Why all the fuss and how will the Bill effect landlords and tenants? Some are saying that the Bill will result in landlords throwing their hands in the air and selling their rental properties. That will result in fewer rental properties, increased demand, and subsequently increased rents. Maybe, but we don’t think that there will be any substantial ‘sell-off’ of investment properties by landlords. Yes, we’ll have to work a bit differently and probably a bit smarter – but we’re already good at doing that. The major changes the Bill is likely to bring about are:
• Getting rid of a landlords’ ability to use 90-day “no cause” terminations.
• Requiring that fixed-term tenancies automatically become periodic tenancies once the fixed term ends, unless otherwise agreed. (note: while we are still awaiting the final drafting of this clause, we believe (and hope) we have a strategy in place to deal with this aspect already)
• Extending the notice period tenants must be given (on a periodic tenancy) if the landlord wants to sell or move into the property.
• Limiting rent increases to once every 12 months instead of every six.
• Banning rental bidding.
• Allowing tenants to make minor alterations to a rental property such as babyproofing, hanging pictures, and earthquake proofing.
• Enabling the Tenancy Tribunal to award compensation or order work to be done up to $100,000 (up from the current maximum of $50,000).
Of the proposed changes the ‘biggie’ in our view is the ‘no cause’ termination. Waving goodbye to a problematic tenant by giving them 90 days’ notice or not automatically renewing their fixed term tenancy is going to be considerably harder in the new rental environment. Landlords will have to know the law. As well they will have to be very proactive in carrying out due diligence on tenants before offering a tenancy, because once in place it will be much harder for landlords to end a tenancy. Our advice is – be prepared to allow more time between tenancies so that your Property Managers can carry out the required level of process checking on potential tenants.