Greens’ rental bill too restrictive for landlords

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Changes to tenancy regulations that are proposed in a Green Party Bill could lead to a decline in rental properties, the NZ Property Investors Federation is warning.

Tuesday, September 8th 2015, 2:53PM 1 Comment

by Miriam Bell

NZPIF executive officer Andrew King

One of the proposals included in the Green Party’s Residential Tenancies (Warm, Safe and Secure Rentals) Amendment Bill, which was introduced into Parliament’s ballot recently, is that tenants be allowed the right of renewal.

NZ Property Investors Federation executive officer Andrew King said the Bill did not indicate how this proposal might work in practice but that, in principle, it would put too much control into the tenants’ hands.

“Potentially, a tenant could stay in a property forever. This would be grossly unjust for the owner as it would restrict what they can do with their own property.

“Such a policy would see many people withdrawing from owning rental property.”

This, in turn, would lead to a decline in rental properties.

The Bill’s proposal to increase the 42-day notice period to 90 days would also be extremely restrictive for landlords.

King said that when selling a rental property, most owners do not know if or when the property will sell.

For this reason, it is common to advise a tenant that the property is on the market but to not issue a 42-day notice until the property is actually sold.

But if the notice period is increased from six weeks to three months, it is unlikely many property buyers would want to wait that long before moving into their new home, King said.

“Sales would be restricted to rental property buyers which would restrict the market and achievable price. This would be unfair to rental property owners.”

Another of the Bill’s proposals is to limit rental increases to once a year.

King said landlords might be allowed to increase rental prices every six months – but that doesn't mean they will.

“However, rental prices can sometimes move quite quickly. If rent increases are limited to once a year then the increase can be quite large and a genuine shock to tenants that can cause hardship.”

He said the NZPIF advises its members to keep a close eye on the rental market in which they own property and make smaller regular increases if they find prices are increasing quickly.

The Bill’s proposal that three-year fixed terms should be the default option on tenancy forms is also not one the NZPIF supports.

King said this is because, when asked, the vast majority of tenants prefer the flexibility of a periodic tenancy.

“For this reason, we don't agree that the default position should be a fixed three-year term, but a tick box with the option of periodic, 1, 2, 3 and other terms to show what options are available.”

Most landlords prefer long-term tenancies so promoting the potential for them is a good thing, he added.

The final major proposal in the Bill is that a warrant of fitness be introduced for all rental properties.

However, King said the whole WOF issue has been openly and stringently examined over the past two years.

“The conclusion to all this research and discussion is that it is expensive and doesn't target the key desires of warm dry rental properties.

“A rental WOF will also led to higher rental prices for tenants.”

In his view, the Government’s planned minimum standards, which focus on insulation and smoke alarms, is a better targeted policy.

“It will provide direct benefits to tenants and will result in only a modest increase in rental prices.”

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