This month we have published our new Facebook page. We can’t wait to provide you with regular property news and updates of interest. To be in to win $500 worth of travel vouchers simply like or follow our page by clicking on this link and you will automatically go in the draw.
We are excited to announce a new relationship with Rothbury Insurance brokers. This sees us being able to offer an AMP-backed comprehensive Home and Landlord policy. This policy is the first of its type in the market and we believe it really is a first class policy. For one, it offers an option to increase your cover for Methamphetamine related damage by an additional $150k. With very few claims going above this level, it ensures real peace of mind for owners of rental properties.
For more information please visit our website.
The new amendment to the Residential Tenancies Act clarifies the situation relating to Methamphetamine (Meth). This aims to:
- Protect landlords and tenants from the harmful effects of Methamphetamine
- Provide landlords with a specific right of entry to do a test with 48 hours’ notice
- Contain new powers to make regulations governing guidelines for:
- Maximum acceptable levels of Meth for habitability
- Make it an unlawful act to rent out a contaminated dwelling in excess of new habitability standards.
A landlord can terminate a tenancy in a case of Methamphetamine contamination. This means that after testing has been carried out the presence of Meth is found to be above the new habitable guidelines. If the tenant is not responsible for creating contamination then rent abates*. You may think that the tenant is responsible but this needs to be proven.
* Note – abates means that rent reduces in accordance with the facilities provided eg. if one bedroom in a three-bed house is contaminated the rent could be reduced to that of a two-bedroom property.
When a 7-day notice is served the landlord has an obligation to provide accommodation during the notice period if the property is deemed uninhabitable.
Landlords commit an unlawful act if premises are contaminated at start of tenancy and they knowingly rent out the dwelling.
Courts won’t accept DIY tests. The Tenancy Tribunal will expect official results from a lab.
The new habitable standard for residential rentals is 1.5 for a high use area and 3.8 for limited use areas (roof and under house etc). The new standard takes an area-by-area approach which differs from the current basis that impacts on the whole dwelling. This will substantially reduce the costs of remediation.
The notice period is now stipulated at 48 hours, which tries to balance the tenant’s right to privacy and the landlord’s right to enter a property.
When a test is conducted by a landlord the results need to be disclosed. The same obligation should apply should Tenants initiate the test.
Where a test result is above the guidelines it is best practice to advise the Police.
Tenants are liable not only for what they cause themselves but also for what they permit to go on at the premises.
If a property is found to be contaminated during a tenancy, previous cases have seen a portion of rent given back to the tenant.
The changes provide clarity for industry and the cost of remediation should be reduced.
An additional change to the Residential Tenancies Act covers termination when dwellings are unlawful residential tenancies.
Such rental properties are in breach of landlord obligations in the Residential Tenancies Act, namely that landlords must:
- comply with all requirements in respect of buildings, health, and safety under any enactment so far as they apply to the premises; and
- take all reasonable steps to ensure that, at the commencement of the tenancy, there is no legal impediment to the occupation of the premises for residential purposes.
Types of unlawful dwellings:
- Dwelling constructed without a building consent of any kind
- Dwelling had a building consent but not approved for human residence e.g. garage
- Dwelling has a building consent for permanent human residence but does not have code of compliance for being rented separately e.g. granny flat
- Building consent for permanant human habitation but owner has added facilities such as a kitchenette
- Dwelling has consent but the owner has added extra rooms so part of dwelling is unlawful e.g. House that had an outside deck that has been closed in by adding walls.
Where a property has a major and minor dwelling and the minor dwelling has consent but is not compliant it can’t be rented separately to the main dwelling. In this case the property would need to be rented as a single Tenancy Agreement.
Where a dwelling is unlawful, tenants can give 48 hours’ notice or apply to the Tribunal to end a tenancy. The tenant does not have to pay rent in unlawful premises. Court cases in relation to minor dwellings have seen rent repaid in full for the period of the tenancy.
However, the new amendment means that should the Tribunal determine a property to be unlawful it shall not make any rent or rent arrears award.
Under the new amendment, awarding compensation for damages is also prohibited. This could be up to the $50k limit of the Tribunal.
Prior to the decision reached in the case of Holler v Osaki tenants were liable for fair wear and tear, and for careless damage. In Holler v Osaki the Court of Appeal decided in general terms that Tenants were not liable for careless damage. The effect has been that all claims to the Tenancy Tribunal for careless damage have been declined since April 2016.
Careless damage is not defined in the Residential Tenancies Act but is generally characterised as negligence, lack of care, or lack of forethought. The question has been expressed by the Tenancy Tribunal as, “Was the tenant exercising that degree of care and attention that a reasonable and prudent tenant would exercise in the circumstances?”
The Government has decided to amend the RTA to give Landlords and Tenants some certainty. The new bill states that a tenant can be held liable for careless damage up to the lesser of a Landlord’s insurance excess or four weeks’ rent. However, the Tenant will be fully liable when damage:
- Is intentional OR
- Caused by an act or omission by the tenant or by any person whom a tenant is responsible AND
- Occurred on or about the tenancy premises AND
- The act constitutes an imprisonable offense.
Where the landlord has no insurance, they can claim the whole of any loss for careless damage.
Where the landlord has insurance the tenant will be liable:
- Per incident of damage – importantly follows insurance protocol
- For the lesser of the Landlord’s insurance excess but no more than the equivalent of 4 weeks’ rent.
The Tenant can make repairs to rectify the damage where agreed with the Landlord. The limit on the value of repairs remains at 4 weeks’ rent equivalent or up to the Landlord’s excess. The intention of the act is for Landlords to benefit from the changes rather than insurance companies. The Landlord cannot accept more than the 4 weeks’ rent or they are committing an unlawful act.
The change needed to happen to provide certainty for Landlords and Tenants. We would expect most damage claims will be covered under a Landlord’s insurance excess or the 4 weeks’ rent per incident.
It’s important to increase your rent regularly in order to be achieving the highest possible return on your investment. Increasing rents is a tricky business depending on the relationship you have established with your tenant. It’s great to have a personal rapport with your tenant, but depending on how personal the relationship is, things can get difficult when it comes to increasing the rent for the property.
Increasing the rent comes down to the market and what it is doing. For example, the market may be flat for a period of time in which case you would not increase the rent on a good long term tenant. If the market changes and demand increase or decreases in a given location, then of course rental returns get affected and subsequently existing tenants rent will either increase or simply stagnate.
If your market rent for the property is stagnating, there are other ways to increase the rent value and income. Doing some improvements like installing a heat pump or perhaps closing in a garage is just one way.
The easiest way to manage rental increases is to review them at the end of their fixed term tenancy or have a set date that you review it, whether it be annually or bi-annually. It’s important to understand that you can not increase your tenant’s rent too much or too often. A good guide to what you can and cannot do is the Department of Building and Housing website www.dbh.govt.nz
Benefit of a property manager
The great thing with a property manager of course is that they increase rents systematically and with few personal relationship issues. The nature of their work does not allow them to interact on a personal level “too much” as it simply makes their job too difficult to do. In addition to this and for the most part, property managers are paid a commission of the rent collected. The higher the rent, the higher their return, they are incentivised to increase rents regularly!