Last call for submissions to save your rental

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.

Conclusion.

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

Submit and vote against radical tenancy changes

New Zealand’s 290,000 rental property owners should resist radical changes to the Residential Tenancies Act both by submission and by vote in this year’s election, Tenancies War spokesman Mike Butler said today.

The current government has the despicable habit of treating some groups of New Zealanders as pariahs. Rental property owners join gun owners and farmers as groups scapegoated for political gain, Mr Butler said.

The main changes that the Government wants are to:

  • Remove a rental property owner’s contractual right to end a tenancy. Currently this may be done by issuing a 90-day notice that requires no reason to be stated.
  • Extend the current 21 days rent arrears as grounds to end a tenancy to at least 90 days.
  • Allow two instances of anti-social behaviour every 90 days with the third such instance being grounds to apply to the Tenancy Tribunal to end the tenancy but only 28 days after the third notice has been given.
  • Nullify any clause in a tenancy agreement prohibiting assignment of the tenancy by a tenant.
  • Mandate that fixed-term tenancy agreements must become periodic tenancy agreements upon expiry unless both parties agree otherwise.
  • Allow for identifying details to be blacked out in Tenancy Tribunal applications where a party has been successful.
  • Ensure that tenants can add minor changes that can be removed at the end of the tenancy and the property restored to its original condition.
  • Prohibit the solicitation of rental bids by landlords.
  • Limit rent increases to once every 12 months.
  • Require owners to permit and facilitate the installation of ultra-fast broadband.

The Government thinks it can allay concerns by allowing an owner to ask the Tenancy Tribunal to end a tenancy if the tenant has been behind in rent or there were instances of anti-social behaviour on three occasions within 90 days.

It is unclear whether an owner must wait 90 days before approaching the tribunal for help over three weeks of unpaid rent or for the resolution of anti-social behaviour that could have occurred in the first month of a tenancy.

“The fact that social housing providers, which includes the Government as the main provider, have exemptions shows that those who drafted this bill know that the changes are unworkable,” Mr Butler said.

“Nearly all 75 clauses have been amended by adding a financial penalty and pointer to the table of penalties and fees,” Mr Butler said.

Only 14 of the 64 unlawful act penalties listed are for failures by tenants. None of the 23 infringements are actions by tenants. This shows a heavy bias against property owners, Mr Butler said.

For instance, there is no penalty for failure to pay rent which is the issue that takes up 72 percent of Tenancy Tribunal time.

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.

While all rental property owners are targeted, the bill singles out those with six or more properties, regards properties owned related parties as the targeted owner’s properties, and doubles the penalties for any infringements by this group.

Will the changes encourage more to provide properties for rent? Probably not. Will some sell? Probably. Will there be fewer rental properties? Probably. Will rents continue to increase? Yes.

“A raft of anti-landlord measures by the current government has turned a housing shortage into a crisis and these proposed changes to law will embed the crisis for years,” Mr Butler said.

The bill may be read here: http://legislation.govt.nz/bill/government/2020/0218/latest/LMS294929.html

Submissions close at midnight on 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

If this bill passes into law, you could show your disgust by voting against those political parties that support this heavily ideological and biased piece of legislation, Mr Butler said.

Labour, Greens and NZ First supported the bill through the first reading on February 20.

Stop the War on Tenancies is a group that since October 2018 has been highlighting the failures of successive governments while creating rental property policy and law.

Are Govt controls the answer to the ‘broken’ housing market?

By Peter Lewis

In the time since the recent British elections the results have received little in-depth coverage and analysis in our local media. Apart from the shocked surprise at the outcome by many of those closet-socialists active in the media, most commentators have shrugged their shoulders and gone back to analyzing Trump.

Yet it is interesting to look not only at the overall result but the ebbs and flows of the various UK electorates and the population profiles within and consider how this may reflect potential changes in the New Zealand political arena.

Generally, in mature democratic democracies, politics becomes a competition between two major political parties. For most of recent history, these parties tend to comprise a Conservative party mainly supported by the farming and white-collar business and professional sectors who promote policies intended to create wealth, and a Socialist party supported by blue-collar voters and those who derive their income from the public purse who promote policies intended to distribute that wealth.

However, we now see that these distinctions are breaking down, not only in those who support such parties but also within the parties themselves. This has been coupled with the recent advent of a professional political class. In the past, an individual would move out into the working world, achieve some success and reputation within that sphere, and then be sufficiently motivated both by their own experiences and the experiences of those around them to progress into political action. These people, those who possess actual real-world experience, have now been replaced by theoreticians, those who have formulated their ideas and beliefs second hand by reading, listening and absorbing the pre-packaged opinions of others.

The quite rapid changes in the nature of employment have hastened these changes. Gone are the days when you joined a major employer on entering the workforce and stayed there, secure and well-fed, until you eventually achieved the gold watch and the retirement cheque. As well as now moving from company to company, perhaps from occupation to occupation, many people have also ended up in the gig economy. Self-employed contractors are not now just highly qualified professional experts and consultants, they can be Uber drivers, Airbnb operators and cleaners.  This is insecure employment, vulnerable to any sudden changes in the political or economic environment, and carrying few if any employment benefits.

We can now see that, in the UK elections, many traditionally blue-collar voters abandoned Corbyn’s socialist promises to nationalize this and tax that and opted for more certainty, less change, and (by leaving the EU) reducing the risk of Johnny Foreigner coming in and stealing their jobs. The number of voters choosing this option vastly outnumbered those holding secure office jobs in large prosperous cities who’d like to remain in the EU because it makes it just so much easier to pop over to Majorca for their summer holidays. Thus the working class are now tending to vote conservative while the educated and professional middle class veer towards socialism. Generally, it would seem that  more insecure you feel about your current status in society these days the more conservative you will become.

Our own two socialist parties now strongly exhibit this trend. Gone are the muscular horny-handed manual workers from both the political and electorate ranks of the Labour party, while the ranks of the Greens have, right from the start, been heavily populated by schoolteachers and academics. These days, to become a Labour party MP, forget the hammer and sickle, move from University into either an MPs support staff role or take a job in an NGO, cultivate contacts within your local part branch, and prepare to pounce when the time is right. For National, there is a similar route – possibly moving from University though a top law or accounting firm and on to the governing board of a multinational company before gracefully accepting the offer of a seat in the Beehive.

Thus we now get a Government almost entirely consisting of people who have grown up and matured in a social and economic hot-house, the path smoothed out in front of them and with minimal exposure to the vicissitudes and tribulations of the real world. Having always been able to view humanity from the top down with an air of supreme detachment, they are then able to formulate and enunciate grandiose plans that are quite detached from reality and practicality. The result? –  we end up with lofty promises to end homelessness, reduce child poverty and build 100,000 affordable homes within ten years. After hubris comes Kiwibuild.

Our housing market may well be ‘broken’, as Shamubeel Eaqub claims. However, is introducing a plethora of controls, regulations and taxes the answer? Real world experience indicates probably not. You and I fortunately live in a country where most of us have access to a vast array of clean and generally wholesome reasonably priced food available in almost unlimited quantities. Sure, there are rules around food storage, handling, and other health-related issues, but there is no overriding and controlling Ministry of Food arranging the supply and marketing, it comes to us by the magic of the free market. Yet in societies where rationing, government control, ten year plans and state food markets are imposed we invariably find food shortages, endemic corruption, high prices and poor customer service, sometimes even ending in famine.

So if freeing up the market so that it expedites efficiency and supply works for the food industry, why would it not also work for housing? Do we really expect that the current plethora of limitations, consents, restrictions, imposed costs, red tape, tax penalties, and over-the-top requirements will provide a responsive and freely functioning lowest possible cost housing and residential rental market? And if it does not, will imposing even more of such demands as prescribed by those MBAs and Ph.Ds now holding the reins of power prove to be the solution?

Back out in the heat and dust of the real world, well away from the air-conditioned four-windowed lofty high-rise corner offices of downtown Wellington or Auckland, I suspect not.

Peter Lewis is the vice president of both the Auckland Property Investors’ Association and the New Zealand Property Investors’ Federation. 

Damage, meth tinkering tangles tenancy law

Political meddling with the Residential Tenancies Act regarding damage to rental properties, meth contamination, and living in garages, has just made tenancy law more complex and litigious, Tenancies War spokesman Mike Butler said today

Residential Tenancies Amendment Bill (No 2), which seeks to address issues related to liability for damage, methamphetamine contamination, and living in garages, passed its third reading on Wednesday. The bill:

  1. Makes tenants liable for careless damage up to four weeks of rent or their landlord’s insurance excess, whichever is lower.
  2. Extends the definition of “residential premises” to ensure that all premises which are used or intended to be used for residential occupation are covered by the Residential Tenancies Act,
  3. Provides yet another regime to address any health risks of any harmful substance in rental properties, including methamphetamine.
  4. Enables tenancies where contamination has been established to be terminated in two days.

“The architect of this bill, Nick Smith, and the current Minister responsible, Kris Faafoi, should explain how limiting a tenant’s liability for accidental destruction of, let’s say, a $500,000 house, to four week’s rent, is either fair or just,” Mr Butler said.

Tenancy Tribunal hearings concerning damage will become more complex and many more cases will be appealed through the court system, as you can see from the following clause that says:

(a) it is for the landlord to prove—
(i) that any damage is not fair wear and tear; and
(ii) that any destruction or damage occurred in circumstances described in subsection (1)(b); and
(iii) that any insurance moneys are irrecoverable for the reasons described in subsection (3A)(a); and
(b) it is for the tenant to prove—
(i) that any destruction or damage was not intentionally done or caused as described in subsection (1)(a); and
(ii) that any destruction or damage was not caused by a careless act or omission described in subsection (2).

“Moreover, the bill fails to address a substantial legal anomaly in that people who wilfully damage rental property manage to escape the consequences of a wilful damage conviction under the Crime Act, which carries a jail term of seven years,” he said.

“Regarding contaminants, the issue of evidence of harm has been avoided, and the bill assumes that current level of 15 millionths of a gram per 100 square centimetres is a meaningful indicator of harm, which it is not,” Mr Butler said.

“The bill should have simply stated that the onus was on anyone claiming harm from a contaminated tenancy to provide evidence of harm,” Mr Butler said.

Treating garages as residential premises to extend coverage of the RTA to them so that they confirmed as non-residential is the sort of thing that gives rise to the expression “the law is an ass”, he said.

“This bill, that seeks to clean up messes created by the Tenancy Tribunal, the Court of Appeal, and the previous Government, has just made the issues more unfair and complex and litigious,” Mr Butler said.

Stop the War on Tenancies is a group that since last October has been highlighting the evidence that successive governments have ignored while creating rental property policy and law.

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