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.

Loss ring-fencing ups war on renters and owners

The largely unreported end of the ability of rental property owners to claim losses against other income shows that the Government is unaware of the scale of the problem it is creating with accommodation, Tenancies War spokesman Mike Butler said today

The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill quietly became law while we were distracted with a Cabinet reshuffle that demoted Housing Minister Phil Twyford.

Under the vague sub heading “Allocation of deductions for excess residential land expenditure”, the omnibus tax Act:

(a) limits a person’s deductions for expenditure incurred in relation to residential land to income derived from the land;

(b) suspends deductions for the excess expenditure for the income year in which the expenditure is incurred;

(c) provides that the excess amounts are carried forward to later income years in which the person derives residential income; and

(d) releases the excess amounts on fully-taxed disposals of land.

Inland Revenue said in various statements that 116,000 owners declared an average loss of $7138 ($137 a week) on earnings in the 2016/17 tax year, bringing an average tax benefit of $2000 a year to each, creating a total cost of $232-million to them.

“The Minister responsible for this, Revenue Minister Stuart Nash, is probably unaware that losses accrue at the first stages of a property investing career, and that as debt is reduced and income increases, investors become taxpayers, with some paying tens of thousands of dollars in tax each year,” Mr Butler said.

“Rental property owners who are losing money now face a choice — raise the rent to cover the loss, absorb the loss to apply it in the future to any profit, or sell,” he said.

“With rents at historic highs it is unlikely owners could add an average extra $137 every week to rents,” Mr Butler said.

“This means owners must choose between hanging on or selling,” he said. “The short answer is to sell, with stand-alone dwellings going to first home buyers.”

“With loss-making owners selling and the prospect of an extended and more fraught period of trading at a loss creating a barrier to new investors, the Minister has just sped up the reduction of the supply of rental property,” Mr Butler said.

“As a result, rents will continue to rise and homelessness will increase,” he said.

The problem for everyone is that the Government is in denial that the policies it is enacting to solve a housing crisis are making the crisis exponentially worse, Mr Butler said.

Labour, New Zealand First, and the Green Party voted in favour on the third reading of the bill on June 20, while National and Jamie Lee Ross voted against it. Hansard has no record of a vote by the ACT Party.

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.

Hopefully pragmatism will replace Twyford’s agendas

Tenants and owners may hope that some pressure may have gone now that Phil Twyford is no longer Housing Minister, paying the price for the political embarrassment that KiwiBuild became, Tenancies War spokesman Mike Butler said today.

His tinkering with rental property standards and tenancy law helped hike rents and drove a number to sell, creating a new housing crisis, Mr Butler said.

Insulation standards based on optimum costs and benefits had already been set by the previous government and Mr Twyford’s requirement for additional insulation would incur extra costs for little extra benefit, he said.

Requiring a fixed heater makes little sense when there is a wide range of affordable heaters that tenants already use to suit their needs, he said.

Installing extractor fans, which are costly, difficult to install, or have an opening window in the way, is in many cases a waste of money. Properties may be ventilated by opening windows.

The $200 million Mr Twyford allocated to the charity Housing First to house 1000 people over four years at a cost of $961 per person per week, relies on leasing properties from the private sector that have been difficult to find, Mr Butler said.

Mr Twyford’s somewhat desperate “build-to-rent” proposal would require substantial Government financial support and guarantees to get off the ground, just like the failed KiwiBuild programme, and would mean high-density, large apartment blocks that most likely would end up as ghettos, he said.

Whether the new Housing Minister, Megan Woods, is pragmatic or agenda-based remains to be seen, Mr Butler said.

The decider will be whether she proceeds with tinkering with the Residential Tenancies Act that would end the contractual rights of owners to end tenancies, and remove the ability to sell with vacant possession, as Housing New Zealand requires when buying properties from private owners, he said.

Stop the War on Tenancies is a group that since last October has been highlighting the errors made by successive governments while creating rental property policy.

See CHB 86-year-old moves out https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12238724

See Housing shortage first hurdle, https://i.stuff.co.nz/business/property/105735200/housing-shortage-first-hurdle-as-housing-first-moves-to-marlborough

Retirement project turns into compliance nightmare

About 18 years ago my wife and I started worrying that we weren’t saving enough for our retirement. After reading some books about investment properties, we decided to take a gamble and take on some rental properties in locations close to our home.

Over 18 years, we purchased 9 properties in Manurewa and Takanini, renting these out to families and couples. We manage the properties. We get to know our tenants very well and have been pleased to see several of them move on to buy their own homes. Five of our properties have had the same tenants for more than five years with one couple having been with us for more than 15 years. Through the years we have spent many weekends cleaning, painting, landscaping and doing general maintenance while tenants are in place or between tenancies.

Our properties are two and three bedroom “Universal” type homes, Hardiplank or brick with Decramastic roofs, about 30 years old. Our current rents are $360 to $450 per week, our total income in rents is just enough to cover mortgage repayments, rates, insurance and some minor maintenance.

When it comes to paying for big ticket items, like new stoves, carpets, fencing and kitchen rebuilds, we pay for these out of our own savings from our day jobs. We have had security window catches fitted on all of our properties, so that they can be safely ventilated. Our tenants seem very happy living in our affordable, warm dry homes in South Auckland.

Our homes were all insulated when constructed with 75mm to 100mm blown cellulose fibre (recycled paper). This is globally recognised as an eco-option that is highly effective, with R value of 2.6 per 100 mm thickness, just fractionally under the new level required which is R2.9 for ceiling insulation in Auckland.

They all also had foil underfloor insulation where possible, which provides suitable R value insulation but is no longer in favour due to potential electrical short issues. The new government “healthy homes” legislation requires that ceiling insulation is at least 120mm thick, meaning that all of our previously compliant homes needed reinsulating. We had to sell one of our homes so that we could remedy the rest, which cost between $2400 and $3700 per house.

To add insult, we are told that we are not allowed to claim the cost of this work as an expense against our income. This beggars belief! Clearly the additional expense is only incurred because we are in the business of renting homes. This government mandated expenditure for a small change in insulation value is an unavoidable cost of being in the business of renting, so must surely be deductible? The additional work only provides minimal extra insulation and doesn’t increase the value or resale ability of the properties; to my way of thinking achieves very little for the $24k that we have spent.

Recently we were contacted by MBIE demanding that we send a copy of our Tenancy Agreement and of our Insulation Statement for a recently tenanted property. We were threatened with significant fines if we couldn’t comply, we sent through our documentation and received terse critique of the same with further threats of fines.

We are now facing more costs with the need to install kitchen and bathroom ventilation in addition to significant capacity fixed heating into our already warm, dry safe houses. The cost of this is estimated at $6k to $8k per house, we’ll need to sell another house to fund these upgrades. We have less than two years to get this work done for what will be our seven remaining homes with their 20 – 25 Year mortgages.

If 60 percent of Aucklanders are living in rental accommodation, then it follows that they all have to rent from someone. While undoubtedly there are some landlords who break the rules and take advantage of vulnerable people, we suggest that the vast majority of landlords are simply hard-working members of the community trying to save for their retirements and for their families.

The almost daily landlord-bashing stories in the news media leaves us feeling like the scourge of society, the ongoing interference in our relationships with our tenants is pushing us to sell all of our properties and get out of the business. Our existing tenants can’t afford to buy their own homes, where will they live once we exit the market?

Dale Young,

AUCKLAND

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