Relationships between residential landlords and tenants have recently had a shake-up with changes to the Residential Tenancies Act 1986 (RTA) which took effect on 11 February 2021. According to Associate Minister for Housing, Hon Poto Williams, “for the first time in nearly a generation, our rental laws are fit for the times”.
The main aim of the new legislation is to enable tenants to “make their house their home” and put down roots in their communities by improving their security of tenure. Williams also says that the new laws provide protections and improve security and certainty for both landlords and tenants. These are certainly honorable goals but what do the changes mean for landlords and tenants in practice?
No More No-Cause Termination
The most important and controversial change is that landlords are no longer able to terminate a periodic tenancy without cause on 90 days notice. If a landlord wishes to terminate a tenancy they will need to rely on one of the grounds for termination set out in the RTA and provide the appropriate notice to the tenant. Some new grounds for termination have been introduced which all require 90 days notice to be given to the tenant. These include:
- Where the landlord does not own the premises (e.g. they are a sublandlord) and their interest is due to end.
- The landlord acquired the premises to facilitate the use of nearby land for a business activity and that fact is stated in the tenancy agreement and the premises are required to be vacant of residential tenants to facilitate that use.
- Changes to the property are being undertaken such as converting it to commercial premises, extensive alterations or demolition.
The notice requirements for some of the existing grounds have also been increased:
- Where the landlord or their family member(s) are moving in or where the premises are customarily used as employee or contractor accommodation the notice requirement is now 63 days (up from 42). Note that the right to terminate is also conditional on the landlord or their family member(s) requiring the premises within 90 days of termination to be used as principal place of residence for at least 90 days.
- Where the owner is putting the premises on the market within 90 days, or has sold, and the agreement provides for vacant possession the notice requirement is 90 days (up from 42).
The requirement for both fixed term and periodic tenancies that the rent be 21 days in arrear before the landlord can apply for a termination order remains. In addition, however, landlords can apply for an order terminating a periodic tenancy if, on three separate occasions within a 90 day period, the rent has been in arrear for five or more working days.
Landlords can now apply to the Tenancy Tribunal for an order terminating a periodic tenancy if, on three separate occasions within a 90 day period, the tenant or their invitee engaged in “anti-social” behavior. What constitutes anti-social behavior is not entirely clear but it includes harassment or anything else that “reasonably causes alarm, distress, or nuisance that is more than minor”.
Landlords will soon also be able to terminate a tenancy (whether fixed term or periodic) on 14 days’ notice if they, a family member or agent are assaulted by the tenant. Previously landlords needed a Tenancy Tribunal order. For landlords to use this provision charges must have been filed by the Police. However, note that if the tenant challenges the notice in the Tenancy Tribunal before the termination takes effect, the tenancy will not terminate until an order terminating it is made by the Tribunal. When this provision comes into effect is to be decided by the government but it will be on or before 11 August 2021.
Tenants can still terminate a periodic tenancy without cause though they are now required to give 28 days notice (up from 21).
Automatic Periodic Tenancy after Fixed Term
At the end of a fixed term tenancy (other than a short term tenancy) the tenancy automatically converts to a periodic tenancy. This is nothing new but what is new is that, for tenancies signed after 11 February 2021, landlords can no longer prevent the automatic conversion by giving notice prior to the expiry of the fixed term. Given landlords can no longer terminate periodic tenancies without cause, landlords need to be aware that their ability to end a tenancy at the end of a fixed term is no longer a given.
There is a notable exception to this rule where, before the expiry of the fixed term, the landlord and the tenant have agreed not to continue with the tenancy. Landlords may wish to consider obtaining the agreement of tenants at the beginning of the tenancy.
- The new law includes a host of new “unlawful acts” and “infringement offences”, the contravention of which potentially opens the perpetrator up to an order for exemplary damages (in the case of unlawful acts) and fines (in the case of infringement offences). The maximum fines for infringement offences have also been increased.
- Landlords must state the rent when advertising the tenancy and cannot invite or encourage prospective tenants to offer more. Note that prospective tenants may offer a higher rent of their own accord.
- Landlords are not to unreasonably withhold consent to a tenant’s request to assign their tenancy.
- Tenants may make minor changes to the premises without landlord consent and landlords must not unreasonably withhold consent to any other fixture, renovation or addition. Landlords can impose reasonable conditions, however.
- Landlords must allow fibre to be installed in the premises provided such a connection is possible and it can be installed at no cost to the landlord. Exceptions to this rule are where the installation would compromise the building’s weathertightness or structural integrity or would breach a restriction that applies to the premises.
- To prevent landlords and tenants being blacklisted for insisting on their rights, a party who is successful or substantially successful in their claim to the Tenancy Tribunal can apply for their name and other identifying details to be suppressed.
- The Tenancy Tribunal can now hear claims of up to $100,000 (up from $50,000).
With these changes to residential tenancy law, it is now more important than ever that landlords and tenants are aware of their rights and obligations. Landlords in particular need to ensure they plan for the future and vet prospective tenants carefully.
If you have any questions about the changes to the Residential Tenancies Act, please get in touch with our Property Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.