Understanding The Residential Tenancy Act Changes for Landlords

The Residential Tenancies Amendment Act 2020 has now passed into law with provisions relating to termination of tenancies coming into effect on 11 February 2021. To get a better understanding of the implications of these changes, we sat down with Samantha Arnold, General Manager, Property Management, and In-House Advisor Megan O'Callaghan.

What are the key changes landlords should be aware of?

Let’s start with the first one which is that landlords will not be able to end a periodic tenancy without a reason.

Putting your house on the market, this is what you need to know:

Penalties

There will now be significant penalties for landlords failing to give tenants’ written notice that a property has been put on the market, or not informing prospective tenants of this fact. Up to $1800 exemplary damages can be awarded for a failure to notify tenants that premises are on the market, and a fine of between $500 to $3000 for not notifying prospective tenants (depending on the number of properties the landlord owns).

Notice periods

Notice periods for unconditional sale or putting on the market after the termination date, a key change to note is that at least 90 days notice for a periodic tenancy is required if:

The owner is required to give vacant possession under an unconditional sale agreement (an increase from 42 days);
The property is to be put on the market for sale by the owner within 90 days after the termination date.

How does that work in practice?

If the owner wants to market the property while the tenants are in occupation but sell with vacant possession, they need to, first of all, notify the tenants that the property is going on the market (this existing legal obligation remains under the new law). Then, when the owner gets an unconditional sale, they will need to give 90 days' notice to the tenant that vacant possession is required. For example, if they list the property on 1 March 2021 (notifying the tenants) and secure an unconditional sale on 1 April 2021, they should then issue the tenants with a 90-day notice which states this reason for ending the tenancy vacant possession. This would mean that the settlement date would need to be around 1 July 2021 allowing for the 90 days notice and adding on any additional service days. The process is the same as the existing law with just an increase from 42 days to 90 days' notice.

What else do owners need to know about putting their property on the market?

If an owner intends to market the property and sell after the tenants have vacated the property, then they are also required to give 90 days' notice. In this case, the owner is expected to give notice and wait until the notice period expires and the tenant vacates before putting the property on the market. After the tenant then vacates, the owner should then list the property within 90 days of the tenant leaving. So, if you wanted to put the property on the market on 31 May 2021 you would need to give notice around 28 February 2021 or slightly earlier to allow for service times. With the tenant having vacated, vendors have the flexibility to settle as soon as possible and access the property freely to complete renovations to improve its market value.

For periodic tenancies, tenants can give 28 days’ notice in response to a 90-day notice received from a landlord (this is an increase from 21 days). If this happens in the case of an unconditional sale, there could be scope for a settlement to be brought forward.

Are there other instances when 90 days notice needs to be given?

Yes, 90 days’ notice must also be given if:

The premises have been acquired by the landlord /owner to facilitate the use of nearby land for a business activity requiring vacant premises;
The premises are to be converted into commercial premises;
The landlord /owner intends to carry out extensive alterations, refurbishment, repairs, or redevelopment of the premises, and: it is not reasonably practicable for the tenant to remain in occupation while the work is undertaken and work is to begin or material steps towards it are to be taken within 90 days after the termination date;
The premises are to be demolished (and demolition will begin or material steps towards it will be taken within 90 days of the termination date).
The landlord is not the owner and their interest in the premises is due to end.
These situations will be relevant where purchasers have development plans and need to give notice to tenants after settlement.

Are there other notice periods to be considered?

If landlords or their family members intend to live in the premises, or the landlord has acquired the premises for their employees’ use, at least 63 days' notice must be given (an increase from 42 days).
If the tenant has physically assaulted the landlord or their family and the police have laid a charge, a 14 days notice can be given.
A tenant can give a minimum of 2 days' notice to withdraw from a tenancy if they have been a victim of family violence.

What about termination for other reasons? (Not by notice)

Periodic tenancies can only be ended by the landlord for one of the following reasons without notice:

The landlord issued a tenant three notices for separate antisocial acts in a 90 day period. Antisocial acts can be defined as harassment; or any other act or omission (whether intentional or not), if the act or omission reasonably causes alarm, distress, or nuisance that is more than minor.
The landlord gave notice that a tenant was at least five working days late with their rent payments on three separate occasions within a 90 day period.
The landlord will suffer greater hardship than the tenant if the tenancy continues.
Existing provisions relating to rent arrears, damage, assault, and breaches still apply.

What penalties have been introduced?

The new law brings in fines and maximum penalties for a whole series of offences or unlawful acts. They range in value from $350 for a landlord demanding rent in excess of a market rent order to $7,200 for premises failing to meet its obligatory level of cleanliness, maintenance, smoke alarms, and reaching the healthy homes standard.

The amount of the fine will now depend on how many properties a landlord has with larger penalties for landlords that have six or more properties.

Are there other key changes you would highlight?

Yes, it’s also important to note that fixed-term tenancies will become periodic tenancies at the end of the fixed term unless:

A landlord gives notice using the reasons listed in the RTA for periodic tenancies.
A tenant gives notice for any reason at least 28 days (increased from 21 days) before the end of the tenancy.
The parties agree otherwise, e.g. to renew the fixed term or to end the tenancy.

Now that we have covered the key changes, what other changes should landlords know about?

Landlords need to be aware of these changes that have also come into force.

Fibre connection - Landlords will have fewer reasons to stop tenants getting ultra-fast broadband installed. Tenants can request to install fibre broadband and landlords must facilitate installation if this can be done at no cost to the landlord.

Assignment - Landlords will have to allow tenants to transfer their "interests and responsibilities" to a new tenant unless the landlord has a "reasonable" reason to decline it. Fixed-term tenancy agreements cannot prohibit assignment.

Minor alterations - Landlords won't be able to withhold consent to minor changes to the premises, such as repairs and work that doesn't require a consent, damage the property or have an "unreasonable negative effect on any person’s enjoyment or use of any property outside the premises". Examples given by Minister Kris Faafoi include, "brackets to secure furniture and appliances against earthquake risk, baby proof the property, installation of visual fire alarms and doorbells and items to hang pictures". The landlord can impose reasonable conditions around how that minor change is carried out and tenants must remove the minor changes and remediate the property when the tenancy ends.

Healthy homes - Landlords will have to provide details of how the property meets the Government's healthy homes standards within 21 days if a tenant requests it.

Recovery of costs relating to assignment, subletting or early release from a fixed-term - As per the current law, these costs can be recovered if they are reasonable and the situations in which a landlord can recover is now extended to include subletting. Now a breakdown will need to be given.

Is there anything you want to share in closing?

Landlords can look to their property managers for advice, guidance, and to ask questions. That is what we are here for. Don’t hesitate to pick up the phone or to send an email. We’ve touched on the key changes but there are other changes worth noting. You can find out more about all these changes using these links: