The RTAA - Changes are coming

16 December 2020

The most important thing to understand about managing a residential rental property is that in doing so, you are running a business. When you start a business, it’s a given that there will be regular upkeep and expenses involved, you’ll need to keep compliant with relevant legislation, and your customer will be at the centre of your efforts. Yet, in New Zealand, we’ve had a traditionally relaxed attitude towards rental properties.

 

It’s not uncommon for people to start renting out a home without a thorough understanding of relevant legislation or to handle queries and maintenance issues themselves. In the past, consequences for this approach have been minimal. But this has also resulted in a lack of clarity around the responsibility of rental property owners, and rental housing often being poorer in quality than owner-occupied homes. 

 

The Residential Tenancies Amendment Act 2020 (RTAA) directly addresses this lack of clarity, filling in the gaps that were previously treated on a case-by-case basis. While some of the changes in the RTAA are already enforceable, the majority will come into effect from 11 February 2021. 

 

So, what are the main changes and how do they impact rental property owners?

 

While the details are specific to the rental industry, these rules are applicable to any and every business in New Zealand. Here are our top takeaways from the impending legislation:

 

Noncompliance can be costly

Several sections in the RTAA note new or increased fees for rental property owners if they do not proceed in accordance with the Act. According to Section 60 AA, any rental property owner that terminates a tenancy agreement for a reason not specified in the Residential Tenancies Act 1986 (RTA) could be charged a penalty of up to $6,500. The penalty for exemplary damages has also increased, now ranging from $350 to $7,200 as stated in Schedule 2. These increased financial penalties set the tone for all changes in the Act, paving the way for a more serious and professional industry. 

Record keeping is crucial

The list of documents that a rental property owner needs to retain has grown and can be randomly audited by the Ministry of Business, Innovation and Employment (MBIE). Rental property owners and managers should keep copies of the following documents for the duration of the tenancy and at least 12 months after termination:

  • The tenancy agreement, along with any variations or renewals
  • Inspection reports
  • Records of maintenance work during the tenancy
  • Compliance with the healthy homes standards
  • Any correspondence between the property owner and customer regarding the tenancy 
  • All documents relating to the building including plumbing, electrical, healthy homes, etc

 

Record keeping has always been important but is easy to forget in your day-to-day. It is recommended to keep digital copies of all correspondence, quotes and records in an easily accessible place to avoid any difficulties down the road. An extra bit of admin now can be hugely helpful if records are requested or disputes are raised.

Privacy is protected

Another key law change is that ‘any tenant involved in a Tribunal case can now ask for their names and identifying details to be suppressed if the tenant is successful or ‘partially’ successful with their proceedings. This change protects rental customers from discrimination during the application process.

 

This law sets the foundation for a shift in the traditional power dynamic between the property owner and the rental customer. Like so many other businesses, a tenancy works best when built on a respectful, trusting relationship. Tenancy checks should still be thorough to protect your investment, but it’s important to recognise the value of a strong, long-lasting relationship and we must do what we can to achieve this.

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