The New Zealand Property Investors’ Federation (NZPIF) is extremely pleased that the Hon Phil Heatley, Minister of Housing, is to advance the Residential Tenancies Act Amendment Bill (No 2). When the Bill was first introduced into Parliament in May 2008, it was stated that the proposed changes would create a better balance between the rights and responsibilities of tenants on the one hand, and those of landlords on the other.
The then Minister of Building and Construction, commented at the time, “Another key proposal will introduce sanctions for landlords who fail to meet their maintenance responsibilities. Landlords will also be able to seek damages for some tenant breaches. Both landlords and tenants will benefit from improved clarity around rights and obligations, and from improved dispute resolution and enforcement processes.”
There are many items in the Bill the Federation is keen to see implemented. These include the using of emails as addresses for service, the recovery of expenses incurred when recovering overdue debts, and the adding of several new unlawful acts such as exceeding the maximum number of tenants allowed in a property and not leaving the property on the appointed departure date.
The most welcomed part of the Bill is the making of abandonment of the premises without reasonable excuse an unlawful act. This means the landlord can receive exemplary damages of up to $1,000. The situation of rent arrears is by far the main reason for applications to the Tenancy Tribunal and a leading problem for the entire industry. This is the first time that any deterrent has been applied to tenants who vacant properties owing rent.
“I think it sends a message that paying your rent is important and there are now consequences if you choose to run away from your debts” says NZPIF President Martin Evans.
The Federation has been particularly concerned about three parts of the Bill. These are limiting tenants liability for damage, introducing professional advocates into the Tenancy Tribunal system and the ability to charge a letting fee. It is now understood from the Minister’s recent public comments that the first two parts are to be changed when the Bill goes forward.
The idea of limiting a tenant’s liability for damage and passing the cost of this on to the landlord flies in the face of personal responsibility. Apart from the absurdness of landlords having to pay for insurance that only benefits tenants, the Insurance Council has said that this is the most expensive method of providing such insurance. If the beneficiary of the insurance does not have any cost applied to them for any of their actions, then this will lead to higher levels of damage. As a result of this, insurance premiums would need to be higher than those which would be applied if the tenant took out the insurance himself or herself.
The Federation also believed that the initiative would have led to double insurance as the vast majority of tenants have contents insurance. This gives them the same cover for any accidental damage they cause to their rental property.
The NZPIF has argued for many years that if Government believes that tenants need compulsory insurance protection then the cost should be applied to tenants. After all, it is the tenants who are getting the benefit of the insurance. If they have contents insurance then they are already covered. If they don’t want or need contents insurance then they can take out the cheaper Third Party Liability insurance option instead. Landlords shouldn’t be involved as they are independent third parties.
With regard to use of advocates by tenants at Tenancy Tribunal hearings, consultation with landlord groups in Australia has made the Federation aware of the difficulties for landlords when advocates are involved. Although originally advocates were to be just for tenants, the idea was changed to enable landlords to have advocates as well. While this may appear fair, the experience of Australian landlords has been that it is far from being fair and has resulted in a lack of justice for landlords.
The reason for this is that, in Australia, tenant groups are granted millions of dollars every year so that they can supply free advocates to tenants. This has effectively established an industry which is funded by public money, forcing landlords to either pay for their own lawyers, who are often cost prohibitive, or to argue their cases against trained professionals who know the law backwards as they are handling tenancy cases on a daily basis.
The NZPIF is extremely relieved that this issue is going to be looked at again before the Bill progresses further and congratulate the Government on their decision.
Finally the issue of the letting fee. The current RTA states that a real estate agent or a lawyer can charge a letting fee to tenants. The NZPIF supports the amending of this section to state that a property manager as well as a lawyer can charge a letting fee to tenants. Alternatively, the Federation would like to see the ability to charge a letting fee withdrawn altogether so that there is a fair and level playing field.
In 1986 when the RTA was introduced, real estate agents did casual letting for which they charged tenants a fee. At that time, there were very few property managers as small business computers and property management software were rare. Hence the wording in the Act .
Since then full property management has blossomed within the Real Estate industry and private property management offices and companies have increased in number. Some private landlords still use property mangers to let their investment properties but handle the on going management themselves. Independent property managers are often asked by investors to provide this service of finding tenants for a fee but are disallowed by the current dated clause in the Act. For this reason, the NZPIF would like to see either all people arranging tenants for property investors being able to charge a letting fee, or none of them.