Compliance

Legal obligations of a property investor and landlord

A landlord has legal obligations and is bound by the Residential Tenancy Act 1986, (RTA). Since the development of the RTA, all parties involved in the rental property market (mainly landlords) have had a continual evolution of compliance requirements to keep up with.

The RTA sets out the rights and responsibilities of both the landlord and tenant (not flatmates). It also stipulates the maximum fines that maybe awarded if breaches occur. It also provides adjudicators the power to hear and settle disputes which may occur between landlords and tenants

AUDITS

As part of their stated procedures with regard to rental properties and tenancies the Ministry of Business, Innovation and Employment (MBIE) has undertaken to audit landlords across New Zealand to ensure their compliance with RTA rules and regulations. Whilst they have started with property management companies and private landlords with more than 14 properties, we do believe that it will in time cover all rental property owners, particularly those where a tenant complains to Tenancy Services. 

Quinovic Merivale has been audited and as strange as it sounds we were grateful for the experience so early on. We have always believed that we operate fully within the expected standards – but if we didn’t I wanted to know.

What does this process entail? We had a site visit from an MBIE Tenancy Services compliance team member. There were a number of quick-fire questions regarding our processes in relation to tenancy applications, bond collection and payment practices, owner maintenance plans, our inspection frequency and process and the like. The auditor then selected a number of our property files at random and went through the relevant paperwork ensuring accuracy, compliance and that the correct insulation and smoke alarm installation documentation was included. Whilst our agreements contained a couple of clauses that Tenancy Services feel may be unenforceable in tribunal they had no issue with our retaining those clauses in our agreement as they clearly outline our expectations of our tenants. This should not be confused with contracting to contravene or evade the provisions of this Act (an illegal clause) which we had none. An illegal clause could cost Landlords a fine of $1500. The auditor also contacted a number of our tenants to confirm our processes were as we had outlined.

Our final outcome was – no further action required – we passed!

To check if you will pass if they turn up tomorrow please see their checklist

https://quinovic-merivale.co.nz/wp-content/uploads/2019/12/Landlord-compliance-checklist-Tenancy-Services.pdf

Also, see what you may be fined if you get it wrong

http://www.legislation.govt.nz/act/public/1986/0120/latest/DLM3285790.html#DLM3285790

Insurance compliance

Since August 2019 the law requires the landlord to disclose whether the property is insured as part of any new tenancy and if any excess amounts apply on claims. A copy of the insurance document must also be available on request.

If the tenant, or their guest, damage the property through careless damage, the tenant is liable only for the cost of the damage – up to four weeks rent – or the excess, whichever is the lower.

The tenant is liable for the full cost of any damage intentionally caused by themselves or their guests.

https://www.tenancy.govt.nz/assets/Uploads/files/insurance-statement.pdf

Healthy Homes Standards  

From 1 December 2020 all new or renewing tenancies must document the current level of compliance against the Healthy Homes Standards.

From 1 July 2021, all private rentals must comply within 90 days of any new or renewed tenancy.

From 1 July 2024 all private rentals comply.

There are of course exemptions but these need to be proved on a house by house basis.

https://www.tenancy.govt.nz/healthy-homes/about-the-healthy-homes-standards/

The Healthy Homes Standards introduce specific and minimum standards for heating, insulation, ventilation, moisture ingress and drainage, and draught stopping in rental properties.

Landlords are responsible for maintaining and improving the quality of their rental properties. These standards will help ensure landlords have healthier, safer properties and lower maintenance costs for their investments.

Heating Standards

Landlords must provide one or more fixed heaters that can directly heat the main living room. The heater(s) must be acceptable types, and must meet the minimum heating capacity required for your main living room. Main living arears terminate where there is a door, so this include a hallway, staircase and landing. 

The World Health Organization (WHO) recommends a minimum indoor temperature of 18˚C. By installing heating that can reach this temperature on the coldest days of the year, tenants will be able to keep warm all year round.

To find out the heating capacity required for a main living room, landlords need to use the Heating Assessment Tool or the formula outlined in the regulations.

Heating Assessment Tool

https://www.tenancy.govt.nz/healthy-homes/heating-standard/

Insulation

Ceiling and underfloor insulation has been compulsory in all rental homes since 1 July 2019. The healthy homes insulation standard builds on the current regulations and some existing insulation will need to be topped up or replaced.

This page explains the healthy homes insulation standard with compliance dates beginning 1 July 2021. For information on the current insulation requirements, visit the current insulation requirements page.  

The insulation levels vary throughout the country but for Christchurch they are ceiling R 3.3, underfloor R 1.3

https://www.tenancy.govt.nz/healthy-homes/insulation-standard/

Ventilation

Rental homes must have openable windows in the living room, dining room, kitchen and bedrooms. Kitchens and bathrooms must have extractor fans which vent outside.

Mould and dampness caused by poor ventilation is harmful for tenants’ health as well as landlords’ property. The ventilation standard targets mould and dampness in rental homes.

https://www.tenancy.govt.nz/healthy-homes/ventilation-standard/

Moisture and Drainage

Rental properties must have efficient drainage for the removal of storm water, surface water and ground water. Rental properties with an enclosed sub-floor space must have a ground moisture barrier.

Moisture can be a large source of dampness in a home. This dampness can lead to poor health outcomes for tenants and can be destructive to the quality of a house.

https://www.tenancy.govt.nz/healthy-homes/moisture-and-drainage-standard/Online

Draft stopping

Landlords must make sure the property doesn’t have unreasonable gaps or holes in walls, ceilings, windows, skylights, floors and doors which cause noticeable draughts. All unused open fireplaces closed off or their chimneys must be blocked to prevent draughts.

Draughts increase the likelihood of lower temperatures in houses, and can make it more expensive for a tenant to heat their home.

Fixing draughts is an easy way to reduce heating bills, and keep rental homes warm and dry.

https://www.tenancy.govt.nz/healthy-homes/draught/

Tenancy Agreement 

Whilst there is a version of a tenancy agreement provided by Tenancy Services the Quinovic Tenancy Agreement is more comprehensive providing both the property owner and tenant with greater protection. However please remember that you cannot contract out of RTA.

Common misunderstandings are generally around reasonably clean and tidy, professional cleaning of the carpets at the end of a tenancy, putting in extra clauses that the landlord would like adhered to during or after a tenancy and altered termination timeframes.

Please remember that no party can sign themselves out of the Residential Tenancy Act – even if both parties are in agreement at the time of signing the agreement.

The penalty for contravening the Act is up to $1800.

2020 and 2021 Changes to RTA

Removal of the 90 day notice and the fixed term now becomes a minimum term with only the tenant or an Adjudicator being able to give notice that the tenancy will terminate. There are some exclusions including the sale of a property and when an owner or their family member requires the property to be their main home.

Please note that notice periods are changing from 11 February 2021. When a tenant is on a periodic tenancy they will be required to give 28 days’ notice to vacate. An owner wishing to move into the property will be required to give 90 days’ notice. 90 days notice can be given to a tenant when the intention is to sell the property. 

Where a tenant on a periodic tenancy agreement has acted in a way that has caused harassment, alarm or distress to a third party, a landlord will be able to issue the tenant with a notice to stop the behaviour. If a landlord has issued a tenant three notices for separate antisocial acts in any 90-day period, they may apply to the Tenancy Tribunal for termination. If the Tribunal considers that the notices were issued reasonably and fairly, it must make an order terminating the tenancy.

What can landlords do if tenants are repeatedly late with rent payments? If a tenant has been at least five working days’ late with the rent payment, the landlord can issue a notice advising the tenant that the rent is late. If a landlord has issued a tenant three notices for separate late payments in a 90-day period, they may apply to the Tenancy Tribunal to end the tenancy. If the Tribunal considers that the notices were issued reasonably and fairly, the Tribunal may make an order terminating the tenancy.

Properties will be required to be advertised with a price, they cannot organise an auction over a rental property; or offer to make an applicant the successful tenant if they agree to pay more rent for the property. This approach does not ban rental bidding. Tenants will be allowed to offer to pay more for a property of their own volition. 

Currently, rent is only able to be increased once every six months. The reforms increase this to once every 12 months.

Improving information provided to tenants fees on ending a fixed term tenancy The RTA allows landlords and property managers to recover expenses reasonably incurred upon giving a tenant consent to assignment, subletting or parting with possession of the premises. The RTA does not currently require disclosure of how a fee has been calculated, so tenants may find it difficult to challenge the reasonableness of a specific component of the fee. The reforms will require landlords and property managers to provide breakdowns of all costs, conditions and processes they are applying upon giving a tenant consent to assignment, subletting or parting with possession of the premises.