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Review update, November 2006

On 21 November 2006 Cabinet agreed to further proposed amendments to the Residential Tenancies Act. The changes, announced by Building Issues Minister Clayton Cosgrove (you can read the press release External website. ), include:

  • extending coverage of the Act to more people involved in renting
  • protecting tenants from substantial liability for damage to rental premises
  • clarifying the status of body corporate rules and providing tenants with remedies should body corporate rules change during a tenancy

Extending coverage of the Act

Ministers have agreed, in principle, to repeal section 5(l) of the Act, which excludes tenancies from the Act’s coverage if the landlord provides meals or services to the tenant, and the value or cost of those meals or services forms more than 20 percent of the rent.

Ministers have also agreed to extend coverage of the Act to boarding houses. However, some of the rights and obligations of boarding house tenants will differ from other tenants, because of the different dynamics created by communal living. These differences include the way tenancies are terminated, the process for dealing with abandoned goods and the ability for landlords to make house rules.

Extending the coverage of the Act will ensure that the minimum rights and obligations of parties to boarding house tenancies and tenancies with a high service component are adequate and clearly defined. Parties to these agreements will also be able to access the tenancy support services provided by the Department of Building and Housing, including information, advice and dispute resolution services.

Liability for damage

A tenant’s liability for damage will be limited to four times the weekly rent, if the tenant can prove:

  • the damage was caused carelessly, rather than recklessly or intentionally; or
  • the tenant did not personally cause the damage, or personally fail to take reasonable steps to prevent.

Any tenant that cannot do this may have to pay more than 4 weeks’ rent

Body corporate rules

Landlords will be required to include relevant body corporate rules in tenancy agreements and notify tenants of any changes to relevant body corporate rules.  A change to body corporate rules will automatically take effect as a variation to the terms of a tenancy agreement, once the tenant has been notified of the change.

If body corporate rules change during the course of a fixed-term tenancy, a tenant will be able to apply to the Tenancy Tribunal for a market rent assessment. The Tribunal will also be able to end a fixed term tenancy early if there is a material change to the body corporate rules and, in the opinion of the Tribunal, it would be unreasonable to require the tenant to continue with the tenancy.

Review Update – September 2006

Proposed changes to the Residential Tenancies Act 1986 approved by Cabinet and announced by the Minister for Building Issues, Clayton Cosgrove.

22 September 2006 Media Release External website.  from the Minister for Building Issues 22 September 2006

The Act defines the rights and obligations of residential landlords and tenants, sets out dispute resolution procedures and establishes a fund into which bonds are paid and held in trust. It also provides for two primary tenancy models - periodic tenancies which can be ended by notice and fixed term tenancies which have predetermined end dates.

In May 2004, Cabinet agreed to review the Act with the objective being to improve the effectiveness and efficiency of the Act in regulating the residential rental market.

Key issues

The review of the Act identified five key issues:

  • lack of knowledge about landlord and tenant rights and obligations due to barriers such as low literacy/lack of education, language and cultural barriers, disability and youth/lack of life skills
  • mixed capability to manage property and tenants which may impact on the quality of rental accommodation, stability of tenure and number of disputes
  • variable standards of rental housing with some rental stock having outdated amenities and being poorly maintained
  • insufficient compliance, enforcement and dispute resolution with concerns about the length of time taken to resolve disputes and the cost, lack of appropriate kinds and levels of sanctions for breaches and difficulties associated with enforcement processes and mechanisms
  • lack of stable tenure for longer term tenants as more people are renting for longer– perhaps for a lifetime, with reducing home ownership.

Changes to the Residential Tenancies Act

Proposed changes to the Act that have been approved by Cabinet will go a long way to making the rental landscape fairer and better for both landlords and tenants. They are designed to give New Zealanders in rental accommodation more flexible and stable tenure, and provide better education on and enforcement of tenants’ and landlords’ rights and responsibilities.

The proposed improvements are summarised below along with those that will be achieved by clarifying the intent of the Act.

Compliance – sanctions and debt collection

  • Some tenant breaches to become unlawful acts that can result in exemplary damages as an alternative to eviction. These would include sub-letting or assigning a tenancy without consent, over-populating the premises or becoming a problem neighbour
  • Sanctions for landlords who breach building, health and safety regulations, resulting in substandard housing
  • Allow landlords to recover reasonable debt collection costs gained in enforcing Tenancy Tribunal orders
  • Tenancy Tribunal able to make an order against a guarantor of a party to a tenancy agreement. (Jurisdiction is currently with Disputes Tribunals and District Courts, incurring considerable time and expense)

Fixed term tenancies

  • Fixed-term tenancies will immediately become periodic tenancies upon expiry of their term unless the landlord and tenant enter a new agreement or one or the other has given notice. (This will provide greater security of tenure. Currently, they enter a three-month period of limbo)
  • Tenants to be able to give notice to end a fixed-term tenancy as though it were a periodic tenancy where a  mortgagee has become entitled to terminate the fixed-term tenancy by notice
  • Tenants in a fixed-term tenancy to be able to apply to the Tenancy Tribunal for an order ending the tenancy early if:
    • they have received notice of a substantial rent increase during the fixed term, and
    • the amount of the rent increase was unforeseen and will cause severe hardship

Right of entry and absentee landlords

  • New right of entry for the purposes of an appraisal by a real estate agent or building inspector. (Currently they are reliant on tenant good will to negotiate such access)
  • Landlords who intend being outside of New Zealand for more than three weeks will be required to appoint a New Zealand-based agent to manage their tenancies for the duration of their absence

The changes will clarify:

  • who is responsible for the payment of outgoings for the premises, for example, water charges and expressly require landlords to ensure adequate provision is made for the collection and storage of water
  • the need for sale of premises to be unconditional before landlords can give reduced notice to end a tenancy on that basis
  • that where a party has given notice to end a tenancy, that party cannot give another notice to change the date of termination unless the first notice is revoked with the other party’s consent
  • the legal rights and obligations when a sole tenant dies by introducing a 14 day termination notice period
  • the wording required in the tenancy agreement to enable rent to be increased during a fixed-term tenancy
  • that rent may be increased by mutual consent in consideration for a variation to the terms of the agreement to the tenant’s benefit, or a substantial improvement to the premises or facilities
  • how tenants exercise rights of renewal
  • the status of a tenant’s fixtures if the tenant does not remove them prior to the end of the tenancy
  • that documents can be served to email addresses and post office boxes, if parties elect to receive documents that way.

The changes will also include better education for both landlords and tenants on their rights and responsibilities.  Further, a working party is to be established to investigate providing greater flexibility around redirection of benefits to landlords.