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RTAA2020 - the thereafter

Tuesday, September 15, 2020

IMG SOURCE: Unsplash

Now that the Residential Tenancies Amendment Act 2020 has been passed and is set to be fully implemented by 11 February 2021, we speak to seasoned property manager Katrina O'Connor from Barfoot & Thompson Manurewa about how the renting industry is responding to and adapting to the new law. 

Q. The RTAA 2020 is said to have dramatically increased the risk of landlording in New Zealand. What are you seeing on the ground? 

We are seeing a larger than usual number of properties where owners/their family are either moving back into them or they are being listed for sale.

Whilst it is difficult to be clear on whether this is due to returning family from overseas (the COVID effect), the Healthy Homes standards compliance date looming or the reform of the Residential Tenancies act, anecdotally I am hearing that the reforms are the final nail in the coffin for some landlords who, although good landlords, are feeling inhibited by the changes.

 

Q. What are you doing right now with the tenancies you are looking after to prepare for and meet the challenges of the new law?

A few things:

  • Historically we have encouraged 12 month fixed term tenancies as a starting point for owner and tenants to give both parties some security over the coming year. We are now encouraging owners to weigh up the “security” offered with a fixed term with the “risks” that come with the tenants’ rights to the assignment of the tenancies and are now leaning more towards periodic tenancies.
  • All properties have now had a rent review and rent increase
  • Recidivist debtors who fell behind, caught up and limped along but had been allowed to remain in the property are being reviewed due to the risk of larger debts occurring and also the extra administrative work involved in managing these tenants moving ahead. Each is being assessed based on merit as to whether it would be appropriate to issue a 90-day notice.

 

Q.  Exploring the issuance of a 90-day notice to terminate riskier tenancies, how do you decide which tenancies to terminate/re-let while you still can? 

I consider a few things. In general:

  • If the tenant's behaviour continues without improvement will it be more difficult to end the tenancy through tribunal?

If we have received complaints around the behaviour of the tenants and or their visitors we may have previously have given them the opportunity to modify the behaviour. However, under the new law we will need to issue a tenant three notices for separate anti-social acts within any 90-day period to seek termination through tribunal so rather than leave the issue unresolved we are addressing this now

  • Does the tenant have an ongoing history of rent arrears?

Historically a landlord may have instructed us to retain a tenant who fell in and out of arrear. Now if those recidivist debtors fall into arrears we are asking the landlord to consider a 90-day notice as moving ahead tenants will effectively be able to choose when they pay their rent as we may not be able to end the tenancy until the tenant was 21 days in arrears or if we had issued a notice that a tenant has been at least five working days late with their rent payment on three separate occasions within a 90-day period. The professional “Bad tenants” will now be able to work the system with no fear of a 90-day notice being able to be issued and owners will have less surety of when rent payments may be received.

  • Once this property is upgraded for Healthy Homes obligations, will this tenant be appropriate for the property?

One of my staff used to say a rolling pot will find its lid – in tenancy, it simply means that a mediocre or less appealing property will often find a mediocre or less appealing tenant. With the Healthy Homes Standards, these properties are being improved to being above their “as let” standard and so we must now review those tenancies and now ask will this tenant respect and maintain the property and chattels in the manner we would expect or do we need to be looking to issue 90-day notice now?

 

Q. Have you changed the way you select tenants since the RTAA became law?

Yes.

 

Q. The logical thing to do in the face of increased risk is to mitigate. We imagine there will be plenty of landlords and property managers doing exactly what you are doing right now, shifting riskier tenancies off their books. What has been your experience so far finding good quality tenants to let your clients' properties to?

There are many great tenants looking for homes whether it is due to the influx of COVID returnees, properties being listed for sale etc however moving ahead it may be that not all properties are listed publicly for rent. Currently, we have good tenants who will be needing to relocate due to properties selling, they will likely get first option on the properties that we may have coming available where tenants are vacating or have been issued a 90-day notice. The competition for great tenants is not just about rent - it's a combination of the property, the price and the relationship. We recently rehomed a tenant who had rented with us previously, the property owner decided to self manage that property and the tenant approached us to be placed into another of our listings as they preferred the consistency of renting through a middle man rather than having to address those uncomfortable things that may arise with the property owner directly.

 

Q. Do you think good tenants will have more pricing power going forward?

I don’t believe there will be an advantage to tenants in regards to “pricing power” when obtaining a property - there are literally thousands of GREAT tenants out there. However, where I think those great tenants will have the power is when they rent from a property management company they will likely be given priority around future homes they wish to apply for within the same agency. It is also more likely for private landlords to keep rents lower in a misguided belief that this will retain those tenants however from a management company perspective we do not see good tenants moving out of a good property as the result of a rent increase.


Barfoot & Thompson is a Gold Sponsor of the APIA and offers professional property management services Auckland-wide. Click here for more information on its services. Katrina will be the guest of our upcoming APIA Unscripted session on How to reference check your tenant Thursday 17th September. Click here for more information and to register.


 


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