Taranaki Property Investors' Association

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23-07-2009

NZPIF submission on the RTA Amendments Bill Pt 1

Submission of the

 

New Zealand Property Investors’ Federation Inc

 

to the

 

Social Services Select Committee

 

examining the

 

Residential Tenancies Amendment Bill

July 2009

  

Martin Evans
President
New Zealand Property Investors’ Federation Inc
PO Box 20039, Bishopdale
Christchurch
Email: Martin@a1prop.co.nz
Ph: (03) 351-7643
Mobile: 027 222-8286

 

TABLE OF CONTENTS

 

SUMMARY 3
RECOMMENDATIONS 3
NZPIF 6
Industry BACKGROUND 6
What is the extent of the private rental industry? 6
Who rents? 6

What does the private sector offer

6

Is renting such a bad thing?

7

Preliminaries

7

BILL - Clause by clause analysis

Clause 4 Interpretation

Clause 9 Contents of tenancy agreement

Clause 10 New section 13AB inserted “13AB Address for service

Clause 13 inserts new sections 16A and 16B

Clause 14 New section 18A inserted18A Landlord security

Clause 15 amends section 19. Landlord’s duties

Clause 22 Tenant’s goods not to be seized

Clause 23 New section 39 substituted - Responsibility for outgoings

Clause 24 Tenant’s responsibilities

Clause 26 Assignment and subletting by tenant

Clause 27 Landlord’s responsibilities

Clause 28 Landlord’s right of entry

Clause 31 Termination by notice

Clause 35 Termination on non-payment of rent, damage, or assault

Clause 38 Destruction of premises

Clause 40 New sections 60A to 60C inserted

Clause 41 Abandonment of premises

Clause 42 Abandoned goods

Clause 58 New sections 86 and 87 substituted

Clause 66 Costs

Clause 69 amends section 109

Clause 79 Residential Tenancies Trust Account

8

Principal Act

Section 17 Requiring key money prohibited

 

 

SUMMARY

The New Zealand Property Investors’ Federation welcomes the opportunity to input into the Residential Tenancies Amendment Bill.

The proposed legislation is well-intentioned and rightly clarifies and rebalances the rights, obligations and penalties imposed on landlords and tenants as many of the law’s current provisions are inconsistent, iniquitous and weighted against landlords.

Landlords have a great deal of capital invested in the residential tenancy market and provide an invaluable service to the community. It is only reasonable that the law recognises the contribution of landlords and their need to be fairly protected.

Balanced and fair residential tenancy laws are essential if landlords are to continue providing rental dwellings and accommodation for people in New Zealand.

RECOMMENDATIONS

 

Clause 4 (2) Interpretation

That a new sub-clause be inserted: “(g) any other person who is a trustee of a trust and director of a company

 

Clause 9 Contents of tenancy agreement

That the proposed new sub-clause “(na)” be omitted

 

Clause 10 New section 13AB inserted “13AB Address for service

 

That the clause should enable and recognise the address for service given as a Lawyer or Accountants address be acceptable.

Email addresses should not be permitted as an “address for service”.

Clause 13 inserts new sections 16A and 16B

The Bill specifies that an agent can be a friend or family member

That the change of landlord form should be temporary or allow Property Investor Associations to have ability to refund bonds. An agent can have all the necessary forms but would not file them unless an incident occurred.

Clause 14 New section 18A inserted

18A Landlord must not require security other than permitted bond

Delete 18A

Clause 15 amends section 19. Landlord’s duties under the Act to pay bond monies also apply to partial bond payments

The Bill should amend the Act to enable a minimum of two and a maximum of 12 weeks (in line with the 90 day termination period), negotiated bond agreement between landlord and tenant

Clause 22 Tenant’s goods not to be seized

Landlords should not be required to keep a former tenant’s items after the tenancy has ended, unless suitable arrangements have been made, and should be entitled to dispose of it accordingly 

Clause 23 New section 39 substituted - Responsibility for outgoings

That section 39 (1) and (2) of the principal Act be amended to reference service connection fees but excluding reconnection fees due to disconnection following a tenant failing to pay their account) and all charges for water supplied to or from the premises (including the cost of charges for standard meter readings) if the charge is identifiable to the premises and the period of occupation by the tenant be payable by the tenant.

Clause 24 Tenant’s responsibilities

Damages should be $3,000 in line with landlord breaching a works order

New sub-clauses be inserted

24(3A) (e) non-compliance with relevant and applicable body-corporate rules

24(3A) (f) gaining a tenancy through a false identity or information

24(3A) (g) wilfully damaging property

24(3A) (h) tampering with fitted smoke alarms

24(3A) (i) Tenants stopping their rent payments after they have given notice to end a tenancy

Clause 26 Assignment and subletting by tenant

Damages should be $3,000 in line with landlord breaching a works order

Clause 27 Landlord’s responsibilities

Delete 45(1A)

Clause 28 Landlord’s right of entry

The Bill define what constitutes “reasonable time” and we suggest that this be: times between 8am and 7pm. , The clause should also provide for the making of consent within 2 days subject to any reasonable conditions.

 

Clause 31 Termination by notice

s31(2) be amended by inserting an additional sub-clause, to read:

(b) Owner of the premises includes a Trustee of a family trust and or a Director of a company

Clause 35 Termination on non-payment of rent, damage, or assault

Damages should be of the level of $2,000 in line with a landlord using force to enter a premise

Clause 40 New sections 60A to 60C inserted

Section 60A should include - during the last 21days of a fixed term tenancy either party can give 21days notice if no other agreement has been entered into.

That Section 60C be further clarified as currently when resigning at the end of a fixed term the rent can increase. This implies 60 days notice must be given prior to the increase.

Clause 41 Abandonment of premises

Damages should be of the level of $3,000 in line with landlord breaching a works order

Clause 42 Abandoned goods

Clause 42 be amended to reflect Clause 25 ie abandoned goods pass to the landlord unless arrangements have been made.

Clause 58 New sections 86 and 87 substituted

There should be some terms guiding the CE’s decision making

Clause 66 Costs

This clause must be included in standard tenancy agreements

Clause 69 amends section 109

The jurisdiction of the Tenancy Tribunal should be extended to include an Order of Examination and an Attachment order at the time of the hearing

Clause 79 Residential Tenancies Trust Account

Unclaimed and abandoned bond monies amounting to around $6million should be retained by Tenancy Services to assist and fund Tenant and Landlord education initiatives

Other amendments to the Principal Act

Clause 17 Requiring key money prohibited

The clause be amended to enable property managers in the grant or assignment of the tenancy to charge any fee or other for services rendered

New Zealand Property Investors’ Federation

This submission has been prepared by the New Zealand Property Investors’ Federation Inc (the Federation) in response to the select committee invitation to provide feedback on the Residential Tenancies Amendment Bill.

Established in 1983, the Federation has twenty affiliated local associations situated throughout New Zealand. It is the national body representing the interests of over 7,000 property investors on all matters affecting rental-housing.

The Federation welcomes this opportunity to participate and comment on the draft legislation.

INDUSTRY BACKGROUND

To assist readers understand the extent of the economic and social importance of the private rental industry in New Zealand and the implications of residential tenancies legislation the following background points are offered.

What is the extent of the private rental industry?

  • According to a recent survey of property investors it was estimated that there are over 300,000 landlords in New Zealand. There are no corporate or institutional residential landlords.
  • There are over 464,000 residential rental properties, housing over 600,000 tenants, and worth around $150 billion.
  • Private landlords are the largest providers of rental accommodation in New Zealand.
  • 81% of tenants rent from a private landlord or trust.
  • Median weekly rent for all accommodation is $300. The amount spent on rent each week is $64 million and annually this is $3.3 billion.
  • Assuming a 20% equity rate on a $257,000 property , the amount spent on mortgage interest payments, at 8% interest, ($16,000pa) is $4.8 billion. ,
  • Most property investors (57%) have been engaged in the business for 10 or more years, which dispels the myth that people are investing in property to make a “quick buck”. Instead, property investors are using their rental income business as a mechanism for saving for retirement and are professional and committed long-term service/accommodation providers.

Who rents?

  • Census information shows 366,000 New Zealand households pay rent, up from 272,000 in 1996 with an average tenancy of around a year-and-a-half, with the average just 16 months for those with private landlords.
  • Renting in New Zealand is very low by OECD standards. In Canada 34.2% people rent, France 44%, The Netherlands 45%, Denmark 47%, Sweden 54% and Germany 55%
  • There is a growing demand for private rental market places and the number of people living in flats or apartments is likely to increase.
  • Despite property price falls and reductions in interest rates, the cost of renting the NZ median priced home in May 2009 was $9255 cheaper per year than the cost of owning the same property

What does the private sector offer?

  • Private landlords provide rental accommodation to those seeking short or long-term housing options.
  • Private rental housing owners are the most flexible and cost effective means of providing housing stock and accommodation to New Zealanders.

Is renting such a bad thing?

Renting is increasing in popularity for a multitude of reasons including:

  • Life style choice
  • Increasing numbers of young people wanting to travel or study,
  • The idea of settling down has not appealed –
  • Burden of student loan debt
  • Raising a mortgage and the risk of interest rate rises does not appeal;
  • Larger deposit requirements are a barrier.
  • Higher cost of renting over home ownership
  • Flexibility to move quickly if required

No responsibility for maintenance and repair issues

The private rental sector plays a very significant role housing New Zealanders and makes a huge contribution to the overall housing system, the economy, and downstream industries.

The private rental sector sustains a range of businesses including the financial, legal, accountancy, property managers, tradespersons, cleaners, gardeners, suppliers (of appliances, carpets, wall coverings, etc) and other professionals over decades.

With this critical contribution it is important to acknowledge that the rental housing market works well. Good and reasonably priced rental accommodation provides a healthy living environment, positively affects New Zealand’s standard of living and contributes directly to the productive sector and indirectly through assisting workers to be healthy.

Preliminaries

It has been suggested by some commentators that renting and specifically more people renting is somehow a problem.

There is no basis for this viewpoint. To balance this perspective, renting is considerably cheaper than owning your own home. Renting carries fewer risks of events such as interest rate fluctuations and provides more accommodation flexibility.

The residential rental market is highly efficient and works well.

To this end, the Federation is supportive of the Bill. Its proposed legislative reforms are needed to bring the Residential Tenancies Act 1986 up to date with the modern rental market and modern needs.

Although the current Act is working reasonably well, there are a number of areas where it can be improved.

CLAUSE BY CLAUSE ANALYSIS

The proceeding commentary follows the headings and numbering sequence of the Bill.

Clause 4(2) Interpretation

The Federation believes that the definition concerning “member of the landlord’s or owner’s family” should also include trustee of a trust and director of a company.

Property is often owned through a third party such as family trust or Loss Attributing Qualifying Company (LAQC). Under the proposed amendment these people would be excluded.

Recommendation

That a new sub-clause be inserted: “(g) any other person who is a trustee of a trust and director of a company

Clause 9 Contents of tenancy agreement

The clause proposes that if the premises have had to be cleansed under a statutory order (e.g. because the premises have been contaminated due to methamphetamine or “P” manufacture) this be disclosed in the tenancy agreement.

The Federation believes this disclosure requirement is unnecessary. If a premise has been professionally cleansed to the satisfaction of a territorial authority, there is no risk or disadvantage to the prospective tenant. This may then create a further downside for the proposal. It may mean the landlord is not liable in any later tenancy issues as the territorial authority has issued an approval for habitation. In other words, the territorial authority would carry any future health implications.

Further, the proposed disclosure would unfairly penalise the landlord, a victim under these circumstances, doubly. Firstly, for the initial cost of the incident (eg decontamination, lost rent, testing, certification, etc) and secondly the potential for not being able to re-tenant the rectified property or only for a reduced rental.

There are many different levels of initial contamination; however the proposed disclosure would be indiscriminate. A recent case publicised on TV3 news saw the tenant abandoning the property and seeking recompense from the owner when only a trace level of P was found on a light bulb, most likely placed there by the tenant themselves or an invited guest. Under the current proposal, this would then have to be notified on the Tenancy Agreement for an undisclosed period.

Following cleaning and being certified as safe and healthy to live in, then the owner can do nothing more. Rental property owners should not be penalised further, especially when they have no method of ever correcting what has occurred. 

If a rental property has been certified safe and healthy to live in then it should not be necessary to insinuate a problem through a permanent notification on the tenancy agreement. If the regulations regarding certifying a property as fit and healthy for living in are inadequate, then these should be altered.

Recommendation

That the proposed new sub-clause “(na)” be omitted.

Clause 10 New section 13AB inserted “13AB Address for service

Many landlords are highly vulnerable to the actions of disenchanted tenants. A tenant who has been evicted for not paying their rent may want to take out their frustration on a landlord. By knowing the home address of their landlord it is easier for them to locate the landlord and either assault them verbally or physically, or damage their home or other property.

A landlord should have the ability to protect their own peace, comfort and privacy by having the option to offer a different physical address for service than their private home.

The clause at 2(b) enables the specification of an email address for the purposes of “address for service”. The Federation sees two major flaws with this, namely, if the email recipient changes address there is usually no redirection order for emails sent to the old address and there is no guarantee that the recipient is going to open them.

Recommendation

The Federation recommends that the clause should enable and recognise the address for service given as a Lawyer or Accountants address be acceptable.

And, email addresses should not be permitted as an “address for service”.

Clause 13 inserts new sections 16A and 16B

New section 16A proposes landlords who are absent from New Zealand for longer than 21 days to appoint an agent and to notify the tenant of the agent’s name, contact address, and address for service.

Property Investor Associations currently encourage members to provide an alternative contact person for tenants when they are out of the country. Many members form support groups between members that works very well.

We are eager to ensure that these arrangements are able to continue following the additions of section 16A and B to the Act. Consequently we want to make it explicit that an agent can be a friend or family member.

Recommendation

The Bill specifies that an agent can be a friend or family member.

The new section also states that if a bond is held in respect of the tenancy, the chief executive must be notified of those particulars in the prescribed form. An agent appointed under this section has all the rights and obligations of the landlord regarding the tenancy.

It is highly unlikely that a tenant will give notice during the time that a landlord is out of the country. The Federation believes that this proposal will create an administrative burden for landlords and the Bond Centre, that will be unnecessary in the vast majority of cases.

An alternative arrangement could be to have both the landlord and the agent sign a form recording the appointment of the agent. In the event that the agent is required to arrange for a bond refund to the tenant, a copy of this form can be sent with the bond refund form so that the Bond Centre can verify the legitimacy of the refund.

Recommendation

The Federation recommends that change of landlord form should be temporary or allow Property Investor Associations to have ability to refund bonds. An agent can have all the necessary forms but would not file them unless an incident occurred.

New section 16B

The Federation supports this section.

This is consistent with proposed revisions in the Unit Titles Bill. As part of section 25 (see below) compliance with body corporate rules should be part of “Tenant Responsibilities” and non-compliance be included as an “unlawful act”.

The proposal that the body corporate rules are deemed to be and form part of the tenancy agreement is fair and sensible. Body corporate rules establish codes of conduct and practices for the better operation and regulation of the property for owners and residential tenants.

Tenants at all times must abide by the body corporate rules. In the event tenants are in breach of the rules, subject to appropriate notice from the landlord (or property manger) to the tenant the offence(s) should be considered an “unlawful act” and subject to exemplary damages.

Clause 14 New section 18A inserted
18A Landlord must not require security other than permitted bond.

The Federation believes that using a credit card facility agreed with and authorised by a tenant should be a legitimate form of Bond payment. Tenants often don’t have the funds to provide a bond when signing a tenancy agreement and this would provide security for a landlord until the tenant can fully pay their bond in the regular manner.

Continuing the ability for landlords to be able to use a credit card facility until the Tenant is able to pay the bond would provide security for the landlord and make them more inclined to accept the tenant, thereby making it easier for the tenant to secure rental accommodation. 

Recommendation

Delete 18A

Clause 15 amends section 19. 

Landlord’s duties under the Act to pay bond monies also apply to partial bond payments.

Section 19B should be amended so that the landlord must lodge the initial bond payment within 23 working days but if the balance of the bond is being paid off then the balance should not have to be lodged until all the balance is received. It is common for the tenant to pay 2-3 weeks at the start and pay the rest off at say $50 per week.

In reference to the principal act – bonds are currently restricted to be no more than 4 weeks' rent. There may be circumstances where a bond in excess of 4 weeks is desirable where a tenant has either a bad track record or is a flight risk such as an overseas resident in New Zealand temporarily.

A move to a bond in excess of a 4-week bond would assist Residential Tenancy Services income through additional interest earned on the funds.

Recommendation

The Bill should amend the Act to enable a minimum of two and a maximum of 12 weeks (in line with the 90 day termination period), negotiated bond agreement between landlord and tenant.

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