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Is renting broken? No, but the RTA could use some fine-tuning

By David Kneebone on 2018-09-14

Rental Blog Image September

Is renting broken? No, but the RTA could use some fine-tuning

You’d be forgiven for thinking New Zealand’s rental industry (specifically, the Residential Tenancies Act) is completely broken and in dire need of repair, that it needs to be scrapped to its parts and start again.

That’s what the latest media coverage on the proposed law changes would have you believe anyway.

A refresher (as much for me as it is for you)

For a quick debrief, here’s what the Government are currently proposing and seeking the public’s feedback on (along with, you guessed it, my take on it all).

  1. Limiting landlords to one rent increase a year

This might stand to reason, but the reality is most landlords increase rents annually already, and they often do so in between tenancies, because private owners are generally reluctant to review rent in the middle of a tenancy.

I don’t see this proposed law change altering the reality too much. At Lodge City Rentals, we conduct reviews every six months and initiate increases for our landlords where appropriate, usually annually. Landlords don’t typically up rent at will; increases are usually as a result of the current market.

  1. Ending no-cause tenancy terminations and increasing termination notice periods from 42 to 90 days

A no-cause tenancy termination can be used to evict troublesome tenants. Sometimes these terminations are contested in tenancy tribunals, where the onus is often on the neighbor to provide evidence of unsavoury activity (noise, parties, intimidation, etc). While a 90-day notice period is useful for moving the tenant on, ironically it benefits the troublesome tenant as their behavior goes unrecorded in a public tenancy tribunal order for eviction (and it can’t be cross-referenced the next time the tenant applies for a rental property).

90 days’ notice can also be used for the landlord to undertake a significant refurbishment or renovation, or if they are selling or moving back into the property. This approach could see such scenarios being drawn out, and give tenants (and property managers) more time to find alternative accommodation.

  1. Abolishing letting fees

At Lodge City Rentals, letting fees, typically one week’s rent, go on recouping some of the costs involved in providing a valuable service to both tenants and property owners in securing the right tenant. Conducting property viewings is just the start.

The process for securing appropriate tenants is time-consuming (but worth it) and includes checking references and credit ratings, income verification, profiles and activity on social media and checks against an international database of tenants to ascertain any previous issues. We typically conduct 4-5 viewings and process around 6 applications before approving tenants.

If the cost of conducting this activity falls on landlords, the result will most certainly be increased rents. The housing minister is on record as having said that a small increase in rent to cover this increase would be better for tenants than the current practice of a tenant finding this fee at the commencement of their tenancy.

Society is changing

We’ve changed a lot since the RTA was last reviewed in 1985. More people are long-term tenants, and the flexibility and mobility renting can provide is seen as more desirable than the traditional fixed abode.

That said, many people are also seeking security in a rental home either because they cannot buy a home or they just don’t want to.

There are some points to agree on with the Government’s proposed changes, but they need to be careful not to swing the pendulum too far in the tenants’ favour.

I’m sure we all agree that tenants deserve safe and healthy homes, fair market rent and the security they need to call a rental property their home.

There’s even room, to a practicable extent, for allowing pets in rented homes. Pets reduce loneliness, promote wellbeing and reduce anxiety – they even help lower blood pressure. Our European counterparts are well ahead in this respect, with many countries allowing dogs inside pubs, shops and airports.

Of course there are many reasons not to allow pets – especially if the property isn’t fully fenced or otherwise equipped for one (for example it’s near a busy road or is an upstairs flat), and they can be troublesome if they aren’t house-trained or used to being left alone.

Why the back and forth?

You may notice I’ve been arguing both sides of the coin here. That’s because for both landlords and tenants to prosper, the laws and practices should be mutually beneficial – it’s not a case of “us” vs “them”.

By and large the current law is fair to landlords and tenants, but given our changing society and the changing ‘face’ of the renter, there are tweaks to the law I can understand – but not a sweeping overhaul.

Let’s hope the government will listen to all the submissions and produce legislation that is practical and fair to owners and tenants. That’s not too much to ask, surely.

What do you think? Let me know your thoughts.

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