COMMENT: What “bad tenant” tales are really saying

Tales about nightmare tenants have been rife in the media of late but such stories are not new – so does the sudden deluge indicate that landlords have reached breaking point, Miriam Bell asks.

Tuesday, October 9th 2018, 10:00AM

Here at landlords.co.nz, we’ve long been hearing that the slew of Government housing and tax policy changes along with an anti-landlord climate will lead to both rent rises and landlords selling up and getting out.

So does the sudden flood of “bad tenant” tales indicate there has finally been a mass eruption of landlord frustration at the current environment?

And could that, in turn, mean that a significant exodus of landlords from the rental market is about to get underway?

To date, putting anecdotal and social media “evidence” aside, it’s hard to tell.

CoreLogic’s head of research Nick Goodall says it is difficult to get definitive data on it but they have some evidence suggesting that landlords are not putting their rental properties on the market in droves. Or not yet anyway, he says.

“We talk to lots of people and the bulk of landlords say they are going to continue on as usual, although there are some that say they are getting out of residential rentals and into commercial property.”

But NZ Property Investors Federation executive officer Andrew King believes growing numbers of landlords are reassessing their options. He says the problem is not so much that investors are planning to sell up but but that many have no plans to buy more rental properties.

“We need people buying to replace the stock that goes from the market each year [about 20%]. We fear that rental stock simply won’t be replaced at the rate necessary and that means rental stock will gradually decline, which will put more pressure on the rental market.”

For others, there’s even less doubt that landlords are starting to get out of the game.

REINZ chief executive Bindi Norwell says the outcome of the raft of legislation directed at landlords was highlighted by a property manager earlier this week who said he’d lost 20 properties due to investors looking to exit the current market conditions.

Yet when writing a NZ Property Investor magazine article on the Government’s proposed tenancy law reforms recently, most interviewees said some changes were necessary. Due to the changes in society and in home ownership that New Zealand has seen, they felt that the new reality of more people now renting for life had to be adequately addressed.

But all my interviewees were concerned about the need for equitable balance between landlords’ property rights and tenants’ rights to a home. They were worried that the right balance was not going to happen, not the least because of the anti-landlord environment and the unbending rhetoric of many tenant advocates.

Also, all my interviewees emphasised that most tenants are good, just as most landlords are decent, and it’s just some bad eggs who create problems. And here in lies one of the big problems for landlords: they feel they simply cannot adequately address the problems created by bad tenants already and that their concerns are falling on deaf ears.

This is particularly the case when it comes to property damage – which is what most of the current crop of bad tenant stories actually revolve around – and that is because of the infamous Osaki decision.

The Osaki decision, and its subsequent application by the Tenancy Tribunal, means that if a landlord has insurance, a tenant is not responsible for accidental damage that they cause to a rental property. But accidental has proved to be a very broad term and, essentially, landlords have to prove that a tenant deliberately damaged a property for the tenant to be held liable for the damage.

This has long been a major issue for landlords and, while the previous Government made some vague moves to address the problem, to date nothing has changed. Further, the word among property investor groups is that many Government MPs don’t know, or understand, what Osaki is or means when it comes to damage liability.

Landlords fear that the proposed tenancy law reforms will aggravate an already difficult situation. And it is this interplay that could simply prove too much for many landlords.

While many among the general public seem to believe the less private rental properties the better, the reality is that landlords provide a necessary public service. More, not less, private rental properties are desperately needed to address the existing shortage of rental stock.

That means the Government needs good landlords on side. It needs to work with them rather than against them. And it needs to adequately respond to concerns that the balance of tenancy law is slipping to far in favour of tenants.

To that end, the Government should take note of the “bad tenant” tales. It should listen to what landlords have to say in the consultations around tenancy law and healthy homes minimum standards.

It should also take a good, hard look at the quagmire around tenant damage liability, that has developed as a result of the Osaki decision, and do something sensible about it. That would send a clear message to landlords that their very real concerns about rental market reforms will be taken seriously.

Read more:

Balance needed in tenancy reforms

Proposed Healthy Homes standards out

Tenant damage liability changes unfair

Tags: Commentary CoreLogic REINZ