The more than one million New Zealanders involved in rental property, renters and owners alike, should speak out against drastic changes to tenancy law being made during the Covid-19 scare.
There are three days left to submit against changes to the Residential Tenancies Act that mean:
- Owners will be unable to end any tenancy, either fixed or periodic, except by selling the property, living in it, doing a renovation, or by seeking the permission of the Tenancy Tribunal while providing evidence of breaches.
- Breaches such as unpaid rent or threatening anti-social behaviour will take three months to resolve.
- Fines of up to $7200 for 87 breaches have been levied, 73 of which target owners.
These measures penalise 290,000 private rental property owners, many of whom might consequently sell.
In addition, these measures will immediately make it tougher for around one million renters, because the proposed measures will mean that:
- Fewer private rental properties will increase demand and raise rents even further.
- Getting rid of threatening, anti-social neighbours will now take at least three months.
- Applicants with a tarnished credit or rental history won’t get a flat or a house from a private owner and face joining the long queue for a State house.
The Government should put this bill on hold rather than push through radical changes under the cover of the Covid-19 scare.
But in the mean-time, renters and owners alike should submit against this bill today.
Submissions close at midnight on Wednesday, March 25. Go here to make your submission. https://www.parliament.nz/en/pb/sc/make-a-submission/document/52SCSS_SCF_BILL_94841/residential-tenancies-amendment-bill
What follows is a plain-language description of changes contemplated by the bill and an analysis of the likely unintended consequences:
Penalties target owners
The most apparent change for in the text of this bill is that nearly all 75 clauses have been amended by adding a financial penalty and pointer to two tables of penalties and fees. To be clear, the government proposes to criminalise rental property owners. Section 126B says “a person who is alleged to have committed an infringement offence may be proceeded against by the filing of a charging document under section 14 of the Criminal Procedure Act 2011”. Why does the government want to criminalise investors and business owners in one sector of the economy and what does the government expect to achieve by so doing?
The lists of unlawful acts and infringement offences show a steep bias against property owners. A total of 87 penalties have been added. Only 14 of the 64 unlawful act penalties listed are for failures by tenants. None of the 23 infringement offence penalties are actions by tenants.
Unlawful act penalties attract fines ranging from $350 to $7200. The biggest penalty is $7200 for any owner failing to meet obligations in respect of cleanliness, maintenance, smoke alarms, the healthy homes standards, or buildings, health, and safety requirements. There is no obligation on tenants for cleanliness or safety.
An owner terminating a tenancy without grounds, that would come into force once the 90-day notice is repealed, would attract a fine of $6500 as an unlawful act.
The penalty for failing to provide a receipt is a fine of $1000. There is an additional fee of $500. This is for owners five or fewer properties.
While all rental property owners are targeted, the bill singles out those with six or more properties and doubles the penalties for any infringements by this group. To get as many owners into this group, the proposed law regards properties owned related parties as the targeted owner’s properties. These unfortunates must pay $2000 for failing to provide a receipt plus a fee of $1000.
There is no penalty for failure to pay rent which is the issue that takes up 72 percent of Tenancy Tribunal time.
What evidence was provided to show that such penalties were necessary? Will these penalties encourage more into providing accommodation? Probably not. Will these penalties encourage more owners to sell? Probably.
These 87 penalties plus the tenancy compliance and investigation team combine to change Tenancy Services from a means to sort out disputes when owners and tenants are unable, to a policing unit that targets owners. If hefty fines are deemed necessary for “the modern renting market”, tenants get a number of notable free passes:
- Intentional damage is an offence under the Crimes Act that carries a jail term of seven years. But tenants continue to have an exemption for intentional damage under the proposed changes.
- Non-payment of rent is an issue that takes up 75 percent of Tenancy Tribunal time. Non-paying tenants continue to have an exemption for from any penalty for non-payment of rent. At least 21 days’ arrears should mean automatic end of tenancy. This currently requires a tenancy tribunal hearing and the weeks of waiting for a hearing. Serial non-payers know this and get weeks of free rent by gaming the system.
- Failure to give notice of departure, abandonment of a tenancy, leaving belongings behind, retaliatory threats by tenant, assault by tenant all don’t appear in the
Removal of the owner’s contractual right to end a tenancy
The government’s determination, in new Section 60AA, to remove a rental property owner’s contractual right to end a tenancy shows ignorance of some realities of managing rental property. Currently this may be done by issuing a 90-day notice that requires no reason to be stated. I have used this three times in 30 years.
Once was when a flat in a block of six rented to a woman and her young son soon became occupied by a Mongrel Mobsters. Soon the Polish woman living next door moved out because of sexual harassment. Under the current law I could give notice without citing a reason and soon they were gone. I have found that once a reason is given there are endless arguments. The government found that out while trying to evict mobsters from Farmer Crescent in Porirua in 2009. That row wound its way through court.
The supposed sweetener, that three examples of antisocial behaviour in 90 days could be grounds to end a tenancy, is unrealistic because it fails to recognise that occupants with the anti-social behaviour will intimidate witnesses. This “three incidents in 90 days” rule actually changes the “tenants responsibility” section of every tenancy agreement from a tenant “may not disturb the neighbours or the landlord’s other tenants” to a tenant “may disturb the neighbours or the landlord’s other tenants twice every 90 days but not three times”. This would come back to bite the Government, as the owner of New Zealand’s largest rental portfolio, if tenancy managers try to move on anti-social tenants. But my observation of some State-housing in Hastings is that tenancy managers just leave it to police who return offenders to the area after a night or so in lock-up. Gang patches are not allowed on government property but they are everywhere in state house areas.
Termination by notice
Changes detailed in the amended Section 51 assume that tenants want to take extended periods of time to move. This does not match reality. More often, when people have a change of circumstance they have to move quickly. I have adapted to changing tenancies within days sometimes by offering the option of ending the tenancy earlier than the notice period, if the outgoing tenant prefers, so long as I can find a suitable tenant soon. Also, once tenants find out that the owner has changed circumstances, the tenant wants to move as soon as possible to resolve uncertainties.
The stipulation that a periodic tenancy requires 28 days’ notice by the tenant coupled with the requirement of amended Section 18 which limits bonds to no more than four weeks’ rent poses a problem with marginal tenants who may have caused damage who stop paying rent as soon as notice has been given. In other words, there will be no money to go towards paying for any damage and the owner is left out of pocket.
Regarding termination for non-payment of rent, damage, or assault, amended Section 55 requires three incidents within 90 days each of which has had a written warning. For non-payment of rent, this section changes the current 21 days arrears as grounds to end a tenancy to three periods in 90 days in which the rent was at least five days behind so long as written notice was given on all three instances. The 14-day notice to remedy has disappeared. A new clause advises the tenant of the right to apply to the Tenancy Tribunal to challenge the notice. As detailed above in the section on 90-day notices, this in effect legalises non-payment of rent twice every 90 days. This could mean three approaches to the Tenancy Tribunal in 90 days which currently requires only one. This in itself could triple the workload of the Tenancy Tribunal. Currently, 72 percent of the tribunal’s workload is to do with rent arrears. Remember, paying rent is an agreed obligation in every tenancy agreement.
Assignment of tenancy
Current tenancy agreements have the phrase “the tenant shall not assign or sublet the tenancy without the landlord’s written consent” with a request to strike out the section in bold if it is not applicable. Section 43A (1) says such a “provision in a tenancy agreement that prohibits the tenant from assigning the tenancy is of no effect” but Section 43B (1) says tenant may assign the tenancy with the prior written consent of the landlord. However, Section 43A (2) exempts social housing.
I used to swap tenancies to people known to the original tenants but no longer do so. I prefer of advertise widely at the change of every tenancy while giving an option for friends of outgoing tenants the option of applying if they wish. That gives everyone a chance to apply. Otherwise, the tenancy in effect is taken off the market. I would prefer to continue to be able to make it clear at the start of the tenancy that I do not wish to either assign or permit subletting
Right of owner to discontinue a tenancy at the end of a fixed-term removed
Owners lose their right to end a tenancy at the end of a fixed term, according to amended Section 60A. Large numbers of fixed-term tenancies ending at the same time of year in university towns has caused a problem. The end of the right for an owner to end a tenancy at the end of a fixed term, in conjunction with the pressure on owners to allow tenancies to be assigned to another looks like an attempt to solve this problem. The circumstances in the regions differ from cities with a large student population which is where a large number of fixed-term tenancies fall due at the same time to match the academic year. This is not the situation outside of university cities. It would be a mistake to impose a solution for tenancies in university towns on regional New Zealand. I don’t use fixed-term tenancies.
Identifying details may be blacked out in Tenancy Tribunal orders online
Details identifying parties to a Tenancy Tribunal decision may be suppressed. This may be achieved by repealing section 115B(3). Publicising names is a key aspect of publishing details of an adjudication. In the tenancy world there are a number of serial offenders. If names are not publicised, the law will shelter these from the consequences of their actions. This fosters re-offending.
That tenants can add minor changes
There is a difference between minor changes as of right and minor changes by agreement. Currently, the sorts of minor changes cited to sell this amendment would most likely be agreed to under the current law. There is always a problem with returning the property to the condition it was in at the start of tenancies. For instance, a vegetable garden seems innocuous but rarely have I had outgoing tenants restore it to lawn. That’s over to me to do, none times out of 10. Even Command hooks, the so-called “damage-free hanging” invariable tear off paint that requires sanding and matching paint, which mostly means painting the entire wall.
Prohibit the solicitation of rental bids by owners.
The rental amount must be in any advertisement, according to new Section 22F, and an owner must not encourage anyone to pay more than the advertised rent, according to new Section 22G. I have never solicited rental bids and have turned down applicants who have offered more money. Having said that, the prohibition of rental bids is the thin edge of the wedge of rent controls. Arms-length bidding in an open market establishes the actual rental value at that time. The higher the demand the higher the bid. Supply is the problem. The government could facilitate the development of additional rental properties by addressing limitations on the supply of residential land and consenting delays that arise from the convoluted Resource Management Act
Limit rent increases to once every 12 months
Rent increases would be limited to every 12 months, according to amended Section 24. The architects of this bill seem unaware that fewer rent increases each year would have little effect on the size of the rent increase. The longer the period between rent increases the bigger the increase will be, and hence the bigger shock for both parties. The bill does not contemplate rent decreases which they may not have experienced but which I have. A 12-month limit on rent reviews may require some to make the choice between staying put and paying more or moving to get a cheaper place.
Require owners to permit and facilitate the installation of ultra-fast broadband.
The landlord must permit the installation of a fibre connection, according to new Section 45B. Few owners would not consent to installation of fibre. Having said that, installation of fibre started with quality installers who did an impeccable job. However, recently I’ve had installers turn up on a Sunday or in the late afternoon (to work into the evening) to cut and drill concrete while tenants other than those getting the fibre have to put up with the din. I have had concrete cut and not remediated, cut concrete slabs not removed, cones not removed, clips attached to wallboard where there is no stud behind it, conduit fastened to the front of buildings without regard to appearance. One Chorus team won’t take responsibility for another team’s work. It is impossible to contact Chorus to get these problems solved. Perhaps that is the reason why some owners are hesitant about fibre installation
Fishing expeditions by the tenancy compliance and investigation team
New Section 133 enables the tenancy compliance and investigation team to require owners to “inform the Tribunal or the chief executive of the provisions of any specified tenancy agreement or agreements, or of all tenancy agreements to which the landlord is a party” and to those that terminated in the previous 12 months. This is already going on, whether such checks are currently legal or not, and are triggered mainly when bonds are lodged. I am aware of two such fishing expeditions conducted on owners who believed they were complying with requirements. Failure to provide documents attracts a fine of $1000 plus a fee of $500. One owner subjected to this wryly commented that the investigations unit must have run out of complaints by tenants so were drumming up some business for themselves to keep occupied.
The current government is seriously misguided if it thinks it can deal with the issue of lack of supply by changing tenancy law to make it more difficult for owners. This bill should be set aside during the Covid-19 scare and should be reconsidered by a more rational government.
Submission written by Mike Butler who has owned and managed rental property in Hastings for 30 years.
The bill may be read here: http://legislation.govt.nz/bill/government/2020/0218/latest/LMS294929.html