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

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.

Double standard in rental privacy guidelines

The Privacy Commissioner’s list of data sought from prospective tenants that is “almost never justified” shows a “do as I say not as I do” double standard from a government that does not practise what it preaches, Tenancies War spokesman Mike Butler said today. The 19 categories of off-limits data include:

  • Broad consent to collect personal information from “other sources”
  • Driver licence number
  • Credit card information
  • Nationality, ethnicity, origin or citizenship
  • Physical or mental disability or illness
  • Personal beliefs or opinions
  • Marital and family status
  • Gender and sexual orientation
  • Rent paid at previous tenancy
  • Sports and hobbies
  • Current expenses
  • Conflicts with previous neighbour tenants or building managers
  • Proof of insurance
  • Languages spoken
  • Details about current accommodation
  • Banking history
  • Employment history
  • Age (apparently one can ask if they are over – 18. Just not exact age)
  • Employment status.

However, Government departments routinely collect such forbidden information. For instance, the questionnaire for those applying for super includes six of those categories:

  • Three forms of ID including date of birth
  • Partner’s three forms of ID including date of birth
  • Proof of bank account numbers
  • Whether you are male or female.
  • What date you married
  • Where you live and whether you live there with your partner

Since these are only guidelines to rental property owners and managers to avoid seeking such information, then should Government departments be “guided” to do the same, as well as banks and insurance companies, not to mention employers, and the mountain of information required under anti-money-laundering law.

Also, the Privacy Commissioner doesn’t seem to understand the process of selecting a tenant.

A spokesman said that “viewing proof of identity and checking the references should come after a preferred candidate has been decided on”.

But reaching a decision on a preferred candidate is based on information provided in the application that the commissioner wants to put off-limits.

Sigh!

See https://i.stuff.co.nz/business/112906661/privacy-rules-wont-stop-discrimination

1 2