Residential Tenancies Act bill moves closer to passing Go

On Tuesday the 7th of July the Select Committee released their report on the Residential Tenancies Act Amendment bill. The proposed changes remain much the same as the original, with a few recommendations being added after the public submissions process.

With the entire National Party opposing the bill at its first reading, will it move past the next stage? Will this party vote the same as it did two leaderships ago? Or will we see a swing towards more ‘Yes’ votes after yet another dramatic reshuffle of the caucus?

Due on the 13th of July, the 64-page report was released a week early. It is still unclear when the second reading of the bill will be, and if this will be before the upcoming September election. However, after reading this report it is clear which direction the bill is taking, and who the winners and losers will be if it passes go and becomes law.

We summarise some of the key changes in the act and their potential impacts.

The proposed Residential Tenancies Act changes

Limiting rent increases to once every 12 months instead of every 6

A ban on rental bidding

Fixed-term tenancies will automatically become periodic tenancies once the fixed term ends

Extending the notice period tenants must be given if the landlord wants to sell or move into the property. From 42 days to 90 days 

Allowing tenants to add minor fittings to the property such as baby-proofing, hanging pictures, and earthquake proofing

Ending 90 day no cause evictions. Currently, periodic tenancy agreements can be terminated without cause as long as the landlord gives 90 days notice. The RTA will now have a list of approved reasons for termination.

The Tenancy Tribunal will be able to award compensation or order work to be done up to $100,000. (currently the maximum is $50,000)

Anonymising complaints to the Tenancy Tribunal by default if the plaintiff successfully enforces their rights or defending a claim against them.

These are the bulk of the proposed changes to the Residential Tenancies Act. So, what will they mean for landlords and tenants if they go through?

Good news for:

Property Managers – With growing complexities and compliance around managing rental properties, expect to see more landlords turning to PMs for help. At a time when people are looking to cut unnecessary spending, this is one expense that could be good value for money.

Families who own multiple properties – Thankfully, common sense has prevailed and section 2A(a) of the RTA around the associated persons’ test will be amended. Previously, ‘associated persons’ included almost everyone in your family. Parents, children, partners and spouses, and the parents and children of partners and spouses. In addition to a number of company arrangements. This is being changed to only include your spouse, civil union partner, or de facto partner. If you have a large whanau or a Rich Uncle Pennybags in your family tree, this change will come as great news.

Tenants who work from home – Landlords permitting the installation of ultra-fast broadband (Fibre) will now be a requirement. Now you can show up to all your conference calls without co-workers criticising your pixels and poor connection (big win). However, there are some amendments to this section. You can’t compromise the weather tightness, or the character of the building when having Fibre installed.

Current tenants – Nothing should change for the worse for current tenants because of the Residential Tenancies Act Amendment bill. However, with the change in demand due to COVID-19, there is still a lot of uncertainty.

Bad news for:

Landlords who have more than six tenancies – Large scale landlords are now liable for much larger fines. The reason for this is that larger-scale landlords can do more damage across their large portfolios.

Landlords who are bad at documentation – If you fail to keep correct records, you’ll need to up your game. The bill proposes penalties for landlords who fail to provide information or provide documentation. This means all of your records around tenancy agreements, rent tracking, building work, and other things, need to be up-to-date.

Tenants with a poor credit history – The general sense from landlords is that they will be far less likely to give ‘risky’ tenants a chance. If a landlord finds negative results in a background check, they will opt for the tenant with a clear history. With the removal of no-cause terminations, many landlords say they will take far more precautions to avoid rent arrears.

Andrew King, president of the New Zealand Property Investors Association is calling the Select Committee’s report ‘hugely disappointing.’ In particular, King says that removing the “no cause clause” will not achieve what it’s intended to, which is increasing the security of tenure for tenants.

“It will cause major issues for landlords who have problem tenants – especially as the Select Committee has now recommended that it should be up to the landlord to prove that anti-social behaviour occurred if a tenant challenges a notice at the Tribunal.”

Andrew King, President, NZPIA

Where to from here?

This bill could pass before the general election in September. If you are a landlord and have been considering making any changes to your tenancy, you need to be across these updates and the timeline in which they will come into effect.

What can I do if I still want to have my say on the RTA changes?

The New Zealand Public was given the opportunity to make submissions on this bill up until the 25th of March 2020. Everyone had an equal opportunity to do this. As a result, over 1600 people made a submission. There were coordinated efforts from NZPI and Renters United with both groups pushing for their members to make submissions.

Now that the Residential Tenancies Act Amendment bill has passed the submissions phase, the best action to take is to lobby your local MP. Then, you can ask them to consider your views when it comes time to place their vote at the second and third readings.

Ayes 63

New Zealand Labour 46; New Zealand First 9; Green Party of Aotearoa New Zealand 8.

Noes 57

New Zealand National 55; ACT New Zealand 1; Ross.

Residential Tenancies Amendment Bill — First Reading votes

Read the full report from the Select Committee here.