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The RTA Amendment Bill – Where are we at in May 2020?

While in recent weeks we have rightly focused on COVID-19 and keeping everyone safe, politicians have continued to work on the RTA Amendment Bill.

The Bill passed its first reading in February, with submissions to the Social Services and Community Select Committee closing around the time New Zealand went into Alert Level 4 lock down late in March.

Since mid-April, the Select Committee, which is made up of nine MPs and chaired by Gareth Hughes of the Green Party, has met, and heard submissions. It is now considering these before reporting back to Parliament via Associate Minister for Housing, Chris Faafoi. Unless there is a change to the timetable, that report is due on 22 June 2020.

What is all the fuss about?

As you probably know, there are several proposed amendments in the Bill. Some of these will likely have more impact than others.

Removal of the 90-Day No-Cause Termination of a Periodic Tenancy

This is the clause that has caused landlords and property investors the most angst, mainly because it obliges landlords to provide a ‘justified’ reason to end a tenancy. Currently, a landlord can give problem tenants 90-days’ notice to end the tenancy without having to provide what can sometimes be difficult to prove evidence of fault, for example anti-social behaviour towards neighbours.

Removing this clause will not only diminish landlords’ ability to exercise some responsibility towards those nearby but will likely negatively impact community tolerance and goodwill.

Fundamental to the way we operate at Hatch Property Management is to match the right people to the right property at the outset. We are confident of our tenant selection process, but also feel the clause should be retained as an important backstop for landlords.

Tenants will be able to make minor alterations to the property without prior consent (within certain criteria)

Property owners probably feel most challenged by this clause in terms of maintaining integrity of ownership, while tenants seek that balance of feeling at home and having a property that suits them at a practical level.

Likely few landlords would be unhappy with a tenant wanting to make a property safe for their baby or to hang a small selection of pictures, but open slather with lots of holes or damage is a different proposition.

While tenants will be required to restore the property to its original state at the end of their tenancy, the major concern with this clause is that it will merely create contention and debate between landlord and tenant.

Extensive and accurate Entry Inspection Reports will come into their own, as will regular property inspections where issues can be recorded and addressed to minimize potential conflict.

Expired Fixed Term Tenancies will automatically become Periodic Tenancy Agreements, unless otherwise agreed

The objective of this change is to provide tenants greater certainty by ensuring they have a tenancy agreement in place once their fixed-term tenancy expires.

Currently, if a fixed-term tenancy is going to end, the tenant and the landlord must reach agreement about what happens next. They may agree to extend or renew the tenancy.

Under the proposed changes the tenant will get more power and could demand to stay, arguably impacting property owner rights and skewing the law in favour of tenants.

The Tenancy Tribunal to have authority to impart higher financial penalties and grant anonymity to parties absolved of actions by the Tribunal

Overall, it is inevitable the proposed Bill will mean a greater workload for the Tenancy Tribunal and with that longer wait times for tenants and landlords, albeit the Bill is proposing greater authority for the Tribunal.

While our preference is that any tenant-landlord issues are worked through to avoid the need to go to it, Hatch Property Managers are trained and experienced in handling matters with the Tenancy Tribunal.  As a result of the proposed changes, we expect increased pressure to track and document every tenancy agreement and every interaction with tenants as evidential proof should the need for it arise.

Rent increases limited to once every twelve months. Rental Bidding prohibited.

Hatch Property Management does not use rental bidding and 12 monthly rental reviews are normal practice.

So where are we at right now?

As New Zealand went into Alert Level 4 lock down, Finance Minister Grant Robinson, announced two important short-term measures to support residential tenants which were effective from 26 March 2020:

  • A freeze on all rent increases (for an initial six months*)
  • A freeze on all 90-day no-cause tenancy terminations (for an initial three-month period*)

*The government has reserved the right to extend both these periods.

Following these announcements, the REINZ called for the RTA Amendment Bill to be shelved until after the COVID-19 crisis is over, however submissions hearings went ahead and those submissions are now being considered ahead of a 22 June report; all strong indicators of government intent.

The next steps for this Bill include a Second Reading and presentation to the Committee of the House, before a final third reading which, if approved, is finally enacted as law through Royal Assent.

While there is no published time frame for this process, Parliament is scheduled to meet twice more in May (Budget) and three times in June, including following presentation of the Select Committee’s report.

Hatch Property Management is a member of the Waikato Property Investors Association (WPIA) and a REINZ member. Industry organisations have been working hard to lobby government and share our perspective that the biggest issues with the proposed amendments are tenancies automatically becoming periodic and the removal of the 90-day no-cause terminations as important options for landlords.

We will keep you up to date of developments as they occur, but if you have questions right now about the Bill’s proposals or your rental property, please give us a call https://www.hatchproperty.co.nz/contact/