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Ensuring there are no smoke mirrors

1 January 2016

Get the low down on what your legal requirements could soon be as a landlord or tenant

New Zealand’s property rental sector is in line for a shake-up, and an extra layer of warmth, with the Government confirming every rental property in New Zealand will have to be insulated within four years.

At the same time there are plans to strengthen residential tenancy laws, including requirements for landlords to provide smoke alarms, and to declare the standard of insulation on tenancy agreements.

On current inspection these reforms will require 180,000 homes to be insulated and the 120,000 homes currently without smoke alarms to have them installed.

At $600 million the insulation retrofitting is expected to have benefits of $2.10 for each dollar of this cost. While the smoke alarms expected $7 million price tage will provide benefits of $15.10 per dollar of cost. Officials estimate the flow-on effect on rents for a property requiring ceiling and underfloor insulation and a new smoke alarm to be $3.20 per week.

So while the amendments, under the Residential Tenancies Act, prepare to go before Parliament in October, it pays to brush up on what your rights and obligations will be if passed – either as a landlord or tenant – so you don’t left out in the cold.

What are the proposed changes the Government has outlined?

As mentioned above, the Residential Tenancies Act is to be strengthened with a pragmatic package of tenancy law changes the Government believe will make homes warmer, drier and safer for hundreds of thousands of New Zealand families without imposing excessive bureaucracy or cost.

First cab off the rank is for smoke alarms to be compulsory in all rentals from July 2016. Once in place tenants will be responsible for replacing batteries and notifying landlords of defects.

Next in the four year window is all rental properties must be insulated from July 2019, though exemptions apply to properties where it is physically impractical to retrofit insulation.

There will also be new powers to prosecute landlords for breaking tenancy regulations, particularly where there is risk to tenants' health and safety. The changes also ensure tenants can take concerns to the Tenancy Tribunal without fear of retaliatory evictions.

What will the new smoke alarm standards be?

If passed by the select committee new smoke alarm standards will require a minimum of one working smoke alarm in the hall or similar within three metres of each bedroom door. In a self-contained sleep-out, caravan or similar, a minimum of one working smoke alarm will be required, as per fire service recommendations.

It is important to note it’s the landlord’s respsonsbility to ensure the alarm is operational at the beginning of a tenancy with the tenant assuming repsonsbility for replacing batteries during the tenancy.

Where there are currently no smoke alarms, the new standard will require long-life photoelectric alarms. Long-life alarms cannot easily have the batteries removed, and are more cost-effective over time because batteries do not need to be replaced every six to 12 months.

Where there are existing alarms, that are not long-life photoelectric, these do not need to be replaced immediately, but when they do need replacing, they should be replaced with the new standard.

What the proposed new insulation standards?

If passed the new law will require retrofitting of ceiling and underfloor insulation in rental homes with a minimum ceiling insulation thickness of 70mm, covering all accessible areas above habitable spaces – except where clearances are required around downlights or flues.

In plain English, a habitable space includes bedrooms, kitchens, living space, bathrooms, toilte, and laundry. But excludes garages and storage space (except where garages are used as living or sleeping areas).

Suspended timber subfloors are also to have underfloor insulation in reasonable condition, covering all the accessible subfloor area beneath habitable spaces. Concrete slabs count as underfloor insulation, as does another habitable immediately below.

This will be backed up whereby all landlords must state in tenancy agreements the level of ceiling, underfloor and wall insulation to help better inform tenants.

When could the new insulation standards be put in place?

According to the Government there will be a two-stage approach to implementing the insulation standars:

  • Social housing (housing where tenants pay an income-related rent for a Housing New Zealand or community housing provider home), by July 1, 2016.
  • Remainder of the residential rental market (including boarding houses) July 1, 2019.

Local authority housing and housing owned by the Government other than HNZ (for example, properties owned by school Boards of Trustees) will be required to comply with insulation standards from July 1, 2019.

Will insulation requirements for landlords be tax deductible:

This all boils down to whether it is replacement insulation or new insulation. New insulation is considered an improvement and as a capital expense. For more properties, the insultaion investment will not be tax deductable.

Will the new standards apply to boarding houses and caravan parks?

Yes. The new standards will apply to all tenancies under the Residential Tenancies Act 1986, so this includes boarding house tenancies, and caravans or cabins that are tenanted for longer than 28 days.

Caravans will be exempt from insulation requirements and cabins may be exempt, depending on the design. Smoke alarm requirements will apply to both caravans and cabins.

How will landlord and tenant compliance be monitored and reinforced?

Under the new laws where a tenant considers a property doesn’t meet the insulation or smoke standards (or existing requirements under the Housing Improvement Regulations), they will be able to use existing processes to take a case to the Tenancy Tribunal. From there the Tribunal can make a work order, or order exemplary damages of up to $3000.

In efforts to stamp out a small minority of landlords seeking to take advantage of vulnerable tenants, where severe breaches of the Residential Tenancy Act are alleged, the Government believes it is appropriate that it is able to investigate and, if necessary, take direct action against such landlords, rather than on behalf of the tenant.

The Government will also provide the Ministry of Business, Innovation, and Employment with new powers to to investigate and prosecute landlords for breaking tenancy laws as part of these reforms, particularly where there is risk to the health and safety of tenants.

The changes will also ensure tenants can take concerns to the Tenancy Tribunal without fear of being evicted for doing so.

Other changes proposed to improve current tenancy law enforcement regarding the standards of rental properties?

A big game changer could see removing the ability for a landlord to make a payment to a tenant instead of complying with a work order, where the work order relates to smoke alarm or insulation standards, or the Housing Improvement Regulations. This is to ensure that rental properties are maintained for current and future tenants.

Currently ‘intentional breach’ of a work order is an unlawful act, carrying a maximum penalty of up to $3000. The RTA will be amended to make ‘breach without reasonable excuse’ an unlawful act, with the penalty remaining unchanged – removing a potential landlord defence of ‘forgetfulness’.

What are the details of the tenancy abandonment changes?

The Government is taking a close look at the approach taken in Victoria, Australia to solve the problem when it comes to tenant abandonment.

There will be a new 10-day process introduced to enable re-tenanting of properties where a tenant abandons a property with no intention of returning. The current process can take up to six weeks leaving a house empty and the landlord out of pocket.

The changes are broken down into three key areas:

Allow landlords 24 hours’ notice of entry on suspicion of abandonment      

Currently, landlords can only inspect a property monthly, after giving 48 hours’ notice of inspection.

Under new changes, when rent is at least 14 days in arrears, a landlord would be allowed to enter a rental property 24 hours after giving notice to confirm a reasonable suspicion that a property is abandoned, regardless of whether the landlord has already inspected the property within the last four weeks.

The landlord must have reasonable grounds to support their subsequent application to the Tribunal for suspecting abandonment:

  • Tenant not responding to usual forms of communication
  • Landlord’s view of property from the street indicates house is empty and tenant has abandoned or;
  • Neighbours do not know where tenant is/provide evidence tenants have left.

Abuse of this power to be an unlawful act

Abuse of the this power by a landlord will constitute a breach of tenant privacy with a fine of up to $2000.

New statutory requestion for abandonment (possession) applications to be heard within 10 working days

The proposed changes to the Act that abandonment (possession) applications be heard by the Tenancy Tribunal ‘on the papers’ (without the parties being present) within 10 working days of reciept, where reasonably practicable and subject to the following conditions:

  • The landlord has provided a valid email address which was provided by the tenant in the tenancy agreement, or subsequently, to allow expedited service of notice of a hearing.
  • The application is complete and includes all required information and supporting documents, including evidence of rent arrears of at least 14 days and evidence to support a reasonable suspicion of abandonment.
  • The application is uncontested by the tenant.
- Brierley Conquer 
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