and medium term the outlook for capital gains is currently not assured. It is probably because of this RBNZ data shows that investor activity is currently down. It wouldn’t surprise me to see some investors currently exiting - and if not simply because of lack of secure worthwhile alternatives.
However, talk to experienced long term investors and you will find that they buy on cash flow and yield as the important factors; capital gains are seen as a bonus, are not realised until the property is sold - which could be 10 years down the track - and with that time frame by no means certain (but on past experience, likely). When one sells, especially if there are pressing reasons for doing so, there is no guarantee that the market isn’t on a downer. To most serious investors, it is rubbish to say either that house prices always go up, or prices double every 10 years.
Most investors over the past 30 years have done pretty well, but the old adage is that the past is no guarantee for the future.
Two of our four sons have an investment property each. Like most investors, first step was homeownership, and then leveraging to buy investment properties. (Note: All four are home owners but bank of mum and dad was not a factor for any of the four.)

It's only worth that much because boomers are lazy investors and dumped all of their money into the property market.
It's an imbalanced market that needs correction.

And how do you propose rebalancing? Let people stay rent free maybe? Have all LLs limited to one rental so all the poor unwashed FHBs can buy? You talk a lot of BS here usually.

YDB
No - RBNZ monthly mortgage data shows that investor activity is currently at a low.
FHB activity is currently on a high - taking advantage of cheap money at the expense of boomers poor TD rates??????

Boomers again subsidizing the rest of NZ

Hi YDAFOI

I have strong feelings about 'landlords' who compete for properties against young first-time buyers, thus forcing the price up and turning would-be home owners into tenants. Happened massively over the past decade. If you want to be a landlord, build the house. However, as to 'lazy investors', most of the 'landlords' I know are aged between 30ish to early 60s, and so very few qualify as Boomers. I think a lot of Boomers cashed in a while back when the going was good -- depreciation, being able to offset other income, no bright line, and not as much stigma as there is today.

15
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Bollocks , there is no ruling landlord "class" in New Zealand ............its a figment of your imagination

More an aspiring new landed aristocracy, not keen at all for the affordability that was extended to them by previous generations being handed on to next generations.

I am a landlord but yes i agree , we are just 5% of the population but hold incredible power over others . Some of us use that power wisely and fairly but plenty don't .
I really can't see the new regulations being a problems most landlords will have always let to the people they consider to be the best tenants .

27
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Uninterested,

I have been a landlord for the past 20 years and have never considered raising rent more than once a year. To do so, is my opinion, sheer greed. if these regulations move the dial too far in favour of tenants as the article suggests, then that is the result of many years of the balance being heavilyin favour of landlords.
There are still far too many grossly substandard rental properties in this country and if landlords can't or more likely won't get them up to a decent dtandard, then the sooner they are forced out of the market the better.

Linklater
Agree with you. When I was a landlord, I always kept rents below market to attract quality tenants, kept increases to a year at most, and worked with tenants when they had a problem. The later two to keep good tenants - accountants will tell you budget for 48 weeks per year but by being reasonable one didn’t have that four weeks vacant - had one tenant for 14 years and another 9 when I sold.

Uninterested, not lodging a bond is not the same as not having a tenancy agreement. Not lodging a bond would not give the landlord any advantage at all, quite the opposite, not lodging the bond is very much frowned upon by the Tenancy Services and landlords who do not lodge bonds face severe penalties of > $1'000

The fact you somehow relate it to a previous long gone administration doesn't really help your argument. Particularly when low volume shower heads in Auckland would be a real boon atm.

Yes, the irony regarding the shower comment was not lost on me either.

Ok. Sure. Climate change eh.
No I don't think so. Watercare's incompetence coupled with the Mayor and Councillors inexperience showing up in not asking the hard questions. Plus who is to say a quick blast of a shower plus no water during the lathering phase cannot use a low amount of water.

There are limits to how many people Auckland can support in terms of water. Even when drawing on the Waikato river.

It may be the next modifications that will be needed on houses will be water tanks to help shore up the security of limited supply in the face of overly large population influx.

I did this 10 yrs ago. Independent thinking.
I can wash my car whenever I want, plus I pay very little to Phil Goff plus that highly paid dude for my water.
My tank is 100% full at the moment.

14
up

Looks like the rents are going up...again! More risk carries more cost!
Rents will go to their highest point before the changes come into effect to offset the longer period without rent increases and more risk. Tenants will be even more under the microscope when applying for a Rental. Property Managers/Landlords will be cautious of who they put into properties. As if it wasn't hard enough already with the current shortages. Unintended consequences indeed!

32
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Doubt it. Rents are set by the market, not by landlords' costs. If landlords could charge more, they already would be. Perhaps landlords can be more selective about who they rent to, but I'd wager there are more than a few landlords out there right now who are just happy to get tenants in and keep the money flowing in.

Any rent that is not at "market" will go up to market or slightly above(if someone is prepared to pay) to account for no rises over a longer period and extra risk.

Any price someone is prepared to pay is the market rate at that point in time. You're more likely to see less interest in rental properties as a result of this change than increase rents. If you were happy with a 3% gross yield on an $750k rental you knew you could rent out at $450 p/w before these changes, maybe after these changes you'd want 3.5% to compensate you for your perceived additional risk, so you'd only bid to up to $670k for example.

Far to rational thinking. Markets aren't rational.

11
up

What..... yield and risk effecting price paid, shock horror. Tui.

That is the problem in a nutshell. To one sided, to long, and everyone chasing their free gains. Its an gigantic circular mess. Recent Govts have been afraid to take on bank profits exploiting the basic need of shelter. Shame.

You only think it's a shame because you aren't part of it.

Or surely because you realise society is about more than just yourself, and more than just right now.

Rents are set by the market, not by landlords' costs.

Correct. The greater the proportion spent on housing costs, the less spent into the consumer economy, which means less revenue, profits, and incomes. This feeds into the equlibrium and constrains housing costs.

"Rents are set by the market, not by landlords' costs"

The market is not one-sided. Market price is driven by supply and demand.

On the supply side, if a single landlord's costs increase then they can try to put up their rent, but they'll be priced above the market and at greater risk of vacancies.
But if *all* landlord's costs increase and they all put up their rents, then the whole market will shift and a new higher market price will be found.

On the demand side, some people won't able to afford the higher rents and so they'll drop out of the market. But other people *can* afford higher rents - they just won't pay them unless they have to. The people that can pay more will pay more if that's what it takes to secure the level of rental that they want. And so a new market equilibrium is reached.

The interesting thing about this legislation is that landlords costs aren't increasing, but their perception of risk is. Increasing your rents is not the only mitigation to higher risk - a landlord can also be more selective with their tenants without increasing rents, for example. So this will come down to landlords personal risk tolerance as well as their ability to mitigate and compete on price.

In other words, landlords' costs absolutely do contribute to setting the market price.
Strange that some find that hard to grasp.

Cool, care to explain to me how my last landlord worked out how much to charge me for the house she bought in 1983 for $80,000?

She charged the amount of rent that the market was willing and able to pay, of course.

Strange that some find that hard to grasp.

Strange indeed.

Maybe you would prefer she supplied a roof for you at prices set 37 years ago? And then went broke, sold and now you have no roof?? I can see how that's a great idea

My argument was that landlords costs have no bearing on the rent they charge, my old landlord being one example. If costs drove rents, my rent would have been about $60 p/w. You might've picked up on that if you'd taken the time to properly read my comment before angrily bashing out your comment, but I'm glad to see you agree that landlords are price takers, not price makers.

15
up

Unintended consequences is Labour’s modus operandi it seems. Decisions made that err towards ideology rather than practicality.

13
up

Landlords might now be less prepared to take a 'risk' with any tenants if they feel they could struggle to get rid of them.

100% this is going to happen. Marginal applicants will definitely not be given the benefit of the doubt any more, and will find it exceedingly difficult to find a rental. Any of the following - Young, part time employed, single parent, no references, flat share, pets, low income, rough around the edges etc. Any single one of these things.

Could create a two-tier rental market - one for sought-after ideal tenants (easy to find a place, possibly cheaper rent to attract them), and the rest (very difficult to find a place and will likely need to pay a premium if they do).

https://thespinoff.co.nz/society/06-08-2020/important-message-from-a-lan...

A great article for all the chicken-little's out there....

As if that guy has ever rented to marginal tenants LOL. All his projects are in Grey Lynn and Mt Eden. Hardly Otara or Flaxmere. Sure young, single, white urban professionals wanting to live in inner Auckland who can afford $500 a week for a one bedroom apartment are not likely to be affected, nor are their landlords. What about the unemployed, Maori, single mother with 6 kids?

Are you for real? His latest project is in Mount Albert and who is to say that his landlord days are strictly associated with his property development business.

And your point is? Last I looked Mount Albert is an inner Auckland suburb, predominantly white, few Maori & Pacific Islanders, with over 40% of the population being University educated.

Yeah that's the thing, families rent somewhere start a family, start in a job or their own business, kids at a local school. All is going well. Suddenly the landlord decides to cash in his/her asset. Devastation and distruption for the renters. Why was the landlord involved in providing rental housing while knowing full well they were going to sell causing this disruption. It's all about capital gain and having someone else pay the way. I have always thought that if you want to be a housing provider you should be thinking very long term rental income as a business model. Buying family homes for capital gain is not doing anything for NZ economy.

This legislation won’t change that - selling the house is still a reason to serve notice. The Property Investors Association opposed this legislation but has instead proposed a new tenancy type for very long term tenure.

I am that landlord Hans. I got into it with a long term view, bought houses that I personally did not want to live in but tenants were happy with. It wasn't about capital gain, it was always about retirement income (I am not in Kiwisaver). I kept the rents below market because I had good tenants (still under 400 a week in fact for three bedder in a small city). Now look at what has been happening to the laws, regulations and insurance costs around land-lording over the last three years and imagine what is still to come from the febrile minds of our great leaders (who have mostly never lived in the real world). Now ask yourself, why would you want to tie up that much capital in an industry as popular and well supported as that when you can make more money by plopping it into shares? You're right! you wouldn't. So up for sale they go and evicted go the tenants. Everybody loses (Thanks unintended consequences of poorly thought out legislation)

14
up

It may be a feature of the Wellington market specifically, but most rentals run on fixed term tenancies from (roughly) Feb to Feb. Renters are forced to compete with the market annually to retain their home, right at the moment when the market is running hot with incoming students and young professionals.
Encouraging the use of periodic tenancies and ending bidding wars are welcome changes, I think.

In the past when I rented in Wellington I found it easy to shift to periodic tenancy at the end of the initial 12 month fixed period. So I think the quality, price-point, and perceived risk of the tenancy makes a difference there.

10
up

It might work like this.

As a landlord, if I have a good property, I will now be extremely vigilant in my screening process, to make sure I don't get one of that 5%? who will trash a property?

The best screening process is to have a property that will attract that type of tenant I want. This will make those landlords that want to be in the good landlord/good tenant end of the market seek out each other. And one of the most attractive reasons for a tenant to rent from me, besides the quality of the rental, are rental/lease terms that ensure they won't be affected just because the landlord changes their mind. This puts it more on the footing of a commercial lease. Irrespective of the new legislation, there are many landlords starting to do this anyway, and it is working great for both landlords and tenants.

This does not stop a sliding scale of ratbag landlords and ratbag tenants from doing business but the risk will be matched, so if a tenant is a high risk, then the quality of property they will be offered is lower and maybe the rent higher. And if the landlord's property is of poor quality, then they will find they can only rent to matching tenants.

And for those that feel this legislation is not for them, then they can sell at a price to a more commercially minded landlord who will knowingly take on the risk of the new legislation, or will buy at a price that allows them to refurbish the property so to target the good tenant.

I own commercial property and so have dealt with commercial leases for over 20 years. This legislation is nothing like the commercial arena.

As an example, when a lease ends, the tenant can't just automatically stay on, on a periodic tenancy (which is monthly by default) for as long as they want. They can stay on a month to month basis if the landlord agrees, or a new lease signed if both parties agree. But of course if they just go on a month to month arrangement, then they can be given one months' notice to vacate.

Also, a question for you: Are your desirable rental properties in less desirable suburbs? Or only upmarket ones?

Your point is correct re commercial leases, but the point I was trying to make was, as long as the tenant sticks to their side of the agreement, then the termination date is not affected by say the landlord saying they want to use the property for their own use. And the commercial tenant also has security under their lease even when you decide to sell, in fact, it may well be the security of term and quality of the commercial tenant, is the reason the purchaser wanted to purchase that property.

There has been many a good tenant that has broken promises of tenancy renewal etc. just because the landlord 'changed their mind.'

This new legislation is bad but not as bad as continuing with the previous law. What would have been better is to fix the building code.

Sorry, forgot your last question. Properties vary between renovated older properties for lower-income to median-priced townhouses and apartments. All properties are super energy efficient and power is included in rent.

As usual the feelz driven policy initiatives beloved of the left will fail in the real-world and produce worse outcomes. You need to think about and understand all the consequences deeply before you attempt to alter a complex system involving humans, and even then you will mostly fail.

"I think it's possible we could see some lower income rentals simply removed from the market and the result potentially could be that more people are driven into social housing. "

This is already happening based on the recent data.

The govt is pouring into state houses, and very proud of themselves, but they can't keep up with the flood of need they have created.

Would have thought the government would have solved the social state housing supply first before bringing in the changes

"They can't keep up with the flood of need they have created."

This statement is either dishonest or moronic. Unless you are referring to the government in general, i.e. the past few decades.

This deeply flawed legislation impinges on contract Law by effectively determining the contract conditions and not allowing willing buyers & sellers to determine the conditions on which they want to do business.

10
up

You could say this pretty much about any piece of regulatory legislation. The previous rules did the same thing. Much of the the consumer guarantees act does this as well as most employment law.

17
up

A tricky situation,
- it's fair and right that good tenants (the vast majority) deserve security of tenure and should not have to worry about being asked to move out
- it's fair and right that good landlords (the vast majority) deserve to be able to evict the few bad tenants quickly and without lengthy hearings

Hear hear!

Well said. Finding the balance is the hard part.

Never been so glad my rental is leased to Housing NZ. As soon as it comes off lease, it's going on the market. I want none of this carry on!

Most commentators have focused on the inability to terminate a periodic tenancy, but the bigger problem is the inability to decline to renew a fixed term tenancy. Most tenancies start off as 6 or 12 month fixed term leases rather than periodic ones, and if the tenant turns out to be rubbish, the landlord simply declines to roll over the lease, making a 90 day notice irrelevant. Its only if the tenant stays on beyond the original lease term, and the lease rolls over to periodic, does the 90 day notice come into play. For the vast majority of bad tenants, they will have been given the boot already. So the claim that not being able to terminate a tenancy will only affect 3% of tenants is not true. Far more would have been evicted at the end of the fixed lease, something which cannot be done now. How long are landlords going to put up with bad tenants before they decide to sell the property? (which is their only option now).

As I understand the legislation, a LL can still give 90 days notice before the end of a fixed term, to end the tenancy at the end of that fixed term.

Edit: Apologies - I see it still requires one of the reasons of ending a periodic tenancy

So if I own a house and decide to take a 6 months or 1 year sabbatical trip overseas, and rent my house out for that time, the fixed term tenancy reverts to a periodic tenancy after said time, is it correct to assume that I cannot ask the tenant to leave my house so I can return living in it?

Can you not give notice 90 days (or whatever the required notice is) before the end of the fixed term tenancy that you intend to move back in so the place must be vacated?
Though if a LL rents a place without being clear to a tenant that they intend the lease to only be 1 year and then it will end due to taking a trip overseas or whatever the reason, then I have no sympathy for that LL if they run into trouble trying to move back in. Be open and honest and don't deceive renters.

If you are moving back in, you can issue a 63 day notice. You have to move in within 90 days of the tenant moving out, and live there for at least 3 months. The house must also be in your personal name, not that of a trust or company, as the Tenancy Tribunal does not recognise that a trust or company can "move in" to a property.

Thanks KW

This is a poor piece of law. When my current tenants, who are very happy at the moment paying below market rent, leave I may well sell up. I would be most wary of getting bad tenants who are impossible to get rid of.

15
up

I mean, there's a large amount of FHBs who would simply say "good".

And without more housing being built, that's another Tenant/family on the street. Can't keep the same poor level of housing circulating between tenants and FHB's. Gotta be building more homes to add to the pool of homes for FHB's and tenants whether by choice or other. Kiwibuild will sort it out....um.. Fail!

And they would be correct (except for the families currently renting the house they are about to buy... this will create greater need in the rental marketplace and solves nothing)

I don't really buy the argument that houses moving from being rentals to owner occupied ends up creating greater need in the rental market. In my experience the kind of house people occupy has more to do with stage of life than anything else. The people who I knew who bought houses in their 29s rented out rooms - same number of people lived in that house as would have had if none of them owned it. The people I know renting in their 30s with kids rented three bedroom houses and then bought 3 bedroom houses. I know that the claim is that rental houses tend to have more occupants, but I think the explanation for that is just that renters tend to be younger.

al123 I hear you and I have no hard facts to say otherwise... just that in my situation, as I look to divest my trusts of the rental houses they currently operate, it will be late parenthood/early retirees in the low socio-economic and ethnically favoured group that will be getting evicted. That these houses will go on to sell to FHB's is almost a certainty with this government and its policies looking 100% to perform another term (I cannot bring myself to use the term 'serve') That is some newfound homelessness about to happen right there.

As a renter, I am pleased that I will no longer have to sign yearly fixed term leases. Say I decide I've had enough of renting and I'd like to purchase a house - currently, if I've got 6 months left on my fixed term, the landlord is well within their rights to deny me subletting or breaking the term early. So what do I do? I can't afford rent and a mortgage, and the tiny window of opportunity to find a house when I've declined to renew a lease at the end of the fixed term puts me in a very tight situation - either find a home to buy (and be the successful bidder hahayeahright) or look for another rental or awkwardly beg my landlord to let me stay on? Moving to a period tenancy automatically stops landlords from timing the market and gives a tenant more flexibility. There is still a shortage of housing, don't worry LL, you'll be able to find someone else to move in no problem.

I do have empathy for LL's with the no cause termination thing though. I believe a LL, giving the correct amount of notice, shouldn't need to give a reason to a tenant to vacate. If the relationship between the LL and tenant is a good one, I'm sure the LL would discuss the reason with the tenant. I feel for landlords who now have to deal with anti-social tenants, however this puts the responsibility back on them to get references and ensure the tenants they take on are responsible and courteous.

Say I decide I've had enough of renting and I'd like to purchase a house - currently, if I've got 6 months left on my fixed term, the landlord is well within their rights to deny me subletting or breaking the term early.

Most landlords will be amenable to transferring the remainder of the lease to another tenant, but will require that you do the work to find a tenant that they approve of.

That's not true in my experience, or the experience of my friends. Landlords far prefer to collect rent on an empty house, and are very reluctant to rent out of cycle when they can't capitalize on competition (as they can in Jan/Feb).

My experience is the opposite :shrug:

Question; if a landlord wants or needs to sell a tenanted house, will it from now on mean that the tenants come with the house, i.e. the house cannot be bought by an owner-occupier like a FHB?

Looks like another 90 day reason - "The property has been sold with a requirement by the owner for vacant possession."
90 days won't be appealing to owner occupier buyers though. Would suggest LLs give 90 day's notice that they intend to sell in that situation.

I think notice can be served under the Act is the owner wants to sell the house, renovate it, move in etc. Been a while since I looked.

Isn't that already the case now if the tenancy is fixed term? And under the new rules, you can still end a periodic tenancy for a reason one of which (if memory serves) is change of use, which I guess would be covered by selling. So I don't think this makes any difference for landlords wanting to sell.

If selling the house and giving vacant possession to the buyer, the notice period used to be 42 days. Now its 90 days. Unless the buyer wants to take the tenant on at settlement, after which they can then give a 63 day notice as the new owner.

Is that true even if the tenancy is fixed term, though? I thought that only applied to periodic tenancies.

They cannot do this for a fixed term tenancy to change the end date of the fixed lease.

It's simple, if you own a rental and the occupiers want to stay then you sell the property as a rental.

My recommendation would be to hand rentals over to a professional property manager. I was involved in this recently and was really quite surprised at how unpleasant they could make a tenants life. Started serving notices, accessing the property, issuing demands etc. The tenant had become abusive and stopped paying rent, it all improved very, very quickly. Top tip, if you are renting to a group of flatmates, make sure all their names are on the lease. If one of them leaves it is (or was) an opportunity to terminate the entire tenancy.

I've got mediation on Thursday with 2 tenants on the agreement and 1 having left the house early, (also rent arrears and use of "P")

Seriously? Get an agent, it's really not worth the inconvenience to deal with it yourself.

Thanks for the advice, it's not my first rodeo though

I used to do the hands on thing but eventually capitulated when my time became worth more than the money I was saving.

There could be an evening out of the market,good landlords with good,legal compliant rental properties will seek quality tenants,perhaps offering competitive rents to keep these tenants.
Dodgy landlords renting out non compliant rot boxes will be left with the not so great tenants...almost kharma that they would end up with each other...the fortnightly mortgage payments will make sure rentals don't remain empty for long.

What about the single mum with three kids, a dog and a part time job that can’t secure a place as a result of these changes? Karma?

Higher risk from a landlord’s perspective, but she may well have been given the benefit of the doubt previously because a 90 day notice could be issued if things don’t work out.

Unfortunately it sounds like she won't be able to afford the rent anyway,as it appears all landlords are putting up their rents asap apparently.

DD makes a very good point, without the safety net of being able to remove someone, only blue chip tenants will be able to access quality rentals.

Is it likely that a tenant like that was given the benefit of the doubt anyway? Put it this way: how many landlords were choosing a tenant like that over a DINK couple before the law change? Not many I would bet.

I have done in the past. Keep in mind that if I don’t give them the benefit of the doubt and instead wait out for “safe” tenants, I lose $550 - $600 per week. No way any sensible landlord will take that chance now. Quality properties can secure safe tenants if you’re prepared to incur the cost of waiting as long as it takes, perhaps even reducing rent slightly if really struggling to get top notch tenants.

Where was Winnie in all of this, the self proclaimed handbrake on Labour and the Greens. Oh yes I forgot, enjoying the baubles of office. Perhaps he is a broad brush lawyer. Winnie realised the need to change the Residential Tenancies Act but forgot to read the Bill. The devil is in the detail.

He was at dinner with the commercial fishing lobby. Talking about 'funding problems' NZ First faces.

All they need to do is remove the clause that automatically rolls fixed term agreements over to periodic tenancy unless both parties agree. The result would be almost all end up on fixed term, giving certainty to both tenants and landlords. Problem solved, but that would be too sensible.

I disagree, I think that clause should stay but be amended so that a landlord can terminate the tenancy by giving notice and without a reason, so that the tenancy ends on the end date of the fixed term, before it rolls onto the periodic tenancy.
Recurring fixed terms allow landlords to deliberately time the market to hike rental prices to above median rent, under the guise of increased demand at the start of the tertiary year, which in turn increases the overall median rent.
You could say this is the free market playing out, but imagine if jobs worked the same way - you had a contract to a specific time in the year. Everyone's contract ends at this same time. When it comes time to re-hire, you're now competing for a smaller number of jobs than there are workers, so you're prepared to take a lower wage simply because all the companies have teamed up to align their recruitment with when most people will be looking.

How is this different to what I’ve proposed really?

From Helen Clark doing everything in her power to encourage investment in housing stock by the Private Sector, to this bunch of fools who clearly dont want anyone to provide houses to the market to rent .

Who is going tp house those who cannot afford to buy a home ?

Housing New Zealand ?

They already cannot cope with the massive backlog ......a waiting list for 18,000 homes .

Making investment in housing unattractive is simply foolhardy

Correct me if i'm wrong, but hasn't the backlog of Housing NZ tenants waiting for a home increased significantly over the past 3 years?

Under Labor the waiting list for HNZ has increased from 5k families in June 2017 to 18.5k (plus 3.5k on transfer list) families in June 2020. It takes them about a year on the waiting list.

Would have helped if they didn't sell off their HNZ housing stock to investors under National.... just saying... stupid is what stupid does!

Common sense would have told you if you let in more people than who leave population grows + houses are built slowly = housing shortage + house price increase + rents rise, which is exactly what they wanted... fast forward and turns out we actually needed that social housing after all... damn

According to Jaqui Dean,nationals housing spokesperson,they apparently built over 30,000 during their last tenure;
https://www.newshub.co.nz/home/politics/2020/07/national-housing-spokesp...

Where were her eyebrows when she said that...

what is the point of a fixed tenancy under this regulation? this effectively mean all rental agreements are open ended from the day 1, unless the tenant decides to leave for whatever reason or the landlord decides to move back in or sell the house.
I also do not understand how price increases will work. Lets say after 12 months the LL wants to increase the rent by 2%, what if the tenant does not agree? disagreement of rent does not seem to be a reason enough to terminate the agreement. What will happen if the LL and tenant cannot agree on rent adjustments?

A fixed term is now simply a minimum period, during which the tenant cannot cancel. If the landlord and tenant cannot agree on a rent adjustment, and the tenant does not pay it, they will be in rent arrears, which is grounds for applying to the Tenancy Tribunal for termination of the lease (or for judgement on the reasonableness of the rent increase).

But also rent increases must be within market rates. If a landlord attempted to put up the tent to $10k per week is be overturned at the TT, and on the case of egregious rents they'd likely suffer a penalty from the TT, possibly including preventing a rent increase for 12 months.

I also notice that there is a provision for when a tenant has to evacuate the house due to domestic violence. The remaining tenants rent will then reduce.
I totally support the fact that a victim of domestic violence should not worry for paying rents at a place they cannot safely live in. But why should the LL suffer for that? Is it not fair that there is a fund specifically for this purpose with costs being recouped from the offending party where possible?

I'm just curious what the safeguards are to stop people ficticiously claiming DV to get out of tenancies.

The tenant has to produce evidence to the landlord when they withdraw from their tenancy. -

"Types of acceptable evidence will be worked out when the regulations are developed, and could
include a Protection Order, a Police Safety Order, or a declaration signed by an independent and
reliable person, such as a women’s or men’s refuge worker, or a counsellor. "

A useful document for those interested: https://www.hud.govt.nz/assets/Residential-Housing/Tenancy-and-Rentals/R...

In Australia, its simply a doctors certificate. And the doctor doesnt require proof of domestic violence in order to provide the certificate. Its a low bar.

This is to me the key sentence:
"I hope the legislation will be monitored closely for any unintended consequences so that changes can be made if need be."

But since when has any such 'monitoring' happened, let alone "changes" in under decadal time-scales?

'Hope' is not a Strategy......

The real laugh is that under the healthy homes act, rental houses have to have higher/more performance standards than what is required under the Building Code.

Therefore you could get a situation where a new house being code compliant for the owner-occupier would then be illegal for the owner to rent out without first upgrading the house.

But the reality is the owner-occupiers always bring their houses up to better than code for their own comfort.

And this is where the issue has been, ie the building code allows you to build a house that does not comply with WHO minimum standards and many landlords have no interest in providing a rental property that is any better than the minimum legal requirement, even when it makes that property not fit for purpose.

But in typical Govt. fashion, rather than fix the Building Code, they apply a healthy homes act band-aid.

"And this is where the issue has been, ie the building code allows you to build a house that does not comply with WHO minimum standards and many landlords have no interest in providing a rental property that is any better than the minimum legal requirement, even when it makes that property not fit for purpose."

WHO minimum standards? What are you on about? Can you provide a link or something?

I'm surprised you asked, being in the industry.

'A third of New Zealand homes are too cold in the winter and too warm in the summer, a new study has found.'

https://www.stuff.co.nz/life-style/homed/latest/119117816/study-finds-th...

https://www.noted.co.nz/currently/currently-social-issues/1600-deaths-at...

http://www.healthyhousing.org.nz/publications/

Of course, the new studies only confirm the old studies:

https://www.sciencemediacentre.co.nz/2008/06/18/cold-houses-and-impact-o....

Last I heard,no one is forced to become a landlord...just saying..

So by that logic, we could put up petrol prices by 300% and say "No one is forcing you to drive!"

Davo36 - It's about the relative elasticity of those demands. Getting fed up and giving up on buying and renting out property is probably less of a hardship than getting fed up and not driving a car.

No one is forcing anyone to put the rent up...

The insurance companies did. The Labour government did. Unless you think I should have just lost money on my investment so that my tenants would like me more? lolol

Exactly vman. Becoming a land lord should be a long term business model, providing housing at market rent. If you think it's all to hard, get out.

Arguably tenant selection is the most risky aspect of landlording. I've personally been saved by rejecting bad tenants on the basis of tenancy tribunal rulings. Wiping bad tenant's slates clean just made the game more risky.

Of course if you get a "professional manager" they don't give a s%^t about your property. They do the minimum amount of tenant selection work and ram in first tenant who puts up their hand. They'll put a third tier tenant in a first tier million dollar house. From the property managers point of view who cares if the tenant destroys the house.

Oh for God's sake that is just utter nonsense. I use a PM for exactly this purpose - that is, tenant selection.

If they put in a bad tenant a couple of things happen: 1) They have to spend heaps of time chasing them for unpaid rent and what not, so their job is much harder and 2) If the tenant damages the house, the PM will get fired and they have just lost one of their properties to manage. Also their name gets put out there as being a bad PM, so they lose out on further business.

So both of those things really negatively impact a PM.

A PM usually wants to build up their rent roll. Which means they want lots of properties under management. You think they are going to be able to do that by putting bad tenants in place? Have you ever even considered for a second how businesses work?

Well I'm having the opposite experience, and I've seen it happen to other people. No property manager, as far as I can tell, applies the same care, scrutiny, and due diligence as the owner.

Second that. For a time my houses were rented via a manager due to my off-shore location. The manager asked what I thought about a few tenants. After the first disaster I recognised this as property manager code for "these people are dodgy, but we can rent to them today and keep receiving our commission", and putting the responsibility for the choice onto me. After the first one I politely declined any more offered in similar circumstances - rather loose a few weeks rental and wait for better tenants than put up with the stress of hearing about the goings on of bad tenants in $500K worth of one of my assets.

BTW, that was still no guarantee. One house was always rented to 'respectable family groups' but required $8K of "P" clean up before it could be sold.

I recognised this as property manager code for "these people are dodgy, but... Yes that's quite similar to what I experienced. I'm overseas too, and now paying the price for for the agents lack of effort. When I select a tenant I usually see at least eight families from one or two viewing sessions. I realise now that a lot of property managers just cant be bothered.

Re: 'respectable family groups' but required $8K of "P" clean up.. That is scary!

That was just to clean mild contamination from the master bedroom ensuite and one other bedroom. The buyer of that house understood it was just minor because his uncle had spent $40K to remediate his house from more serious contamination by a similar 'class' of tenants. You just don't know who tenants really are.

"Arguably tenant selection is the most risky aspect of landlording."

Totally 100% agree !
I can see a number of existing landlords selling so they do not have to bother with these new anti landlord regulations.
FHB are out in force now, so good for them, but the pool of rental properties will be reduced, pushing up prices ?
Remains to be seen.

As opposed to previously it being "landlord selection being the most risky aspect of renting"...there are good and bad on both sides.

"I can see a number of existing landlords selling so they do not have to bother with these new anti landlord regulations."

Could see that coming with the change in govt, so got out in 2017. Cleaned up the houses, remediated "P" contamination as required, and sold 'as is' to owner occupiers to renovate and make the places their own. Not that they were slums, just worn/tired after 15 years of tenancies - buyers were falling over themselves to sign up. Reinvested elsewhere and very happy to have doubled my income and reduce my stress level. Don't give a hoot about the 'lost' potential capital gain on the properties sold - got more 'cash' than I want to spend, and can't take it with me when I am gone.

Had tenants aren't getting their salaries wiped clean.

The TT can *choose* not to record the claimant's name. They would do that in cases where they brought a claim against a landlord and won, ie when the landlord is the one in the wrong. Such tenants have until now been unfairly discriminated against for having their names in the register, event when they aren't at fault. Bad landlords don't want to get tenants who know their rights and are willing to go to the TT to get them upheld.

Are you sure? Section 95a looks incredibly flexible to me. It appears the tribunal can withhold whatever it wants. It certainly looks like tenants who successfully defend cases brought against them will not have their names recorded, and that's important because the tribunal almost always find's in favour of the tenant. That little red flag will no longer be available. http://legislation.govt.nz/bill/government/2020/0218/latest/LMS306555.html

My local landlords' association in the 1980s used to have a list of people whose addresses were wanted to be known. It was actually a list of people who were not to be rented to as they were bad tenants. Capitalists find a way round anything.

This labour Government and Greens wants landlords to sell, they have done this before bringing in the Healthy homes act, making landlords install heat pumps and extractor fans, to free up the housing market, to make homes available to home buyers in theory. If you have a rental, do not play their game, DO NOT SELL because of them.Hang on and if possible buy more. Property is still a good investment.

@ ddporter...thats a bit intense,perhaps you should let people make up their own minds....are you worried there will be a mass exodus...ding,ding,better be quick,thats the sound of the gravy train leaving the station...

The author needs to disclose any conflicts of interest - i.e. does he hold interests in rental property.

That wouldn't be a "conflict" of interest in this case.

Therefore no tenants are allowed to comment either, for the same reason.

Watch this space... I've got a story about problem tenants which has developed within the last week since the legislation. I'll share the detail with readers shortly.

Won't this legislation make some areas much less livable than others? It is hard enough to get the local noise control to act when you have a bad neighbour or a bad tenant, but at least before this legislation a decent landlord had the ability to remove tenants that made their neighbours lives hell.

Yip, this is the biggest issue with this new regulation IMHO. However, the way out may be by (as the owner) sacking the landlord (as in the Property Manager). As their interest in the property ends, they may give 90 days' notice. Section 51: 2 (c).
As the TT doesn't recognize companies or trusts as owners - in cases where 'owners' want to move back into their properties, It will be interesting to see if you can move your Landlord title onto your spouse or neighbour for this exercise. (in the case where it's owned by a body corp.)

“ The Government seems to forget that no private individual HAS to provide rental property. They do it for a return. Make anything too difficult and people may just stop doing it - IE renting out property.”. As if the majority of landlords could afford their rental property if the tenants wasn’t paying rent!

One option as a start would be a model of declaring a house as a residential property or a rental property. Once declared then the property can only be sold as a home for owner occupation or as an investment. This would provide tenants with surety of tenure so long as the terms of the lease are met. Current laws now provide for minimum standards. If a tenant has surety of tenure it will become their home and they are more likely to look after it as such. This model is used in places like Switzerland. Denmark, Norway and works very well. Landlords looking to make a quick buck your day is over, this is more about being a responsible provider and tenants are stakeholders in the equation.

I will be putting my new rental out to rent for $million a week negotiable. Whoever beats me down the least gets it. Should get round the rent auction problem.

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