Residential Tenancies Amendment Bill

  • enacted

Residential Tenancies Amendment Bill

Government Bill

218—2

As reported from the Social Services and Community Committee

Commentary

Recommendation

The Social Services and Community Committee has examined the Residential Tenancies Amendment Bill and recommends (by majority) that it be passed with the amendments shown.

Introduction

The Residential Tenancies Act 1986 came into force over 30 years ago to govern a rental market very different to the rental market today. This bill seeks to make a number of changes to modernise the Act. It would also make changes to the rights and obligations of tenants and landlords.

The bill would:

  • increase the security of tenure for tenants who are meeting their obligations by removing a landlord’s right to use “no cause” terminations to end a periodic tenancy agreement

  • require that fixed-term tenancy agreements must become periodic tenancy agreements upon expiry unless both parties agree otherwise, or certain conditions apply

  • clarify the rules about minor changes tenants can make to premises

  • prohibit the solicitation of rental bids by landlords

  • limit rent increases to once every 12 months

  • allow for identifying details to be suppressed in situations where a party has been wholly or substantially successful in taking a case to the Tenancy Tribunal

  • clarify the Tenancy Tribunal’s power to suppress names and identifying particulars of any party or evidence given, if that is in the interests of the parties and the public interest

  • require landlords to permit and facilitate the installation of ultra-fast broadband, subject to specific triggers and exemptions

  • increase financial penalties

  • give the regulator new tools to take direct action against parties who are not meeting their obligations

  • make other administrative changes.

Proposed amendments

This commentary covers the main amendments we recommend (by majority) to the bill as introduced. We do not discuss all minor, technical, or consequential amendments that are proposed.

Prohibiting rental bidding

Clause 17 of the bill would insert new sections 22F and 22G into the Act to prohibit rental bidding, by specifying that a landlord must state the amount of rent when advertising residential premises and must not invite or encourage bids for rent. Rental bidding can exacerbate affordability issues in the market because it leads to higher rents being paid for properties than originally advertised.

However, we note that sometimes housing provision is included as part of an employment package and the cost of the accommodation is deducted from the employee’s pay in an arrangement known as a “service tenancy”. We consider that it would be unreasonable for rent to be stated in these particular advertisements, especially as there are no requirements in employment law for including the remuneration amount in employment advertisements. Additionally, we note that employers offering housing provision as part of an employment package are not primarily motivated by getting the best rent.

We recommend amending clause 17, proposed section 22F(2), to specify that the requirement to state the amount of rent in any advertisement or offer would not apply to a service tenancy.

Assignment and break-lease fees

Assignment involves a tenant transferring their interests and responsibilities under a tenancy to a new tenant. Currently, the law distinguishes between tenancy agreements that prohibit assignment, and those that require landlords to consider assignment requests on a case-by-case basis. The bill proposes that all assignment requests be considered by the landlord, who may not withhold consent unreasonably.

We consider that landlords should be required to respond to the assignment request in writing, and within a reasonable amount of time. This would ensure that they do not effectively withhold consent by failing to respond. We are aware that “a reasonable amount of time” is a subjective measure, but consider that it need not be strictly defined. It should accommodate both a response that needed only a short time, such as a reference check, through to a response that might need more time, such as for a criminal record check.

We also consider that a landlord should only be required to respond to an assignment request if the request names the proposed assignee. This would allow the landlord to conduct appropriate checks to determine the suitability of the assignee.

We recommend amending clause 24 by inserting new section 43B(3A) to specify that a landlord must respond in writing to an assignment request within a reasonable period of time if the tenant makes a written request that identifies and includes contact details for the proposed assignee. We also recommend inserting section 43B(3B) to make it an unlawful act if the landlord fails to comply. (Under section 109 of the Act, if a person intentionally commits an unlawful act, the Tenancy Tribunal can order that person to pay an amount (in the nature of exemplary damages) to the other party to the tenancy or, in some circumstances, to the regulator.)

Fibre connections

The bill would require landlords to permit and facilitate the installation of fibre broadband services. This is designed to ensure that New Zealanders renting a property have similar opportunities to access fibre as owner-occupiers.

Compromising weathertightness of a building

Clause 28, which would insert section 45B(2)(a)(i), would exempt landlords from fibre obligations if installation would compromise the weathertightness of the building.

We note that almost all fibre installations involve penetrating the building, which could be considered as compromising its weathertightness. The same is true with heat pump installations. Usually, however, the risks to weathertightness are reasonably managed.

We recommend replacing section 45B(2)(a)(i) to exempt landlords from permitting the installation of a fibre connection if installation would “materially compromise” the weathertightness of the building.

Compromising the character of a building

Clause 28, new section 45B(2)(a)(ii), would exempt a landlord from permitting the installation of a fibre connection if it would compromise the character of any building (other than by having a mere visual impact).

We consider that, in some circumstances, what would technically be classed as a “mere visual impact” could be a legitimate reason for an installation not to proceed as it might significantly alter the character of the building.

We recommend replacing proposed section 45B(2)(a)(ii) to specify that a landlord is not required to permit the installation of a fibre connection if installation would “materially compromise” the character of a building. We note that this is a subjective test, which might be tested by the Tribunal. However, we consider that it would provide flexibility to cover a wide range of situations that may arise.

Time limit on renovation exemption

Clause 28, new section 45B(2)(c), would exempt the landlord from permitting the installation of fibre if the landlord intends to carry out extensive alterations, refurbishment, repairs, or redevelopment of the premises and the installation would impede that work.

We wish to protect against misuse of this provision and ensure that the landlord’s intention is genuine. We propose that the exemption specify that material steps must be taken in progressing the alterations within 90 days of the request for fibre. We recommend amending proposed section 45B(2)(c) accordingly.

Landlord or network operator unable to obtain consent

Clause 28 would insert section 45B(2)(d) to exempt a landlord from permitting the installation of a fibre connection if installation requires the consent of a third party and the landlord or network operator is unable to obtain consent.

We note that the Telecommunications (Property Access and Other Matters) Amendment Act 2017 already provides for a scheme which allows shared property owners to object to fibre installation in certain circumstances, on a limited number of grounds.

We consider that the bill’s proposed provision unnecessarily duplicates adequate processes in the Telecommunications Act. We recommend removing section 45B(2)(d).

Tenancy Tribunal’s jurisdiction

One technical change that we recommend is the removal of proposed new section 77(2)(mab). This paragraph was intended to ensure that the Tenancy Tribunal had jurisdiction in respect of disputes about the landlord’s obligation to facilitate fibre installation. We are satisfied that this matter is already covered by the general language of section 77(1), so paragraph (mab) is unnecessary.

Termination by notice

The bill would remove “no cause” terminations to prevent landlords from being able to end a periodic tenancy without a reason. Instead, landlords would be able to end a periodic tenancy on various specific grounds. They include existing grounds in the Act and additional grounds proposed by the bill. This is designed to ensure that the tenants would know why their tenancy was ending and that a justified reason existed. It would also give tenants the benefits of security of tenure.

Termination to allow the owner or a family member to move in

Clause 32 of the bill, which would amend section 51 of the Act, specifies that a landlord may end a periodic tenancy on at least 63 days’ notice if the owner requires the premises as the principal place of residence for themselves or a family member.

We consider that a further restriction should be applied: that the owner or their family member must move into the premises within 90 days. This would help ensure that the notice of termination was genuine in its intent and that the property did not stand vacant for an extended period of time.

We recommend amending clause 32, section 51(1)(a), to this effect.

Termination where the landlord requires the premises for an employee

Clause 32 would amend section 51 to allow a landlord to terminate a periodic tenancy on at least 63 days’ notice if the premises are to be occupied by employees of the landlord. This possibility would have to have been clearly stated in the tenancy agreement.

We note that the Ministry of Education owns many premises that are made available for teachers. However, because teachers are employed, or engaged as contractors, by their relevant board of trustees and not the ministry, the ministry could not use the proposed provision to terminate a tenancy.

We also note that there may be other work situations where it should be allowable for a tenancy to be terminated if the premises are to be occupied by contractors under contracts for services to the landlord.

We recommend amending clause 32, section 51(1)(b), to allow a landlord to terminate a periodic tenancy by giving at least 63 days’ notice if the landlord customarily uses the premises, or has acquired the premises, for occupation by employees or contractors under contracts for services, and this was clearly stated in the tenancy agreement.

We also recommend amending clause 32 by inserting section 51(1)(c) to specify that the Ministry of Education, as landlord, may terminate a periodic tenancy if it customarily uses the premises, or has acquired the premises, for occupation by employees of a school board of trustees or contractors under contracts for services with a school board, and needs them for that use. The tenancy agreement must have provided for this possibility.

Termination to change to a commercial premise

Clause 32 would amend section 51 to allow a landlord to terminate a periodic tenancy by giving at least 90 days’ notice if the premises are to be converted into commercial premises.

We consider that a further restriction should be applied: that the premises must be used for a commercial purpose for at least 90 days. This would help ensure that the tenancy was terminated because of a genuine intent to use the property commercially and that the tenant was not required to leave earlier than necessary.

We recommend amending clause 32, section 51(2)(e), to this effect.

Termination to allow renovations

Similarly, clause 32 would amend section 51 to allow termination of a periodic tenancy if extensive alterations, refurbishment, repairs, or redevelopment were to be carried out, and it would not be reasonably practicable for the tenant to remain in place.

We consider that where a landlord has terminated a tenancy on this ground, the landlord should take material steps towards beginning renovations within 90 days of the termination date. This would ensure that the notice was given with genuine intent and that the premises do not stand idle.

To allow flexibility, we consider that “material steps” need not be strictly defined, but they should relate specifically to the termination ground.

We recommend amending clause 32, section 51(2)(f), to include the requirement that work is to begin, or material steps towards it are to be taken, within 90 days after the termination date. We also recommend inserting section 51(2AAA) to define “taking a material step” as applying for regulatory consent, seeking engineering or other professional advice, or taking any other significant step.

Termination because of demolition

Clause 32 would amend section 51 to allow a landlord to terminate a periodic tenancy, with at least 90 days’ notice, if the premises are to be demolished.

As with the above provision, we consider that the landlord should take material steps towards beginning demolition within 90 days. We recommend amending clause 32, section 51(2)(g), accordingly.

“Within 90 days” of termination

As noted, clause 32 provides for a number of termination grounds that envisage landlords doing certain things within 90 days of the termination date.

We note that a tenant could give 28 days’ notice following a landlord’s giving of a 90 day notice. This would terminate the tenancy earlier than the landlord had expected.

We recommend inserting clause 32(4), new section 51(9), to clarify that, when calculating the 90 days, “termination date” means the date provided for by the notice of termination given by the landlord, regardless of when termination in fact occurs.

Social housing termination grounds

Clause 35 would insert new section 53B into the Act. Amongst other provisions, it would specify that a social housing provider may terminate a tenancy if it considers that the tenant should be transferred to other social housing because of the tenant’s needs, the social housing provider’s operational needs, or the needs of the community.

The Public and Community Housing Management Act 1992 (PACHMA) already allows Kāinga Ora and registered community housing providers (CHPs) to transfer a tenant to different housing within their housing portfolio if they consider this necessary or desirable for any reason. This transfer is effected either by the parties agreeing to the transfer, or the social housing provider using a 90-day no cause termination under the Act and offering a new tenancy.

We consider there is some uncertainty about how this bill’s transfer provision might interact with PACHMA’s existing transfer provisions, and see the possibility of unintended consequences. We discuss these issues below.

Aligning the termination ground with PACHMA’s transfer provisions

As it stands, the bill would allow a termination to facilitate a transfer based on the needs of the tenant, the social housing provider, or the community. However, PACHMA allows a transfer to other housing appropriate for the tenant’s needs “if it is necessary or desirable for any reason”. We propose that the social housing termination ground in the bill be widened to align with PACHMA. We note that termination decisions would continue to be taken in the context of Kāinga Ora and CHPs’ mandate to provide housing for vulnerable people.

We recommend amending clause 35, section 53B(1)(b)(iii), to specify that a landlord under a periodic tenancy may terminate the tenancy by giving at least 90 days’ notice if the social housing provider requires the tenant to transfer to different social housing. The provider must consider that the transfer is necessary or desirable, and that the other housing is appropriate for the tenant’s housing needs.

Clarifying the role of the Tenancy Tribunal in cases where a tenant is transferred

We propose that the Tenancy Tribunal would not be able to review a social housing provider’s reasons for transferring a tenant, including consideration of whether an alternative social housing home offered to a tenant meets the tenant’s housing needs. We consider that the Tribunal should focus on whether the Act’s obligations are met, while existing processes can be used to determine the property’s suitability.

We recommend amending clause 35, section 53B(1)(b)(iii), to specify that the determinations that the transfer is necessary and the housing is appropriate be made by the provider.

The termination ground does not affect the existing social housing transfer process

We propose that the bill clarifies that the termination ground does not affect the existing social housing transfer processes in that a new social housing assessment is not required to invoke the termination ground.

We recommend amending clause 35, section 53B(1)(b)(iii), to specify that the social housing tenancy can be terminated to facilitate a transfer based on the most recent needs assessment by the social housing agency (notified to the provider), regardless of when the assessment and notification took place.

Termination for anti-social behaviour

Clause 37 would insert section 55A to allow a landlord under a periodic tenancy to apply to the Tribunal for an order terminating the tenancy on the ground of anti-social behaviour. The Tribunal would make the order if it was satisfied about certain things. The tenant (or person on the premises with their permission) must have exhibited anti-social behaviour on three separate occasions, and the landlord must have given written notice each time. The landlord’s application to the Tribunal must be made within 28 days after the third notice.

The bill would place the onus of disproving the anti-social behaviour on the tenant before the Tribunal, if the tenant chose to challenge the notice. We consider this unfair and potentially prohibitive for tenants who wished to challenge a notice.

We recommend amending clause 37 to insert section 55(5A). It would specify that, if a tenant makes an application to the Tribunal challenging a notice given under subsection (2)(b), it is for the landlord to prove that anti-social behaviour occurred and that the notice met the requirements of subsection (2)(b).

Privacy and access to justice

Clause 51 would insert section 95A to make two changes to the name suppression policy. First, it would make clear that the Tribunal could make a suppression order prohibiting the publication of evidence, or the name or any identifying particulars of any witness or party to proceedings. It would also require the Tribunal to prohibit the publication of the name or identifying particulars of a party to the proceedings if that party had applied for suppression and been either wholly or substantially successful in the proceedings (unless the Tribunal considers publication is in the public interest or is justified because of the party’s conduct or any other circumstances of the case).

The Ministry of Business, Innovation and Employment (MBIE) can take a case as the regulator on behalf of a party. As introduced, the bill would require MBIE to apply for name suppression for that person. We note that in some cases tenants may not be aware that a case has been taken up on their behalf, and we would not wish them to be potentially disadvantaged for future tenancy applications.

Considering this, and to simplify the process for MBIE and the party on whose behalf the case has been taken, we suggest that the bill provide for automatic suppression when MBIE takes a case on behalf of a party. We recommend amending clause 51 to insert section 95A(3A) specifying that, if the chief executive acts in the place of a party under section 124A, the Tribunal must make an order that the name and identifying particulars of the party not be published.

Enforcement

Associated person test

The bill provides that landlords with six or more tenancies would be subject to higher infringement fees and pecuniary penalties. To avoid landlords structuring their affairs in such a way as to avoid liability, the bill sets out an associated person test, with the tenancies of the associated person counted towards the landlord’s number of tenancies. The bill proposes that the associated person test include parents, children, partners and spouses, and the parents and children of partners and spouses, as well as a number of company arrangements.

Many landlords submitted that they have very little contact with people who would be considered their associated persons. We agree that there will be many instances where two or more landlords who are considered associated persons will have little or no business connection with each other.

We recommend amending clause 4(4) to replace section 2A(a), to specify that one person is associated with another if they are their spouse, civil union partner, or de facto partner of the other person. This would remove parents and children and the parents and children of spouses and partners from the associated person test.

Determining what is a “large-scale” landlord

The bill provides that landlords with six or more tenancies would be subject to higher infringement fees and also to pecuniary penalties. The intent of the bill is to hold larger-scale landlords to account as breaches of the Act by them are likely to do more serious damage across a larger property portfolio. Additionally, the new penalties would help protect the tenants of boarding houses, who are particularly vulnerable and face barriers to enforcing their rights.

The “six tenancy” threshold as proposed, however, would capture some landlords who may neither own boarding houses or large-scale tenancies. For example, a landlord may own two houses with three room-by-room tenancies in each, amounting to six tenancies.

We recommend amending clause 4, to insert new section 2(2C) and (2D) to specify that, to determine how many tenancies a landlord has, any tenancies related to a room-by-room tenancy that is not a boarding house should be treated as only one tenancy.

We also recommend amending clause 55, which would insert new sections 109B to 109E, by replacing section 109B(1)(a) to ensure that the Tribunal may make pecuniary penalty orders to a landlord of a boarding house as well as a landlord of six or more tenancies.

We also recommend amending Schedule 3 of the bill, which would insert new Schedule 1B in the Act, to specify that a landlord would be liable for fines and fees for infringement offences if they have six or more tenancies or are the landlord of a boarding house. This would be a consequential amendment as a result of the amendments to clause 4.

Infringement notice still valid for large-scale landlords, even if issued for fewer than six properties.

The bill provides for differing infringement fees depending on how many tenancies a landlord has. As the bill stands, an infringement notice could be given for a penalty on five or fewer properties, even though the landlord had six or more properties.

We do not want the infringement notice to be invalidated. We consider that the bill should provide that an infringement notice is still valid even if it issued for the penalty for five or fewer tenancies, when the landlord had six or more tenancies.

We recommend amending Schedule 3 of the bill (new Schedule 1B in the Act) to insert clause 2A specifying that an infringement notice served on a landlord with six or more tenancies or a boarding house is not invalid merely because the notice imposes a fee for an offence relating to five or fewer tenancies.

Regulations relating to infringement offences

The Regulations Review Committee recommended that the bill should include guidelines as to the exercise of the regulation-making power to specify infringement offences.

We note that standard practice is for the Ministry of Justice to be consulted before new infringement offences are recommended.

We consider that the bill should include a requirement for the Minister responsible for the Residential Tenancies Amendment Act 1986 to consult with the Minister of Justice on any new proposed infringement offences before recommending any regulations. We recommend inserting new clause 69A which would insert new section 139A to this effect.

Failing to provide minimum information

The Act lists the minimum information required for a tenancy agreement. However, there is no penalty for failing to provide this information, even though it could result in parties having difficulty enforcing their rights.

We consider that it should be made unlawful for a landlord to fail to provide the landlord-related information in a tenancy agreement.

We recommend amending clause 8 by inserting new section 13A(1AAA) to specify that a landlord who fails to ensure that the tenancy agreement includes the landlord-related information specified by the Act commits an unlawful act.

Requirement to retain documents

The bill would require landlords to keep certain records and provide them to the regulator on request, including records of any building work, prescribed electrical work, or other maintenance work. We note that this wording may not encompass gas work and plumbing, and consider that these should be included in records of building work required to be kept by the landlord.

Also, we consider that the reference to building work may be too broad as that term includes relatively low-risk work that a lay person can carry out without needing consent. For that reason, we recommend qualifying the term so that documents must be retained for building work requiring a building consent.

We recommend amending clause 61, section 123A(1)(c), accordingly.

Transitional and emergency housing

The Act exempts certain transient and temporary housing, and only limited provisions apply to short-term tenancies for fixed terms. We note that the Government administers various transitional and emergency housing assistance schemes, such as the Emergency Housing Special Needs Grant.

The grant was originally intended to be provided for up to seven days, and transitional housing for up to twelve weeks. However, due to pressures in the housing market, lengths of stay in transitional and emergency housing are increasing, so there is a real risk that the Act’s provisions could apply to these types of housing.

If the Act applied to transitional or emergency housing provision, one unintended consequence could be that some providers may choose to exit the market. This could leave large numbers of New Zealanders without a place to stay.

We consider that the bill should provide for a new exemption to clarify that the Act does not apply where a person occupies a premise that is provided as part of transitional or emergency accommodation. We recommend amending clause 5 (which would amend section 5) to insert new subsection 1A. This would exclude the Act from applying where the premises are used to provide emergency or transitional accommodation, and it is funded wholly or partly under the Special Needs Grants Programme; or by a government department as emergency or transitional accommodation for people in need of housing; or where the accommodation provider is a person prescribed by regulations made under the Act.

We consider that this exemption should commence as soon as practicable to minimise the risk of providers exiting transitional and emergency housing schemes. We recommend amending clause 2 to specify that the exemption would come into force on the day after the date on which this legislation received the Royal assent.

National Party minority view

National opposes the Residential Tenancies Amendment Bill. The bill would significantly change the balance of rights between landlords and tenants, reducing the rights of landlords in ways that would also be of ultimate detriment to their tenants. This bill would not improve relations between landlords and tenants nor assist the increasing need for rental options.

While the bill seeks to make a large number of changes, the most problematic is not allowing a landlord to end a tenancy with 90 days’ notice, except for a very limited number of reasons. This ability of a landlord to end a tenancy would now be severely limited and consequently would not reflect private property rights.

Particularly in cases of poor tenant behaviour, landlords would now be required to issue three separate notices within a 90 day period before engaging the Tenancy Tribunal. While acknowledging that notice is important, in the instances where poor behaviour must be immediately addressed– –often for the sake of neighbours and the wider community– –this new provision would simply prolong problems and arguably lead to further issues as subsequent notices are awaited. That the Tribunal’s processes often take a long time would simply compound issues. Finally, the burden of proof would move solely to the landlord which will inevitably prove difficult for many circumstances of anti-social behaviour.

Changes such as limiting rent review to once every twelve months would simply lead to less frequent yet larger increases. Similarly, that the bill seeks to prevent rental bids may only lead to higher prices being set in the first instance. These are just two examples of reactive changes that some may think positive on first look, but would actually make the situation for renters arguably worse.

National Party members are concerned, as are a large number of submitters, that these changes would simply make renting harder and more costly. These costs would ultimately be borne by tenants and consequently negate the very purpose of the bill. A number of submitters also noted that fewer people would seek to be landlords thereby reducing the available number of properties, and consequently lead to higher rents.

National Party members recognise that some changes are welcome, such as allowing minor changes to a property or ensuring access to fibre internet. These, however, do not outweigh the more substantial changes.

Appendix

Committee process

The Residential Tenancies Amendment Bill was referred to us on 20 February 2020. The closing date for submissions was 25 March 2020. We received and considered 1,436 submissions from interested groups and individuals. We heard oral evidence from 118 submitters via teleconference and videoconference.

We received advice from the Ministry of Housing and Urban Development. The Regulations Review Committee reported to us on the powers contained in clause 70.

Committee membership

Gareth Hughes (Chairperson)

Darroch Ball

Paulo Garcia (from 27 May to 3 June 2020)

Anahila Kanongata’a-Suisuiki

Agnes Loheni

Hon Tim Macindoe (from 3 June 2020)

Hon Alfred Ngaro

Maureen Pugh (until 27 May 2020)

Priyanca Radhakrishnan

Hon Louise Upston

Angie Warren-Clark