By Ben King, Senior Solicitor, Aspiring Law
It’s now nearly two years since significant changes to the Residential Tenancies Act came into force – so, it’s timely for landlords to double-check they are complying with the new laws, and are up with the play on what’s yet to come.
The amendments to the Act aim to make New Zealand’s sizeable rental housing stock drier, healthier, warmer and safer. And, it’s a big job. According to the last census, rental properties account for around a third of our 1.5 million residential dwellings.
Providing homes to renters with adequate insulation is one of the key focus points that comes through in the legislation. Landlords have until July 2019 to ensure ceilings and any suspended underfloor spaces are insulated to Building Code standards. Given many of the rental homes in the Queenstown-Lakes and Central Otago districts were built after the late 70s, most will have at least some insulation, even if it is just in the ceiling. Likely, the biggest issue is that insulation that is below the current minimums of R3.3 for ceilings and R1.3 for underfloor might need to be looked at and replaced if it is in poor condition and past its use-by date.
The insulation industry has issued warnings to landlords to start arranging for their properties to be inspected, and, where needed, book in to have new insulation installed. They say of the 180,000 properties nationwide that will need new insulation to comply, just 10,000 had been done as of late last year. They’re predicting a potential bottleneck – and penalties for landlords – if they don’t get moving.
All tenancy agreements – and, yes, every agreement is a formal contract and must, by law, be in writing – are legally required to include an “insulation statement”, spelling out the status of the installed insulation. Check out Tenancy Services’ website – www.tenancy.govt.nz – where you’ll find an insulation statement template. Fail to document it, or get it wrong, and you’re up for a $500 penalty.
Remember, the new insulation regulations for rental properties are governed by guidelines which stipulate the standards required. These specifics are included in a comprehensive document Tenancy Services has put out. Simply called “Insulation Requirements”, you’ll find this 20-page guide on its website.
Another reason landlords need to check the insulation in their rentals is cost. Insulation isn’t cheap and whether starting from scratch, or retrofitting to boost the R value of what’s already there, the costs will likely stretch into the thousands. Better to avoid last-minute shocks, and start budgeting now. Also, have you explored whether your property is eligible for a subsidy? If July 2019 comes and you haven’t complied, you could be digging even deeper into your pocket for a potential $4000 fine.
The second critical change for landlords to note is the ban on foil insulation. Breaching this risks a fine of up to $200,000. If your rental property has existing foil insulation that is in reasonable condition, then it can stay. However, if it’s damaged and worn, you must replace it with an alternative that meets Building Code standards.
When checking insulation, you do need to know what you’re looking for and have a good understanding of the changes to the Act. It can also be dangerous. For many, it might well be best to call in a reputable installer – many are offering free assessments. Exemptions to the new standards do apply in limited cases. Landlords don’t have to insulate if a professional installer is unable to access the space where insulation is required, or it would cause undue risks to health and safety, or substantial damage to property, to do so.
Another important, and potentially life-saving, legislative addition that came in last year was for smoke alarms. All rental property owners must ensure a photoelectric sensor smoke alarm, with long-life batteries, is installed within 3m of every bedroom, or any other areas where people sleep. Landlords are responsible for ensuring proper smoke detectors are installed. Tenants are obliged to ensure the units are tested regularly, replacing any dead batteries, and for informing the landlord if the detector is faulty. Given what’s at stake, neither party can afford to overlook their obligations on this one.
If, as a landlord, you do need to arrange the installation of new insulation or smoke alarms, remember your obligations around access under the Act. You, or your agent, are entitled access to the property between 8am and 7pm on any day; but, to exercise this right, you must give at least 24 hours’ prior notice.
The heat is on
The changes we have seen so far are unlikely to be the last.
Often in property investment, diligence and keeping on top of compliance, paperwork and having regular property inspections are the keys to success. It all starts with having a written agreement and understanding your obligations. Again, Tenancy Services has a template providing a good starting point. I would, however, strongly advise getting a lawyer to review your agreements. More often than not, additional clauses are required, and, to be enforceable, they need to be appropriately worded. To avoid a potential appearance before the Tenancy Tribunal, you also need to be careful you don’t include clauses that likely won’t stand up – for example, it has been held that clauses in tenancy agreements requiring tenants to have carpets professionally cleaned are unenforceable.
The law is constantly changing in this area, so keeping your lawyer in the loop gives them the chance to help you keep up with changes you might not, otherwise, have been aware of. Case in point: landlords must have an agent in New Zealand if they are outside of the country for more than 21 consecutive days. This could affect the many landlords who, for example, take extended annual holidays or travel for lengthy periods on business.
The landlords who I see succeed are the ones who do their homework, and invest their time into their properties. Owning rentals, and meeting your obligations, requires time and effort, and, like any venture, you tend to reap what you sow.