Biggest tenancy law reform in 35 years: ‘I’ll keep my places empty’

A landlord has expressed fear about the biggest tenancy law reform in 35 years,threatening to empty his homes when New Zealand’s 1.5 million renters get much more power early next month.

From February 11, major changes to the Residential Tenancies Act 1986 become law, embedding tenants more firmly and making it harder for landlords to evict, with a far more limited range of reasons.

Investor John Kenel, who runs an investment business specialising in housing, said there was no question about what he would do in response.

“This means I’ll be keeping more property vacant, unfortunately. I buy older houses for development and in the past I could rent them out at low costs until I wanted to develop them. Now, it will be just too hard,” Kenel said.

New Zealand has around 1.5 million tenants in about 600,000 properties.

Others say the reforms will make being an investor untenable and predict rental properties will go up for sale from next month.

But economist Shamubeel Eaqub doubted landlords would sell en masse: “So the homes will be bought by renters or already-occupiers.”

Prime Minister Jacinda Ardern says an increasing number of New Zealanders are renting.

“The changes we’ve made as a Government have been about creating balance and making sure that a renter’s home is warm and dry. My view is that some of the statements we’ve seen made publicly does a disservice to landlords. The majority of landlords have good, stable tenants,” she said.

From the middle of this year, further new housing standards come into force to ensure homes are fit for purpose to rent. From July 1, further health home standards become mandatory.

Tougher laws mean landlords will need to comply with new heating insulation, ventilation, moisture and drainage and draught-stopping standards.

Kenel said other housing developers he knew would also not rent their places.

“The Government just doesn’t understand cause and effect,” Kenel said, refusing to say how many properties he owned but indicating it was many.

After the Residential Tenancies Amendment Act was passed last August, the Real Estate Institute said it would do more harm than good. Bindi Norwell, outgoing chief executive, said a survey found 46 per cent of landlords and investors said it was likely or highly likely they would sell their rental property if removal of the right to issue a 90-day notice went ahead.

That is now law and from February 11, landlords will be more restricted from evicting tenants.

“Given we already have a shortage of quality rental stock across the country, this is problematic as it will further reduce the pool of rental properties available and likely push up rents even further,” Norwell said.

“With median rents in Auckland having risen 9.8 per cent in the last three years from $510 to $550/week and in Wellington by 20.2 per cent from $420 to $505/week, it will be interesting to see how much higher rents go as more landlords withdraw from the market,” she said.

Tenants without an excellent rental history might now find it even harder than they already do, given how hard it will now be to remove tenants who end up significantly in arrears, she said.

Accountant Anthony Appleton-Tattersall, who specialises in property, said the February 11 changes were sweeping.

“These changes really will result in some pretty serious unintended consequences for this Government. While I’m reasonably sure that most of the ‘landlords will quit the market’ rhetoric is just that, I am certain that tenants whose records are more marginal will no longer be given that shot,” he said.

“The downside risk of renting to a problem tenant will now be so huge that most landlords would see a vacant property as preferable to a chance at being stuck with a tenant from hell,” Appleton-Tattersall said.

“Short term these changes are awful for landlords. Long term, the unintended consequences will just push rents and property prices up, and landlords who stick with it, win eventually. They always do.”

He was unaware of the 14-day notice landlords will be able to issue for assault, a further change but not due to come into effect until August.

“But in what world should a person charged by police with assault against their landlord have the right to live there for a further 14 days? They should be put out overnight if the police took notice,” Appleton-Tattersall said.

One of the most controversial and biggest changes is an end to no-cause terminations: landlords won’t be able to axe tenancies without lawful reason from next month, meaning they can’t just give the 90 days’ notice without any cause.

The tenancy can still be ended if the landlord proposes to sell but instead of the landlord giving 42 days, it becomes 90 days.

Landlords will be able to give other reasons but they will need to be real such as demolishing or changing the premises’ use. Three notices for anti-social behaviour is one reason under the changed law, or if the tenant is five days late with the rent on three separate occasions.

Landlords will have to issue a tenant three written notices for separate anti-social acts within 90 days then apply to the Tenancy Tribunal to terminate the tenancy.

Other reasons to seek eviction are:

• if the tenant has been at least five working days late with rent on three separate occasions within 90 days;
• where the landlord will suffer greater hardship than the tenant if the tenancy continues;
• where the landlord or a member of their family or employee requires the premises as their principal place of residence.

From last August, it became illegal to raise rents every three or six months and instead is now limited to annually.

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