Legal Guide To Owning A Rental Property
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Whether you currently own a rental property or just want to know more about what’s involved, this legal guide is for you.
Renting a property comes with important legal obligations you’ll need to keep up to date with. In this guide we’ll walk you through some of the recent changes to tenancy law, and help you understand what your responsibilities are.
Today it’s estimated around 1.5 million New Zealanders rent – a number that’s been steadily rising as home ownership levels decrease. In recent years the law has been created or updated to reflect this change in the way we live. The intention of this is to ensure Kiwis and their families have a safe, healthy and secure place to call home.
Let’s start the guide by looking into legislation around healthy homes.
Healthy Homes Standards
The Healthy Homes Standards came into effect in 2019. These standards aim to raise the quality of rental properties in New Zealand, ensuring all tenants have a warm and dry home. For property owners, the standards also help to reduce maintenance costs that can result from ongoing damp & mould issues.
There are 5 standards:
Heating
Insulation
Ventilation
Moisture Ingress and Drainage
Draught Stopping
Details of what each standard is (and any exemptions) can be found on the Tenancy Services website here.
When do I need to comply by?
From 1 July 2021 - All private rentals must comply with the standards within 90 days of any new or renewed tenancy.
From 1 July 2024 – all private rentals must comply, regardless of when the tenancy started.
For properties with a compliance deadline on or after 12 May 2022:
Changes to several healthy homes standards came into effect on 12 May 2022, but only apply to properties with a compliance deadline on or after 12 May 2022. Find out about the changes here.
Compliance Statements:
From 1 July 2019 - a Healthy Homes “intent to comply” statement needed to be included in any new, varied or renewed tenancy agreement. You’ll need to keep records that show how you are complying with any standards that apply during the term of the tenancy.
From 1 Dec 2020 - a Healthy Homes Compliance Statement needs to be included with most new or renewed tenancy agreements. This includes specific information about the landlord’s current level of compliance with the healthy homes standards.
You can find the compliance statement templates on the Tenancy Services website here.
Insulation
From 1 July 2019, ceiling and underfloor insulation became compulsory in all rental homes where it was “reasonably practicable” to install. This was mandated under the Residential Tenancies (Smoke Alarms and Insulation) Regulations 2016.
All tenancy agreements must include a signed insulation statement that covers what insulation the property has, where it is, and what type. The healthy homes insulation standard increases the minimum standard for existing insulation – so you’ll need to check it meets the new standard, even if it met the old one.
The comprehensive insulation guide by Tenancy Services provides detailed information on the new standards, exemptions, and how to check your insulation.
Residential Tenancies Amendment Act 2020
In the past two years there have been significant changes to tenancy law. Let’s start with the Residential Tenancies Amendment Act 2020, which took effect on 11 February 2021.
Ending a Tenancy
One of the key intentions behind the 2020 overhaul of tenancy law was to give Kiwis greater security and stability in their tenancies. Previously a landlord could end a periodic tenancy by giving 90 days’ notice, without giving a reason to the tenant. Landlords can now only end tenancies for a range of “fair and justified reasons”.
When the bill passed, it was criticised in some quarters by those who felt it took away their ability to end a tenancy gone wrong. However, there are provisions for landlords to end a tenancy when the the tenancy agreement or the Act has been breached in a serious way - including persistent late rent payments, anti-social behaviour, assault, and intentional damage to the property.
Other key changes in the act included:
An increase in notice periods
A ban on rental bids (i.e. asking people to make the highest offer for a rental, or advertising a rental without a price)
Rent increases limited to once every 12 months.
Tenants able to make minor changes to properties – examples include baby proofing, hanging pictures, adding shelving or curtains.
For further detail on the changes, read our update on the topic: The Residential Tenancies Act is changing - here’s what landlords need to know.
Residential Tenancies Amendment Act 2019
In 2019 the Residential Tenancies Act had other amendments. The major change surrounded liability for damage caused by careless behaviour.
Damage caused by Careless Behaviour
If tenants (or their guests) damage a rental property as a result of careless behaviour, the tenant will be liable for the cost of the damage up to a maximum of four weeks’ rent or the landlord’s insurance excess, whichever is lower. Careless behaviour is generally considered damage that would arise from negligence or lack or care.
For more information on liability for repairs and damage of a rental property, visit this page on the Tenancy Services website.
Insurance Statements
Landlords were also required to provide an insurance statement in any new tenancy agreement.
This included whether the property is insured and if so, what the excess amount is. The insurance statement also needed to inform the tenant that a copy of the property’s insurance policy is available on request.
Methamphetamine
Landlords were granted the ability to test for methamphetamine in rental properties while tenants are living there. They must provide 48 hours’ notice to tenants before entering the property.
Unlawful residential premises
The 2019 update to tenancy law update also strengthened the ability to hold landlords to account if they rent out unsuitable properties.
This law was designed to give extra protections to people living in garages, sleepouts, warehouses or other buildings. It meant that regardless of whether premises can be legally lived in, under the Act they are considered a residential property.
Under the Act, landlords must comply with all legal requirements relating to buildings and health and safety that apply to the property. They must also ensure that the property can legally occupied at the start of a tenancy.
This two-page online brochure summarises the 2019 tenancy law changes.
What to do
There’s quite a bit to understand (and potentially get in order) before taking the leap into renting a property. Many people find accessing the help of property management or specialist Healthy Homes property companies helpful to make sure they are fully compliant with their legal obligations.
From a legal perspective, here’s a short checklist to help you get started:
Checklist
If you are looking at buying a property to rent out, you’ll need to check whether the home meets the Healthy Homes Standards.
If you already own a property, now is a great time to check how you are tracking to meet compliance for the next time the tenancy is renewed or before the final date.
Ensure your tenancy agreements include all additional statements – insulation, insurance, and healthy homes “intent to comply” and healthy homes compliance. Templates for all can be found here.
Make sure you are up to date with the latest tenancy law. You can subscribe to Tenancy Services Tenancy Matters newsletter for regular updates.
If there’s any aspect of tenancy law you are unsure on, please contact us.
The information in this article is provided to summarise this topic and is of a general nature. If you have any residential property/tenancy questions that we can help you with, please get in touch.