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RTA Amendments: Big Changes

Sharon Cullwick outlines what the Residential Tenancies Amendment Bill means for landlords.

By: Sharon Cullwick

1 September 2020

In a dramatic last minute effort on the last day of the House sitting before closing to enable the commencement of election campaigns, the Government pushed through the Residential Tenancies Amendment Bill. This bill went through Parliament under urgency with the second reading, Committee of the Whole House, and the third reading all being heard within a few hours.

Reactions to the passing of the Bill have been equally dramatic and have ranged from professional landlords predicting negative unintended consequences to tenant protection groups heralding a new age of security for tenants.

There is no doubt that the Bill will make substantial changes to the way landlords run their businesses. No longer will a landlord “take a chance” on someone who does not have an impeccable rental history. Things like credit checks will become more crucial, and the finer details of potential renters’ lives will be carefully scrutinised. The financial risks of offering your property to someone who could be considered a “marginal” tenant are now too significant.

One of the changes included in the Bill is the inability of a landlord to remove their tenant by using the 90-day no-cause notice. This method is hardly ever used, and never for a good tenant. However, in the event that a disruptive or anti-social tenant needs to be moved on, a landlord now has to collect evidence of three significant anti-social or disruptive activities within 90 days. Each time an event happens, the landlord must advise the tenant of the details.

The tenant must also be advised of their rights. This method will make it nearly impossible to remove a disruptive tenant. It puts the onus on the landlord to gather the facts, even though this may be at a personal risk to themselves.

Another change is that fixed-term tenancy agreements will automatically roll over to periodic tenancies unless both parties agree otherwise. Although in many situations this is fine, it will, however, create problems for student suburbs where tenants generally have terms of one year.

The sitting tenants can decide if they want to go or stay close to the end of the year whereas currently by mid-year students would have confirmed their accommodation for the following year.

This shift in business will have a profound effect on student areas like Dunedin. Students will no longer know if they have a property to rent until closer to the end of the year. It may mean that they have to go flat hunting during exams, or worse end up going back early from their holidays to secure a property. It is also expected that when properties become vacant outside normal student terms, families may choose to move in, thereby reducing the number of houses available for students.

The Bill has increased the number of unlawful acts against a landlord from 24 to a whopping 60. There are 24 pecuniary penalties and other fines which could be as high as $100,000. The risk of incurring these fines has increased with the establishment of the Ministry of Business, Innovation and Employment compliance and investigation team, set up to investigate landlords. This team was set up about seven years ago with 1.4 people. It has now increased to 32.5 persons and has been given higher power to prosecute landlords on behalf of the tenants.

Inevitably, although these changes were intended to increase the security of tenure for tenants, they will reduce the incentive to be a landlord and therefore reduce the supply of rental properties. When it becomes harder to secure a rental property, rents are likely to increase. It is beyond me why further regulations are put on landlords at a time when we need more houses to solve the housing crisis.

As Judith, a good friend of mine said, “This government needs to realise that landlords don’t have to be landlords.” Who will fill the gap between what the state can provide and the wait list, now at 18,000, for these state houses?

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