Residential Tenancies Act Amendments

OLIVIA COWDY / Manager, Property Management Division

August 2020

Constant and complex changes to residential tenancies legislation in New Zealand mean there are now more and more reasons to use a Property Manager.

We often hear from landlords who have found it too difficult to keep up with and understand legislative changes. With our competent team of Property Managers, consultants and the backing of the Real Estate Institute of New Zealand (REINZ), we have all the information available to ensure we can help our clients be prepared ahead of changes coming into force.

On the evening of 5 August, the government’s controversial Residential Tenancies Amendment Act (RTAA) 2020 was passed into law, ignoring the many submissions from Property Managers, property investors and REINZ.

Property professionals are joining with landlords in warning that while the Act may achieve some positive things for tenants, the rental law changes will have some unexpected outcomes.

While the majority of the Act will come into effect in February 2021, one significant change has already taken place. As of 12 August 2020, rent increases are limited to once every 12 months (rather than once every 180 days) to help tenants who are struggling financially as a result of COVID-19. Rent increases can take effect from 26 September 2020 (at the end of the rent increase freeze which had been introduced as part of the COVID-19 response) and any rent increase notices issued from 12 August must comply with the 12 month rule.

The other reforms include the removal of the “no cause” 90-day termination notices, replacing them with a comprehensive list of specified, justified reasons a landlord can use to end a tenancy.

“There are now more and more reasons to use a Property Manager”

This change has been fought fiercely by landlord groups. National MP Simon O’Connor says it will create many unintended consequences. According to REINZ CEO Bindi Norwell, a recent survey found around half of landlords and investors (46.3%) said it was likely, or highly likely, they would sell their rental property if the removal of the right to issue a 90-day notice went ahead.

Considering the shortage of quality rental stock across the country already, this is a problematic statistic. The pool of available rental properties would be reduced further in this case, which is likely to then push up rental levels even more.

In addition to this, tenants without an excellent rental history could find it even more difficult to successfully secure a rental property considering how hard it will now be to remove tenants that end up in significant arrears.

“This is especially true, considering landlords will need to apply to the Tenancy Tribunal to terminate the tenancy, therefore extending the average timeframe to resolve claims and extending backlogs further,” Norwell says.

For more on what the RTA Amendments mean for landlords, we have constructed a summary here illustrating the changes to the current RTA and the dates the changes come into effect.