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Residential Tenancies Amendment Bill (No 2) – What you need to know

July 6th, 2017.

The Residential Tenancies Amendment Bill (No 2) which has just past its First Reading in Parliament is addressing the issues of methamphetamine, the extent of a Tenants liability for careless damages and heavier penalties for Landlords renting out unlawful residential premises.

Click here for the full press release from the Beehive.

 

New Methamphetamine Standards

The new guidelines on methamphetamine testing and decontamination have been released by Standards NZ last week.

Under the old guidelines, the limit was 0.5g micrograms per 100cm2. So the main change they have made is that the new contamination level is has now been set at 1.5 micrograms per 100cm2 limit. Originally they had proposed a multi-level approach, but have opted to use a single level which will be simpler and minimize potential confusion.

If the level of methamphetamine in any one high use area exceeds 1.5μg/100cm2, professional decontamination is required in those areas before the property can be tenanted. A Landlord can be fined up to $4,000 for renting out a property that is contaminated, plus the tenant does not have to pay rent if the property is found to be contaminated and they were not responsible. The new standard will also require accreditation for people carrying out testing for detailed assessments and recognised training courses for testing and decontamination operators.

A recent article from landlords.co.nz has quoted Standards New Zealand manager Carmen Mak saying “Application of the standard will provide assurance that activities such as screening, sampling, testing, assessing, and decontamination of contaminated properties, and disposal of their contents, are carried out in accordance with good practice.” NZ Property Investors Federation executive officer Andrew King said “For many people, including Tenancy Tribunal adjudicators, any level of contamination is toxic. That is not the case. The new 1.5 level is conservative – and it is safe. There are likely to be higher levels on bank notes.”

So now that the new standard have been confirmed, should you meth test your rental property between tenancies? In our professional opinion, we think it would be well advised and prudent to do so. The only sure way to prove that a tenant has contaminated your property is to test at the start and end of every tenancy. Your Tenant at any time can arrange for an independent meth test to be done without your consent, so often it is better to know exactly what you are dealing with while the property is vacant before the property is occupied with tenants.

Once contamination is discovered in a tenanted property things start to get a lot more complicated, you may find yourself in a situation of having to refund all of the rent paid back to the tenant plus also pay compensation towards any of their personal belongings that have been contaminated and hit with a $4,000 fine, these being all on top of the costs of testing, decontamination and loss of rent. Lastly make sure you use reputable testers and that you understand what your insurance company will and will not cover for in the event of discovering your rental property is contaminated and uninhabitable.

 

Tenant Liability for Careless Damages

When this part of the new Bill comes into effect it will be a huge relief for Landlords and Property Managers, after what has been a horrific period post Osaki of not being able to claim the costs of careless damages from tenants, thus leaving Landlords severely out of pocket in a lot of cases we have seen.

“Under the Bill, tenants will be liable for the cost of their landlord’s insurance excess up to a maximum of four weeks’ rent for each incident of damage caused by carelessness. A tenant remains fully liable where the damage is deliberate or a criminal act, and the landlord liable for fair wear and tear and damage beyond the control of the tenant, like a natural disaster.”

Building and Construction Minister Nick Smith says the settings under the Bill “strike a balance between incentivizing tenants to take reasonable care of the premises they rent, and protecting tenants from very high cost and risk.

The Bill’s Regulatory Impact Statement says for 25% of renters nationwide, payment will be capped at more than $1,996, for 50% of renters: between $1,116 and $1,996, and for 25% of renters: less than $1,116. Furthermore, it points out: “Landlords could increase insurance excesses to the level of four weeks’ rent to limit their risk, but not pass on savings to tenant in terms of rent reductions. This is mitigated by the need for landlords to disclose their insurance arrangements to the tenant at the beginning of the tenancy and during the tenancy if there were changes to the policy.”

Click here for further reading on the Ministry of Business, Innovation and Employment website on what these changes could mean for you.

 

Unlawful Residential Premises

While being able to claim for careless damages is good news for Landlords, on the flipside the new Bill will also see the cracking down of Landlords renting out properties that are not code complaint to be independently rented out. Specifically minor dwellings, converted garages or granny flats etc must have consent for permanent habitation AND consent to be rented out separately from the major dwelling.

Landlords who rent out unconsented dwellings could find themselves in a position of facing fines of up to $4,000, an order the refund the tenant part or all of the rent paid, a work order to bring the property up to the required standard and in a position where the Landlord cannot claim for any damages to the property that the tenant may have done. So in short it’s a very serious offense that will be very costly for any Landlords who are not following the rules.

Click here for further reading on the Ministry of Business, Innovation and Employment website on what these changes could mean for you.

Talk to us today if you have concerns about how these changes may effect you and your rental property.

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