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The Real-iQ Recommendations For RTA Reform

Is the average length of a tenancy only 12 months? We don’t think so!

We provide our solutions for pets, security of tenure and sorting out Tribunal

Back In February 2018, the much anticipated Housing Stocktake of New Zealand was published. This report which was commissioned by Housing Minister Phil Twyford back in November 2017 painted a sorry picture of the housing situation in New Zealand and in particular, for renters and low income earners. The report was written by Alan Johnson of the Salvation Army, Philippa Howden-Chapman of Rental Warrant of Fitness fame, and Generation Rent author Shamubeel Eaqub. The report is fascinating reading with many recommendations that we are now seeing in front of us through the Tenancy Reform Discussion document. Hopefully, you got a chance to make a submission.

However, we have found one potential inaccuracy that leads to serious question marks as to what advice the Government is receiving.

12 month tenancies the norm? We don’t think so!

In this month’s article, we have decided to include the Real-iQ submission to the Government in regards to tenancy reforms and in this we question how they have come to the conclusion that most tenancies last 12 months. Please bear in mind that this submission is purely of the opinion of Real-iQ. Others mentioned in this article may not share all of our opinions. It would be great to get your feedback regarding our submission so please feel free to share your comments.

Our submission to the RTA Reform Committee

This is our response in regard to the Residential Tenancies Act Reform Document. We thank you for the opportunity to submit our views to the proposed reforms.

As New Zealand’s most recognised Property Management training company, partnering with The Skills Organisation and REINZ, few are in a better position to give a balanced view on what needs to happen with regards to renting in New Zealand.

We support many of the changes recommended in the reform document but there are other areas that are of concern and we wish to put forward our recommendations to help improve the experience of renting for tenants without penalising landlords unfairly.

 Information sourced from the Housing Stocktake of New Zealand

Information sourced from the Housing Stocktake of New Zealand

 In our opinion, landlords have been penalised enough recently following the Court of Appeal decision that stops tenants from being liable for accidental damage. This is hugely unfair. Even though this is being addressed in the Residential Tenancies Amendment Bill Number 2, it does not go far enough. We will touch on this later.

 Decisions based on incorrect data

 The Government is basing some of its decisions on incorrect data, in particular, the average length of a tenancy.

 In paragraph 6 of the RTA Reform documentation, it states that most tenancies in New Zealand are around 12 months. The reality is that this summary is woefully inaccurate. At Real iQ we get access to Property Management data from around New Zealand which will include close to 20,000 properties under management. Only in one case have we seen a rent roll with the average length of a tenancy close to 12 months. The vast majority of what we see is in excess of two years with the longest being three and a half years. On top of this, we have contacted some of the largest companies in New Zealand such as Barfoot and Thompson, Ray White, Crockers in Auckland and Oxygen in Wellington. Between them, they will manage in excess of 30,000 properties. Again, their data correlates with our findings.

 This graph from the Housing Stocktake of New Zealand shows the turnover of tenants is reducing and the report goes on to say the average length of a tenancy is over two years. Phil Twyford commissioned this report yet he insists that most tenancies last only 12 months.

This graph from the Housing Stocktake of New Zealand shows the turnover of tenants is reducing and the report goes on to say the average length of a tenancy is over two years. Phil Twyford commissioned this report yet he insists that most tenancies last only 12 months.

 The Housing Stocktake of New Zealand is a report commissioned and signed off by Housing Minister Phil Twyford. The report was compiled by Shamubeel Eaqub, Philippa Howden-Chapman and Alan Johnson back in February 2018. A lot of the recommendations around tenancy reform have come directly from this report. Under paragraph 1.4, the findings of the authors are that the average length of a tenancy is in excess of 2 years. Again, this backs up our findings throughout the industry.

One must question how and why the minister is stating that the average length of a tenancy is only 12 months. Therefore, we ask whether it is wise to make decisions when some of the data you are making the decision on is clearly flawed and inaccurate?

Removing ‘No Cause’ terminations from periodic agreements

This is a decision that we have thought long and hard about. Yes, some landlords do exploit this and if landlords do end a tenancy as a Retaliatory Notice (see section 54 of the RTA) then they should face sanction.

However, the reality is that the vast majority of tenancies end because a tenant gives notice, not the other way around.

What the reforms do not take into account is the safety and wellbeing of landlords, neighbours and in particular, Property Managers. Every year we survey the industry and put forward the question ‘Have you ever felt that your safety has been compromised as a Property Manager’?The majority of Property Managers have said yes, in particular, female Property Managers.

 The job of a Property Manager can be at times risky and dangerous. You deal with conflict on a regular basis and property seems to bring the worst out of people. The risks of the role were so tragically highlighted last year when two Property Managers were shot dead in Northland.

 The question we have around having to give a valid reason to end a tenancy is this. If we have to go to Tribunal to end a tenancy, how do you prove that your Property Manager felt at risk? We teach Property Managers to listen to their instincts and if they do not feel safe, do not enter. On a small amount of occasions in my previous role managing a large Property Management team, I would give 90 days’ notice to a tenant due to the fact that the Property Manager, almost always female, felt at risk entering the property. Seldom will the Police get involved as they look at these situations as civil matters. Therefore, obtaining evidence will become difficult.

Selling the rental property

Other concerns we have is around the landlord not being able to give notice to a tenant to sell a house vacant. This is hugely unfair on a landlord and I have seen numerous occasions where tenants have deliberately tried to sabotage sales due to the fact that they do not want to leave their tenancy. This can cost a landlord thousands upon thousands of dollars as tenants leave the property messy but not so bad that warrants a breach. We understand that the rental property is the tenants’ home. However, the property is owned by the landlord and they should have the ability to end a tenancy to sell a house vacant.

We see no issue with removing 42 days’ notice and extending this to 90 days’, but we feel that tenants notice period should extend from 21 days to 28 days. This will give a landlord more time to advertise their property to reduce the vacancy period.

Therefore, after careful consideration, we simply cannot support the removal of ‘no cause’ evictions. The decision is based mainly on the grounds of health and safety and the wellbeing of Property Managers up and down New Zealand. We wish for the status quo to remain for both periodic and fixed term tenancies. We do however, have an alternative recommendation in terms of penalising landlords who use ‘no cause’ evictions unlawfully.

Alternative action instead

What has always been apparent is that there is a simple lack of knowledge of rights and responsibilities. This is not just for tenants but also for landlords and disturbingly, many Property Managers as well.

Tenants already have a multitude of rights, the issue is, they do not know this, or they simply cannot be bothered challenging landlords. As such, we have an alternative suggestion to help protect tenants from being subjected to unfair evictions.

  • Increase exemplary damages for unlawful acts to a percentage of the annual rent income rather than a dollar amount and strengthen the penalties that can be awarded against landlords and tenants.

o   Example; currently the maximum amount of exemplary damages for section 54, (Retaliatory Notice) of the RTA is $4,000. It would be a far greater disincentive to make this far higher. For example, expand this to a maximum of 50% of the annual rental income. If a property rented at $450 per week then the annual rent would be $23,400. 50% of this means the maximum exemplary damages award for a Retaliatory Notice is $11,700.

  • Under section 13A of the RTA (Content of a Tenancy Agreement) include that a statement must be on the Tenancy Agreement notifying tenants that if they feel that they have been given unfair notice, they have the right to appeal this under section 54 of the Residential Tenancies Act. As 42-day notice periods are likely to be removed then we can extend the amount of time a tenant can apply to Tenancy Tribunal to 35 working days to give them more time.

 Different Types of Tenancy

 One of the recommendations the report makes is to remove the fixed term tenancy. I do see some logic in this reasoning. Fixed term tenancies can cause issues for tenants and landlords alike. However, they are particularly useful in regard to student flatting situations and gives tenants the assurance that their property cannot be sold from underneath them and it gives landlords assurance that they have tenants for the student year.

However, as the main theory around removing fixed term tenancies was due to the fact that periodic tenancies would convert to fixed term to avoid ‘no cause evictions’ then there is no point to change if the status quo remains. If a tenant is paying their rent on time and looking after the property, then there is no reason to not renew a tenancy.

 Rent Increases

 One recommendation that we do have is that a landlord can only do a rent increase at the renewal date of the tenancy and not half way through a fixed term.

Rarely have we seen rent increases every six months. The vast majority will offer a rent increase on an annual basis. We also have no issue with banning rent bidding.

 Review Osaki ruling and we agree with Pets

 This is one recommendation that we do agree with. Tenants should have the right to own a pet as they can play a major role in the emotional and mental wellbeing of tenants. It is not fair that a family in an owner-occupied property can have a dog, but tenants next door cannot without the landlord’s permission.

However, there has to be changes to the RTA to protect owners and this is where the current proposed changes in the RTA Amendment Bill Number 2 do not go far enough. Whether we like it or not, pets can and will damage rental properties. It is unfair to expect any landlord to have to pay money to rectify accidental damage caused by a pet however this will be the case under the current proposed changes in the RTA Amendment Bill Number 2. Under the proposed section 49B(3) When tenant liable it states that the tenant can only be liable for up to four weeks rent or excess of insurance, but not for each event.

 The infamous Osaki case is finally being dealt with in the Residential Tenancies Reform Bill Number 2. We argue, it doesn’t go far enough with landlords unable to claim multiple insurances excesses for multiple insurance claims. This needs to change if tenants have the right to own pets

The infamous Osaki case is finally being dealt with in the Residential Tenancies Reform Bill Number 2. We argue, it doesn’t go far enough with landlords unable to claim multiple insurances excesses for multiple insurance claims. This needs to change if tenants have the right to own pets

Often, insurers will look at multiple damages by a tenant as individual claims, so the landlord will have to pay multiple excesses. The tenant is only liable for up to four weeks rent. This again is unfair.

If the RTA Amendment Bill Number 2 is altered to ensure that tenants are liable for the excess on each insurance claim made by a landlord, then we will gladly support the allowance of pets.

 In terms of pets, we suggest a new section of the RTA being introduced.

 Section 41A Tenant’s responsibility for actions of pets.

 In this, we propose the following.

  • On request by the tenant the landlord cannot unreasonably deny a request by a tenant to allow a pet.

  • Any pets allowed at the property must comply with local and statutory laws such as the Dog Control Act 1996. If the pet is a dog, then it must be registered with the local council.

  • The landlord can put limitations around the number of pets at the property (similar to occupants)

  • At conclusion of the tenancy, the tenant agrees to have the carpets commercially clean and treated for pests such as fleas.

  • Body corporate rules supersede any rights that a tenant may have in regard to pets.

 Modifications

We agree that tenants should be allowed to make minor modifications to a rental property. Tenants will not be able to make structural changes to the property, this would be in breach of the Building Act and any local council by laws. Likewise, with electrical or plumbing work. Tenants should be allowed to hang picture hooks, put up shelving and other minor alterations.

The only concern we have around this is in regard to painting walls. Landlords should have the right to ensure that any painting is carried out to a professional standard and should have the right to say no if they have concerns around the tenant’s ability to carry out the work.

At the conclusion of the tenancy the tenant and landlord can decide to have the property restored at the tenants expense or leave the property as is.

Boarding Houses

We strongly approve of a Warrant of Fitness being introduced for boarding houses and their operators. The recommendations in the report should be implemented. New Zealand’s most vulnerable citizens often live in boarding houses and they need to be protected. Landlords in breach of standards set around a Warrant of Fitness should find their licence to operate suspended or have work orders enforced on them to make them compliant.

 With an increase in short term rentals on a room by room basis, in particular around Central Otago, we believe that any property being operated under this manner with a tenancy that is greater than 28 days should come under sections Part 2A Boarding house tenancies.


Real iQ Recommendation for Exemplary Damages

 This is what we believe exemplary damages should look like. We also believe that there should be additional exemplary damages for intentional damage of a property, whether it be caused by the tenant, a guest of the tenant or a pet.

This is what we believe exemplary damages should look like. We also believe that there should be additional exemplary damages for intentional damage of a property, whether it be caused by the tenant, a guest of the tenant or a pet.

Enforcement of Tenancy Law

As stated earlier, we believe that enforcement needs to be looked at and in particular, how Tenancy Tribunal operates.

First, we will deal with exemplary damages. The current exemplary damages do not go far enough both for tenants and for landlords. We propose that the penalties should be greater and reflect the annual rent collected.

Example: Breach of section 45.1A Landlords Responsibilities is currently $4,000. This is a serious breach and should be extended to on serious cases such as the ‘Papakura swamp house’ a maximum penalty of 50% of the annual rent with a maximum ceiling of $50,000.

Likewise, the current penalties tenants may face do not go far enough. Tenants do not face exemplary damages for intentionally damaging a property. If I deliberately smashed someone’s car, I would face criminal charges. However, a tenant can deliberately damage a landlord’s property and only be charged the cost of repair and remediation.  

 This brings us to our final recommendation.

 Automate Tribunal Orders for rent arrears only applications

Tenancy Tribunal is slow. With these reforms we predict that we will see more tenants exercising their rights (something we approve) and extending the amount of time it will take to get a hearing. Yet currently, of the 15,000 annual Tribunal hearings, roughly 68% of the hearings are for situations where the tenant is in arrears.

 The Tenancy Tribunal role is to make rulings on disputes, however quite often, when a landlord makes an application solely for rent arrears, there are no disputes. What we propose is as follows.

  • The landlord can apply for termination on the grounds of rent arrears under either section 56 or 55 of the RTA.

  • When a tenant becomes 21 days or more in arrears then section 55 of the RTA applies (Termination for non-payment of rent, damage or assault).

  • The landlord should then send evidence to Tenancy Services proving that the tenant is 21 days or more in arrears.

  • If the application is solely for rent arrears then the adjudicator must provide a possession order of tenancy to the landlord giving possession to the landlord in five working days.

  • The tenants will be notified of the possession order. The time between possession being granted to the landlord will give the tenant time to apply for a rehearing under section 105 of the RTA. If the tenant has evidence that they have paid then a rehearing will be granted within 10 working days of the possession order being granted.

 We believe that this will have the ability to half the Tenancy Tribunal wait time and lead to faster and fairer dispute resolution.

 We believe following this process could half the wait time for a Tribunal hearing. Approximately 10,000 cases involving rent arrears are heard every year in Tribunal. On many occasions the tenant will not even turn up.

We believe following this process could half the wait time for a Tribunal hearing. Approximately 10,000 cases involving rent arrears are heard every year in Tribunal. On many occasions the tenant will not even turn up.

 We agree that Tenancy Services and Tenancy Compliance Investigation Team (TCIT) should have powers to audit landlords and Property Management companies for compliance and have the powers to enter Boarding Houses. We also believe that TCIT should have the ability to issue all three options suggested under Enabling effective and efficient enforcement action.