Fixed on change. Why tenancy reform will benefit New Zealand

  • Radical changes proposed to Residential tenancies Act will provide more tools to property managers
  • Security of tenure may spell the end to the fixed term tenancy

Almost twelve months on from the formation of the Government, the changes around tenancy reform in New Zealand are coming thick and fast. Make no mistake, radical change is coming and particularly around the security of tenure and protecting tenants. A case I dealt with recently highlights why tenants need more security.

I received a call from a Property Manager last week asking for some guidance. The situation arose after a tenant was given 90 days notice to end the tenancy.

This is a scenario that many Property Managers, including myself, have found themselves in and many of you reading this will probably be able to relate to this story.

The Property Manager explained to me that a tenant of a particular property was demanding and very ‘nit picky’ when it came to requesting maintenance. However, although this tenant could be demanding, he looked after the property and always paid his rent on time. The landlord who had six properties with this company could sometimes drag his feet in getting things fixed and responding to requests. After a number of requests for a variety of minor maintenance issues, the landlord had simply had enough.

“Give the tenant 90 days notice” was the instruction that came across. “OK” said the Property Manager. The Property Manager then notified the tenant who asked why he had been given notice. The Property Manager in this case correctly stated that they do not have to give a reason but she would ask the landlord.

The landlord responds “Tell him my sister will be moving in after Christmas”. “OK” responded the Property Manager.

After notifying the tenant, the tenant subsequently gives the landlord 21 days notice to vacate the tenancy and move out.

Then the landlord responds to the Property Manager. “Right, can you advertise for new tenants please?”

“Hang on! You just told me your sister was moving in.”

“Yes, things have changed and she may no longer need it”

What is the Property Manager to do? Tell the landlord no we can’t and risk losing 6 managements with an annual contract value of approximately $10,000? Or do you risk it and re-advertise the property and hope the tenant does not go after you for Retaliatory Notice? If found guilty this could leave the company exposed to exemplary damages of up to $4,000.

This is not an isolated occurrence and as more and more tenants start to find their voice and speak up for their rights, more and more landlords may leave themselves and their Property Managers at risk because they make bad, ill informed decisions based on a lack of knowledge and emotion.

Laws need to evolve and landlords have to accept it.

In New Zealand, our rental laws have just become outdated and we are finally catching up with the rest of the world. The reality is that there are plenty of landlords out there who abuse their power and hide behind the Property Manager expecting them to take the fall whilst they have no care of responsibility. This was highlighted in a recent Consumer report that highlighted Property Managers were much slower in getting maintenance organised compared with the landlords who self managed. This is not because Property Managers don’t care, it is because it is much easier for a landlord to say ‘no’ or ignore the request altogether when you have a Property Manager as a go between. When you have to deal face to face with the tenant, its a lot harder to say no.

Have your say on proposed reforms to the RTA

I liken being a landlord to being a parent. No one admits to being a bad one but unfortunately in New Zealand, there are plenty of them. Whether through intent or pure ignorance of their responsibilities, many landlords get it wrong. Yes, the vast majority are good and try to do the right thing, but, like Property Managers, they can be let down by a small minority. Tenancy laws are not robust enough to deal with modern day renting and as about a third of New Zealanders now rent with many caught in the rental cycle for life, the Residential Tenancies Act has to evolve. Tenants need to be protected and looked after.

Tenants were given 90 days notice after this property hit the headlines for all the wrong reasons. The tenants rightly challenged this. No cause evictions will soon become a thing of the past. Good riddance I say.

As our Government approaches its first year anniversary, announcements of tenancy reforms are happening more and more as Phil Twyford’s masterplan starts to take shape. Between now and Christmas, we are going the see the following.

  • Proposed reforms to the Residential Tenancies Act announced in particular around the ‘security of tenure’, rent bidding and allowing tenants to have pets.
  • Stricter rules and regulations for operators of Boarding Houses with likely introduction of a Warrant of Fitness.
  • Standards and timeframe around the implementation of the Healthy Homes Guarantee Bill criteria.
  • Residential Tenancies Amendment Bill No.2 and Abolishment of Letting Fee Bill will become law.
  • And yes, the elephant in the room, there will be some announcement as to whether our industry will become regulated.

The Fixed Term Tenancy may go

The removal of ‘No Cause’ notice on periodic tenancies where the landlord can give the tenant 90 days notice without reason is the right thing to do. Yes, you will get the odd occasion where tenants who are a nuisance to society with anti-social behaviour may abuse the situation if it is not managed properly. However, situations like this will be rare and overall, this change will be to the betterment of New Zealand and it is long overdue.

The proposed reforms will scrap the 42 day notice period for family members moving into the property or vacant possession when the property sells. All notice periods to end a periodic tenancy will extended to 90 days under normal circumstances. More importantly, the landlord will also have to provide a valid reason to end the tenancy. Not liking a particular tenant isn’t a valid reason.

A potential victim of the removal of ‘No Cause’ 90 day notice is the Fixed-Term tenancy. The government have certainly done their homework around this, correctly identifying that if you have to give a valid reason to end a periodic tenancy, landlords will simply switch to Fixed-Term tenancies. With no reason required not to offer a renewal, the landlord retains control and the tenant may have to leave without good reason. As such three options have been proposed

  • Providing tenants with a right to extend their fixed-term agreement

This provides tenants with a right to extend or renew their agreement or allow tenants to move onto a periodic agreement provided that the tenant has not breached their obligations during the tenancy.

  • Specify a minimum length for a fixed-term agreement

This seems less practicable. There will be lots of situations where a landlord may want to rent his or her property out for a short period of time. Stating the minimum period may be too restrictive.

  • Remove fixed term tenancies altogether

This is the final option that has been muted as a way of dealing with the security of tenure and therefore, we will only see periodic tenancies. Landlords with properties catering for the student market around Universities will shudder at the thought of this suggestion. A tenant giving notice in July, half way through the student year could be disastrous with no rental income for six months being a real possibility.

The other unforeseen consequence of this is where a family has a holiday home. In many of the holiday hotspots, landlords offer fixed term ending around Christmas time so they can occupy the property for their Christmas holiday. This is common in places such as Wanaka. Requiring the property to have a ‘holiday’ is not a valid reason for giving tenants notice. It will be interesting to see the impact of the changes in markets such as this.

Looking across the ditch to Victoria, new rental laws have recently been passed which are very similar to what is being proposed in New Zealand. For Fixed term tenancies, landlords will only be able to end tenancies using an ‘end of fixed term’ notice to vacate at the end of a tenant’s first fixed term agreement. At the end of any subsequent fixed terms for that same tenant, the landlord will only be able to end the tenancy using one of the grounds specified in the state Residential Tenancies Act.

This reform aims to improve rental security and encourage longer term leasing arrangements between the parties, especially where a tenant has proven they can meet their obligations.

Tenants who receive an ‘end of fixed term’ notice will also be able to give 14 days’ notice to vacate the property at any time, rather than having to pay rent until the end of the fixed term. This will stop tenants missing out on new homes because they have to wait until the end of the fixed term, or paying double rent when they find a new home.

The household pet has been a victim of the housing crisis as many families have been forced to give up dogs. The new proposal is fair and reasonable as the problems arise from the tenants rather than the dog.

Who let the dogs out?

A long standing victim of the housing crisis isn’t just people, it’s pets. In fact, over three years ago, I wrote an article about the plight of families with pets looking for rental properties called ‘Gone to the Dogs’. From my own experience as a Property Manager, rarely did I have an issue in dealing with pet loving tenants. In fact on the contrary, I found pet loving tenants to be an absolute pleasure to deal with. So long as tenants provide evidence around registration of their dog, then having pets in rental properties should be a right of the tenant and not the landlord. A two year old child is just as likely to cause damage to a rental property, just leave them a set of crayons!

What we would recommend though is that landlords have the ability to ensure that carpets are commercially cleaned at the end of a tenancy along with treatment for fleas.

Why do we go to Tribunal for arrears?

A flow on affect from tenants feeling more secure could be an increase in tenants exercising their rights through the Tenancy Tribunal as there would be no fear of retribution. This would see a likely increase in Tenancy Tribunal hearings and longer wait time before you get a hearing. Tribunal has to operate quickly and fairly. Having unnecessary delays is unfair on both landlords and tenants. If there is a dispute and genuine concern about ongoing damage to a property then the landlord should be able to access tribunal quickly and vice versa for tenants.

One solution we have thought of is to remove rent arrears only applications from being heard in the Tenancy Tribunal.

This is the one area of renting which is straight forward and if a tenant is in arrears it is not a dispute. It is fact.

In 2017, there were just under 10,000 Tribunal hearings for rent arrears. This equated to approximately 65% of all Tribunal hearings.

In 2017, there were just under 10,000 Tribunal hearings for rent arrears. This equated to approximately 65% of all Tribunal hearings.

If the landlord or Property Manager can provide evidence that a tenant is more than 21 days in arrears and it is not in dispute then why should you have to go to Tenancy Tribunal to get a possession order? So long as there is no cross application then there is no dispute and possession should be granted without wasting the time of everyone involved.

Just think about the time that would be saved in Tenancy Tribunal.

  • Approximately 15,000 Tenancy Tribunal hearings take place every year
  • According to the reform discussion document, 90% of cases are lodged by landlords of which 75% are for rent arrears.
  • If the document is accurate this means that approximately 10,000 tribunal hearings will be for rent arrears.

Imagine the time saving if arrears disputes could be handled remotely without having to go to Tribunal. Once a tenant becomes say 21 days in arrears and evidence is provided then a possession order could be written up, sealed and the tenant would have to vacate the property within 7 days unless payment of the arrears is made.

In the UK, most tenancy disputes don’t even have a hearing. Parties submit evidence and a ruling is based purely on this. In today’s modern age with technology becoming so prevalent, it seems a complete waste of time and money to have to wait for a Tribunal hearing that in most cases the tenant does not even turn up for.

Other factors to discuss

The reforms are far and wide reaching. covering them all in this article would be akin to writing a book. Other factors that are in the document are as follows.

  • Outlawing rent bidding and reducing rent increases to once a year
  • Improving accountability for operators of boarding houses
  • Reviewing exemplary damages and assessing whether they go far enough
  • Look at the powers of MBIE to investigate severe alleged breaches of the RTA

Whatever comes of these changes, there is no doubt that tenant groups will become more confident about the future of renting with more power moving towards the tenant. Overall, as an industry I do not believe we have anything to fear - in fact I believe the reforms will make our job easier. Yes, there will be concerns around what happens with Fixed-Term tenancies but I have not seen anything in this document that I feel strongly opposed to. If anything, I do believe the changes will give more power to Property Managers as they will have more tools at their disposal in dealing with difficult clients whether they be landlords or tenants.

The concept of being a tenant has changed. It is no longer a temporary solution before you get your first house. For many, they do not have that luxury. I for one support many of the changes proposed.

Next thing to cover will be the standards around the Healthy Homes Guarantee Bill and regulation of our industry. Change is constant in business and in life and sometimes the amount of change we are dealing with can feel somewhat overwhelming. Rather than fight the inevitable, my belief is that we should embrace change and the companies that do this will thrive. In the case of tenancy law, it is change that needs to happen and long term, the nation will be better off for it.

Church preachers 'game changer' as calls for regulation intensify

  • Property institute claim to be 'game changers' for property management
  • We believe that governance through the REA is the only logical solution

Never before has our industry come under such intense scrutiny as it has right now. Whether it be tenant groups, politicians, the media or the oppressive Tenancy Compliance and Investigation Team, everyone wants to attack Property Managers. In fairness, we seem to be giving them plenty of ammunition and the latest faux pas by a Wellington-based Property Management company was embarrassingly distasteful. One wonders what they must have been thinking.

With all the negative publicity and an increasingly vocal call from all parties to regulate our industry, it is now a case of when the regulation of our industry will happen rather than if.

The focus should now turn to what regulation will look like and, as an industry, we seem to be heading in two different directions.

The main discussion is whether Property Management will self-regulate as has been suggested by some influential figures within the property sector, or whether the Government should become the regulator. If you read between the lines and listen to what Housing Minister Phil Twyford says, it appears that the Government do not have regulation high on the agenda.  The amount of bad publicity and calls from all sectors, especially renting groups who are traditionally Labour supporters, will likely have the Government re-evaluating their position.

We are starting to see two very different opinions coming through from two different organisations.

VOTE NOW: Should we be regulated and if so how?

Firstly we look at the smaller but well supported Independent Property Management Association (IPMA). They appear to be very much in the self-regulation camp after aligning themselves with the Property Institute of New Zealand (PINZ). Ashley Church, CEO of PINZ announced their partnership under much fanfare back in July claiming it to be a 'Game Changer' for the Property Management industry. Time will tell if this will be the case.

REINZ CEO Bindi Norwell with Housing Minister Phil Twyford at the recent REINZ Conference in Auckland

The opinion we favour and has been voiced by REINZ is the case for regulation under the REA. In our opinion, this is the only logical answer to help solve the issues that have consistently plagued our industry and will provide greater assurances for both tenants and landlords alike.

We fear that Twyford may take the soft option and seek the industry to self-regulate as the Government may not want to create more work for themselves. This will be the likely middle ground that will leave the Government claiming that they took steps without actually taking any responsibility.

How did we get here?

The problems started over a decade ago when the then Associate Justice Minister Clayton Cosgrove introduced a bill that stripped REINZ of its then self-regulating powers and we saw the birth of the Real Estate Agents Authority (now known as the REA). Before the evolution of the REA, to work as a Property Manager leasing property, you had to have your salesperson certificate. As the axe fell on self-regulation and the REA was introduced, it was decided that Property Management should be left out. I remember this time well as around 2010 I was invited to participate in the REINZ Property Management Sector Group. At the time it was discussed that most of the complaints REINZ received were about Property Managers and it was decided that the REA would not have the resources to deal with so many complaints. Therefore, it was decided that Property Management would be left out, meaning anyone could become a Property Manager without any qualification.

The new elected National Government amendments to the Residential Tenancies Act in 2010 escalated the issue, thus allowing anybody operating as a property manager the ability to charge letting fees. Previously only REINZ members were able to do this. This opened the floodgates as new Property Management companies started everywhere, leading to the situation that we have now. A proliferation of small unqualified Property Management companies governed by no one has led to a drop in standards.

Deregulation of our industry has failed.

Game changer claims

It seems that after ten years, we have come full circle and the status quo cannot remain. The question is what will Twyford do next?

We know that Minister Twyford has met with IPMA and with Ashley Church of PINZ and if I was a betting man, I would predict that Twyford will take the IPMA and PINZ preferred position of self-regulation, governed by PINZ.

Ashley Church of the Property Institute claims that their relationship with IPMA is a 'game changer' for the Property Management industry. Time will tell if he is correct.

If PINZ and IPMA get their way we will be looking at PINZ to set the standards on what best practice will look like and one would suspect they would have their own in-house disciplinary procedures for rogue Property Managers.

Ashley Church has two years to prove to the current Government that they have what it takes. PINZ are predicting many more Property Management companies will switch to IPMA as part of their new initiative and IPMA chair Karen Withers makes the bold claim that their members already represent the pinnacle of the Property Management industry.

One must applaud such an initiative. It adds greater credibility to IPMA and will give them more profile. As such, they can start to influence Government policy and in particular around the Residential Tenancies Act.

But does this mean that we will all become members of IPMA and will PINZ be telling us how to run our industry?

Self regulation flawed

In principle, any suggestion of self-regulation is better than the current situation however on a second look at the idea, I do have serious concerns about the practicality of such a plan.

For this idea to have any merit we will need to see the big players switch from REINZ to IPMA and this is highly unlikely. Under the current IPMA constitution, REINZ members cannot take up IPMA membership. Can you imagine the likes of Barfoot and Thompson walking away from REINZ to become a member of IPMA? Me neither!

If IPMA get their way, REINZ will set their own criteria, they partly have already with their Accreditation programme. This would split the industry in two.

It also goes against what Labour stood for 10 years ago when Clayton Cosgrove opposed the self-regulating powers of REINZ - so why should Property Management be any different and can you guarantee that PINZ will run it differently or any better than the way REINZ ran the industry 10 years ago?

My main concern is this will become too confusing for the consumer. Whether we like it or not, there will be multiple times where issues cross the boundary between residential sales and property management and as such having to go to two separate bodies to raise issues will not be practical.

As an example. A house is managed by ABC Property Managers and the landlord decides to sell with Anne Agent Real Estate. The house is sold but there is confusion around possession date and subsequently, incorrect notice is given to the tenants meaning the purchaser cannot move in on the date they settle. Both ABC Property Management and Anne Agent Real Estate blame each other for the mistake. The delay costs thousands as well as the emotional distress it causes the purchaser, the vendor and the tenants. The purchaser decides to log a formal complaint.

  • Who do they complain to - REA, PINZ or both?
  • What happens if different regulators come up with different conclusions?
  • What happens if both regulators end up blaming the other party?
  • Does the purchaser have to fill out two separate complaint forms?
  • Are there different appeal processes?

Whether you like it or not, there is simply too much crossover between residential sales and property management. Although there is clearly a difference in the service that both sales and property management offer, ultimately, they are dealing with the same product, real estate. Therefore, keeping it regulated under one roof is the only logical answer. Having it any other way is too confusing and can lead to inconsistencies.

In this diagram, we try to show the different parties that can be involved in a transaction involving the sale of an investment property. It simply makes sense for the REA to be the regulator, keeping the process simple for consumers. Tenants would continue to deal directly with Tenancy Tribunal and not the REA yet if a landlord has an issue with their property manager, they can complain directly to REA.

REA the only way forward

When you look at what the REA covers it seems ludicrous that Property Management is left out. Leasing of commercial real estate is a prime example. To do commercial leasing you have to operate under the boundaries of the REA - yet leasing a residential property is deemed not to come under REA. For companies that run real estate in conjunction with property management, this can unfairly expose them to risk.

I have thought about how regulation would look for some time now and back in February of 2015 when I first started consulting I wrote an article proposing how regulation should look. Not a lot has changed in my opinion.

Read article on regulation written February 2015

What I proposed for property management is as follows.

  • Compulsory qualifications for Property Managers: Do we financially benefit from this as a company? Yes, of course we do, but can anyone seriously argue that being qualified as a Property Manager does not benefit the individual, the company they work for and their consumers whether they be tenants or landlords? I truly believe that knowledge is power and lack of knowledge of the Residential Tenancies Act within our industry always astounds me. Since delivering the New Zealand Residential Property Management Level 4 qualification we have seen a nearly 80% increase in uptake since the previous year. We expect to get very busy in the next twelve months.
  • Compulsory verified and non-verified training: Replicate what happens in real estate. Our industry is constantly dealing with change whether it be through legislation, technology or consumer demands. 10 hours on verified and non-verified training has helped real estate. It will also benefit property management.
  • Mandatory Trust Accounting: Professional Property Management is about trust and transparency. The money collected does not belong to a Property Management company, it belongs to the client who will give a small percentage to the company for managing their asset. Yet too few companies actually use a trust account. Money that does not belong to the company can easily be used for business expenses and it is way too easy to deceive your consumer.
  • Compulsory Auditing of Trust Accounts: Under section 125 of the Real Estate Agents Act 2008 the agent's trust accounts must be audited and the REA has the power to appoint an auditor to audit accounts at any time. When you think of the millions of dollars that are held in an account over a twelve month period, being audited is an absolute necessity.
  • Criminal record checks on employees:Again this is about establishing trust with the consumers. Property Managers will enter 100's of houses throughout the year. They will do approximately 500 inspections a year and will be potentially managing millions of dollars of landlords income and tenant bonds. You want to know the person doing this has no unpleasant history.
  • Extend the powers of the REA:Put Property Management under this as well. There has to be some discussion as to what authority they have and what constitutes a worthwhile complaint. You cannot have the authority bogged down with small complaints. This was the original issue back in 2008. Landlords would get upset because their expectations around what constitutes reasonably clean may not have been met. Let the REA deal with cases where the claims are for a significant dollar amount. There will have to be clear boundaries put in place for this. Also, give the REA powers so they can penalise companies or individuals or even ban them from operating.
  • Transparent complaints procedure: Every property management company should issue landlords a copy of their complaints procedure and tenants should also be given booklets on what to do if they have an issue that cannot be resolved. The reality is only a handful of property management companies actually have a transparent complaints procedure and many have no procedure at all.
  • Tenant charges clearly displayed: This is a step we have taken from the UK. If tenants break a contract they should be charged for the re-letting of that property. However, to avoid confusion and disputes, those fees should be clearly outlined along with how they are calculated before any tenant signs the Tenancy Agreement. Again, this helps establish transparency and trust.
  • Compulsory training for private landlords:  This is a new suggestion. If you are a landlord you are in business and it can no longer be treated as a hobby. As letting fees being charged to tenants are banned and the responsibility for fees is with the owner, we may see more landlords choose to manage the property themselves. This will cause potential issues as many landlords may have great intentions but do not have the skill set or knowledge to manage a residential tenancy.

The argument put forward by many of the people who oppose regulation under REA is that property management will just become a second-class citizen to residential sales. 10 years ago, I would have agreed, however, I firmly believe that opinion is changing. The true value of any real estate business is in the rent roll, not in the sales. Rather than property management being poor cousins, I see us as the rich uncle or auntie who looks after the family silver. We also have a changing generation as the baby boomers sell up and retire, a new breed of business owner is emerging. They understand the value of a high performing property management business and the companies that thrive will focus on property management first, not the other way round.

Many people may think I take such a stance because of our association with REINZ. That is not the case, however, I do take umbrage when individuals make comments suggesting our stance is commercially motivated. Nothing could be further from the truth. Every decision we make as a company has the industry's well being at heart. It actually makes commercial sense for us to keep quiet. However, I once received some great advice when I was on the REINZ committee from the brilliant Hayley Stevenson of Housesmart in Queenstown. "You can sit on the sideline and whine or you can get on the playing field and speak up for what you believe". I choose to do the latter.

Our industry has taken an absolute hammering over recent times. Yet in spite of this, I remain optimistic that good will come out of all the bad publicity that has been associated with Property Management. There is now a strong sense that change is coming. One hopes that the Government listens to all parties and think their decisions through very very carefully. The next few months are critical for our industry and we cannot afford to get it wrong.

An open letter to the property management industry

Real-iQ’s vision for the Property Management Industry

During Christmas of 2015, after surviving my first year in business, I sat down and wrote down a plan as to how I saw the future of Property Management and what type of role I wanted to play in the industry. It was at this point I decided to develop a Training Business to support Property Managers throughout the country.  I simply wanted to make a positive impact on the industry that had given me so much pleasure and satisfaction. I had seen too many Property Managers in offices up and down the country struggle with a lack of resources, training and support. I truly believed that I could make a difference.

Real-iQ has come a long way in our relative short history.  I started off as a sole operator and now we are a small and dedicated team whom I am grateful to work with and who share my vision.

Recently, it was announced the REINZ, Real-iQ and The Skills Organisation were partnering to bring the Property Management industry the revamped New Zealand Residential Property Management Level 4 qualification. I have read some comments on social media sites, including our own which disapprove of REINZ’s involvement within the Property Management industry. Rather than respond to each post individually, I think it is important to make everyone clear as to how we see Property Management evolving and why we see partnering with REINZ as a hugely important way to support our industry.

Real-iQ partnering with REINZ

Last September, I first met the new REINZ CEO Bindi Norwell, and since then we have had numerous meetings where we have discussed the future of Property Management. I have been hugely impressed with her enthusiasm for Property Management and willingness to listen and learn. I have also been very impressed with the profile she has given our industry within the media. REINZ have made a real commitment to support the industry through advocacy, providing resources and now education.

In my opinion, they are the group that has the most political influence and are best suited to represent our industry. I have always shared their view that Property Management should come under the scope of the REA whom should be the regulator of the industry. There is simply too much cross over between Real Estate and Property Management to separate and have them regulated by separate bodies. I also do not share the views that Property Management should be self-regulated. When there are issues of poor practice that involve allegations against a Real Estate agent and a Property Manager, it would be far too confusing for the consumer to have to complain to two separate parties. Keeping the entire industry governed by one body is the only logical answer.

We believe that the New Zealand Property Management Level 4 Qualification will be the qualification of choice for the industry and our goal is to have the entire industry qualified or working towards it by December 2020.

We believe that by partnering REINZ, we will be providing the industry with the best resources, training and support and we will be actively promoting Property Managers to become members of REINZ.

I am fully aware that not all Property Managers and companies will want to be associated with REINZ. Consumers should always have choice and REINZ is no different. If people do not want to be a member of REINZ then I would encourage them to become a member of IPMA. Real iQ works with companies who are associated with IPMA and this group also does good work by its members.

I have learnt in business that you will not get 100% agreement from all parties. A debate is healthy so long as it is carried out on the correct platform. It should not be a case of us versus them, it should be a case of collectively sitting down and seeking the best way forward for our industry.

We are proud of what we have achieved in our very short history, but we are fully aware that the task of improving our industry has only just begun. We cannot do it alone and this is why we are proud to have partnered with REINZ, who we feel is best suited to lead the charge to regulate the industry.

As ever, we welcome your feedback.

The broken dreams of renters united

  • Renters united launch the plan to fix renting
  • Tenant group growing in political influence with heavy weight support

On Wednesday the 11th of July, Renters United launched their 'Plan to Fix Renting' and it grabbed plenty of media attention. This small group of volunteers have certainly been successful in drawing attention to themselves and whether you are a tenant or a landlord, you have to hand it to them they are extremely well run and have some prominent public figures backing their cause.

At the launch, they had Philippa Howden-Chapman of Rental Warrant of Fitness fame presenting and supporting them. They also had Sam Huggard of New Zealand Council of Trade Union presenting and Labour MP for Rongotai Paul Eagle was present as well.

Legitimate concerns or socialism in disguise?

I decided to go along to have a look and listen to what they were proposing and to talk to some of their members. First impressions are that Renters United are a well-meaning group, fighting for the underdog. You have to admire the efforts and commitment of people such as Kate Day and Robert Whittaker who largely run the organisation. There is though an element of the group that is a little concerning with more than a hint of anti-capitalism and pro-socialist about their views. Because of this, it could have a detrimental impact on their credibility.

The fact that there has been absolutely no engagement with landlord groups or the Property Management industry is regrettable. As I wrote in my blog back in February, for every good intention a well-meaning group may have there is likely to be unforeseen consequences that can have a negative impact on what you are trying to achieve. You cannot fix renting without taking off the blinkers and listening to the thoughts and recommendations of Property Managers and landlords alike.

The most compelling of the speakers questioned the whole principle of private land ownership, and was utterly scathing of Property Managers, referring to our industry as 'Opportunistic Profiteering Parasites'. It is all very well to stand on stage and claim that our industry regularly discriminates based on race, sexual orientation, employment status and family status but to then go on and label our entire industry as parasites is a nonsense, hypocritical and discriminatory in itself. Groups like Renters United would do better to engage in meaningful debate with landlords and Property Management groups rather than call upon individuals who draw attention to themselves with such extreme and polarising views.


What is in the plan?

There are four sections to the plan with 36 points that they want to develop to fix renting. The four sections are as follows.

  • Stable homes
  • Fair rent
  • Safe and healthy homes
  • Meaningful enforcement

Let's tackle each of these issues one by one and grade them out of 10.

Stable homes

The first part of the plan has nine steps that focus on protecting tenants from eviction. Firstly, we agree that a stable home is essential for the well-being of tenants. Stability will be beneficial for all. Children are not uprooted from schools and families will become more engaged with their local communities.

This part of the plan mainly focuses on reasons why a tenancy is ended by a landlord. There is a large emphasis on protecting the tenants against evictions and in particular, no cause evictions. A landlord will have to give a legitimate reason to end a tenancy and the tenant will have the ability to address that reason. This even comes into effect if the landlord has to sell the property. Renters United are proposing that even if a property sells, or the owner wants to reoccupy, this is not a legitimate reason to end a tenancy. If you rent out your property you could potentially be putting the property on the rental market indefinitely.

The only reason to end a tenancy will be for rent arrears, anti-social behaviour and serious damage to the property. Indefinite tenancies could become the norm. Tenants will also be able to make minor alterations to the property and be allowed to have pets. In the event of a landlord giving tenant notice, the tenant will be able to give the landlord 7 days notice. Overall, the ideology around these steps does have some logic. Tenants can stay as long as they want so long as they look after the property and pay the rent on time. Win-win for everyone.

However, the plan fails to take into account the dilemma that many landlords may find themselves in as their circumstances change. A landlord may be forced into either selling the property or having to reoccupy it.

If you do have to sell, who would want to buy a property with a permanent sitting tenant in place? What it will do is reduce the capital value of the property. The only people who will likely purchase the property are either investors or developers. It will not be available for first home buyers.

The accidental landlord could also be forced out of the rental sector. Some people become landlords not through choice but through accident whether it be through divorce, relocation or inheriting a property. If this group of landlords are forced to rent out their property indefinitely they will leave the rental sector adding to a reduction in rental stock and driving up rents even more. These are just some of the unforeseen consequences this type of ideology can create.

I do share the views that too many tenants are forced out of houses quickly when the landlords sell and extending the 42 day notice period may help. However, the recommendations made by Renters United would likely see even more landlords leaving the private rental sector. Landlords should be able to sell their assets in circumstances that suit them. You would see a greater reduction of first home buyers as they would be squeezed out of the market due to lack of available stock. This may lead to a two-tier housing sector with first home buyers forced to pay more as there will be a shortage of supply.

One thing we do agree on is the reduction of the frequency of inspections to every six months after a tenant has occupied a property for one year. Every three months is intrusive and unnecessary however if the tenant is not looking after the property and breaches are issued a landlord should have the opportunity to re-inspect following up on the breaches.
Overall, we give this section a 5 out of 10. The policies are well-meaning but will lead to a further reduction in rental stock.

Fair rent

One of the great misconceptions within the group was that landlords and property managers ramp up rents every six months. I hardly ever see this happening. I see no issue with an annual rent increase as to what they are proposing and tenants already have the power to challenge the landlord through the Tenancy Tribunal for Market Rent. Capping a rent increase goes against the concept of a free market.

The basic rule of economics is supply versus demand. Yes, rents have gone up and slightly ahead of income but the reality of the situation is simply down to a lack of rental stock. Landlords are having to make a significant investment in their properties and want an economic return. The only way this can happen is through rent increases.

This graph is the Housing Affordability Measure for all properties in New Zealand. It is based on the number of occupants of houses that spend more than 30% of their income on accommodation. As you can see, rent has been stable for over 10 years. (sourced from Ministry of Business, Innovation & Employment).

Take a look at Christchurch and Wellington as an example. Christchurch has an oversupply of rental stock available and as such we have seen rents decrease slightly compared to Wellington which has a shortage of stock and subsequently rents have increased. There is no conspiracy between landlords to fix rents in Wellington. There are no landlords preying on students who have had money given to them by the state. The issue has always been that there is not enough stock in Wellington. In particular, three bedroom properties are what New Zealand needs. This is the failure of consecutive central Governments, local councils, poor planning, increased bureaucracy and a lack of foresight. This is not the fault of landlords.


In this chart, we highlight the impact of Supply v Demand. The average weekly rent in Wellington is $488 compared to Christchurch which is $372 (statistics obtained from MBIE) . The only way to control rents is to increase supply. State intervention is not the answer.

If you want to control rents, do not leave it to the state. New Zealand needs a strong private rental sector and if you make it difficult you will see a mass exodus of private landlords. We have already seen this as compliance costs, meth, Osaki have all lead to many landlords saying enough is enough. Let the market decide and build enough rental stock to meet the demand to control rents.

Renters United also seem to have the opinion that landlords own copious amounts of properties and nothing could be further from the truth. The vast majority own only one or two properties.

The final point that Renters United make is to scrap the letting fee. There is a sense of inevitability about this and ultimately the tenants will pay for it with rent increases as companies and landlords attempt to recover the costs.
As with every facet of business, let the market decide, not the state. If you want rents to be stable we need more stock.
This will have the opposite effect. 2 out of 10.

Safe and healthy homes

This is one section that Renters United and I agree on the majority of the proposals.

I have always argued that if you are a landlord you have a social responsibility to provide a warm dry house and as a nation, we will all collectively benefit if our housing stock is warm and dry.

The Healthy Homes Guarantee Bill will go a long way to sorting out the rental stock of New Zealand but it will take time to fix simply due to a lack of tradespeople.

A concern I have about their proposal is that there seems to be an over-emphasis on compliance with the Rental Warrant of Fitness being implemented along with a Rental Housing Quality Grade system. One or the other should suffice, having both is further unnecessary cost put on landlords and on the tax-payer. More bureaucracy, more cost.

There is also a suggestion that local councils can supplement national standards with their own specific regional needs such as ventilation in warmer climates. This is all very well but why would you limit the proposals to just rental properties? Surely all residential housing needs to come under such legislation.

One potential flaw in the plan is that if they try to rush this through, then time may be an issue. I suspect we will see a number of non-compliant rental properties this time next year due to a lack of insulation. If standards are set and the timeframe for compliance is too short we may see thousands of rental properties left derelict as the cost of getting older properties compliant will not make financial sense. This will again lead to a reduction in available rental stock and drive up rents further.
The majority of this we are onboard with 7 out of 10.

The plan to fix enforcement

Some of this we are 100% behind such as the regulation of Property Managers. I even support increasing sanctions on landlords who are in breach of the Residential Tenancies Act. There is also the recommendation that a landlords register is adopted along with a register of every rental property. The data that will be accumulated will be extremely valuable to track trends such as rents, length of tenancies and track compliance.

Whoe does tenancy tribunal favour. Vote now.

Some of the suggestions though are unbalanced. Renters United claim that the disputes process is unfair, with a power imbalance in favour of the landlord.

The current system is in our opinion extremely fair and if anything there is a bias towards the tenant. Look at the implication of the Osaki case. Tenants have no responsibility in terms of accidental damage and many, including myself, feel that this has swung too far in the tenant's favour.

Overhauling the whole disputes process including Mediation and Tribunal would be a massively expensive and an unnecessary process. Some of the changes they propose around changing Tenancy Tribunals to become focused on investigation and establishing the facts seems to be exactly what we have now. Tenancy Services provides a useful service for tenants and landlords.

The reality is tenants have plenty of rights. The main issue is that the vast majority of tenants do not know how to exercise them or simply cannot be bothered.

Another interesting idea is to anonymise tenants who appear in Tribunal so they do not fear standing up for their rights. This can work but only under special circumstances such as when the tenant applies to the Tribunal. They can be given the choice to remain anonymous and it must only apply when they are successful in their claim or when the tenant's safety is compromised.

The concept around this is that every tenant is a victim, yet there are plenty of landlords who are victims of bad and unscrupulous tenants.

The feeling that tenants are victimised through the disputes process is completely unfounded and highlights the deficiencies in this whole plan. It is too one-sided with no input from the other side. If you asked Property Managers who are dealing with disputes who the system favours, I would suspect the majority would say the tenant.
Some of this is spot on, other parts are inaccurate. 5 out of 10.

Is renting really broken?

Reviewing this leads me to the final question. Is renting really broken? Some of the current legislation is probably now out of date and needs reviewing, but overall the Residential Tenancies Act just needs some fine-tuning.

The main issues are around supply and demand of rental properties, poor quality of much of the rental stock and issues around the lack of regulation around Property Managers. If and when the industry is regulated you will see long-lasting improvement in the quality of service and qualified, regulated Property Managers will not be allowed to manage non-compliant properties. The other recommendation we have is that private landlords need to sit an exam to allow them to privately manage their own investment properties. Many of them muddle their way through the process, making mistakes and leaving them exposed to litigation.

At least the Government is trying to do something about increasing stock and the Healthy Homes Guarantee Bill will go a long way to improving the quality of rental properties, but this is going to take time.

Overall, Renters United have successfully put the spotlight on renting in New Zealand, though this whole document would have far more credibility if it had input from groups such as REINZ or NZPIA. It would be far better if we all listened to each other's concerns and adopted a collective response.


Busted!! The rise and fall of the methamphetamine industry

In August 2014 two-year-old Emma Lita-Bourne died after suffering a brain haemorrhage. The story made the news the following winter after a coroner reported that the condition of the property had contributed to the little girl’s death.
The property was contaminated and it wasn’t methamphetamine.

Instead, dampness and mould had played a significant contributing factor into the death of young Emma according to the coroner. It was a story that highlighted the sorry state of many rental properties around New Zealand and in particular, Housing New Zealand.

If that wasn’t bad enough, last year a BRANZ report was released stating that up to 1,600 deaths a year could be attributed to the poor condition of New Zealand housing.

Yet somehow, the poor condition of New Zealand’s rental stock has not been the focus that it should have been. Instead, New Zealanders have been gripped by the fear of owning or living in a Meth contaminated property. It has now become clear that this country has potentially wasted hundreds of millions of dollars on what appears to be nothing more than fake news and, in some cases, scaremongering that has led us to this ‘moral panic’.

Emma Lita-Bourne died only two years old and the poor condition of property she lived in contributed to her death according to the coroner. No one has been able to name me a tenant who died from living in a meth contaminated property

Housing New Zealand has spent approximately $100 million on testing and decontamination work. What has the private sector spent? Probably about the same. Yet no one anywhere can name an individual who has died because they have been exposed to one of these properties.

Somewhere along the line, we’ve completely got our priorities wrong!

A brief history of the industry

I have seen the Methamphetamine testing and cleaning industry evolve from its early days at the start of the decade all the way up to its zenith. I also have to confess that in the early days of the industry, even I was sucked into it, becoming a ‘Methsolutions Certified Sampler’ whatever credibility that qualification had.

I even appeared on the front page of the Manawatu Standard back in November 2013stating that properties will need to be proven to be ‘meth free’ before being rented out.

We have been writing about the Meth Testing industry for over two years questioning the validity of it. In January this year, we predicted that the Government would review it's stance on Meth and we were proven to be right.

However, as the problem grew, after a while, you start to question yourself. Is all the money being spent on this necessary? Has anyone actually got seriously ill from living in a property? Who is policing the testers and the decontamination companies?

It became apparent to me that there was a big problem back in February 2016. I was invited to speak at a Property Management training day in Auckland and before my presentation, a highly respected legal consultant presented before me. His presentation was going to be on the new Health and Safety at Work Act, but it was soon to be hijacked around the risks of methamphetamine contamination. He stated that under the new Health and Safety at Work Act, every rental property would have to be tested for methamphetamine contamination and every property manager was putting themselves at risk by going into untested properties. It all seemed a bit over the top to me.

At the end of his presentation, he then proudly announced that his company had just launched their new ‘meth testing service’.

Scaremongering? I’ll let you make up your own mind.

What this presentation did though was prompt me to start researching the industry. If he was getting into it, who else was?

The results shocked me. In a two-month window between 1st May 2016 and 30th June 2016, at least twenty companies had been set up to do work within the testing and remediation sector. None had been set up during the same period the previous year.

In July 2016 I wrote an article ‘Welcome to the Wild West of Meth Testing’ arguing that the industry was wide open to corruption with a massive increase in the number of companies being set up without regulation.

After getting plenty of support from that article, I became convinced that what we were witnessing was at best scaremongering with some dubious tactics and at worst, a money-making scam.


Was it all a great big scam?

Well, it is too early to tell, but it does need to be investigated. If you give the benefit of the doubt to the early pioneers in this industry they may have been acting on incorrect information or they are only catering to the demand created by decisions that came out of the Tenancy Tribunal.  I will be the first to admit that not everyone who works in this industry are bad people. I have met many operators who genuinely believe in what they are doing, one, in particular, only started his company after his brother became a meth addict. If you’re in business, it has to be for the right reasons.

But as reality begins to bite, many of these individuals will soon be looking for a new job or career as the industry has been dealt a near fatal blow by Sir Peter Gluckman and I for one applaud him.

There is no doubt that there will be literally hundreds of landlords and tenants now seeking some retribution and probably with some justification. We are already seeing the public and media outcry, looking for someone to blame. Housing New Zealand, The National Party!

Who is to blame?

One thing being in business does teach you is that when things go wrong, rarely is it the fault of one person. This sorry state of affairs is no different and there are multiple reasons why it escalated to become the scandal it has.

The Tenancy Tribunal

For three years now, I have been collecting Tenancy Tribunal decisions on cases that involve methamphetamine. They make for some interesting reading and one of the key issues is the lack of clarity as to what you can and cannot claim for. There is also a wide range of damages awarded for relatively low levels of contamination.

Here are some simple examples.

  • Case Number 4005320 13th June 2016

The tenant is ordered to pay $35,764.72 to the landlord the highest reading of eight tests was 2.6 micrograms and only three were above the then guidelines of 0.5 micrograms. The entire property was refurbished after recommendations by the company Prodecon.

  • Case Number 4065206 20th March 2017

The tenant is ordered to pay $3007.83 for decontamination and $2,318.50 for testing with a reading of 2.5 micrograms. That’s a $30,000 difference.

  • Case Number 4083990 1st June 2017

The tenant is ordered to pay for cleaning and testing due to contamination even though the highest reading is well under Ministry of Health guidelines.

Yet probably one of the most controversial decisions was made by Adjudicator Hogan who released a tenant from a fixed term tenancy back in March 2016 stating that any level of methamphetamine was too high. In this case, the highest reading was 0.17 micrograms.

It was the Tenancy Tribunal who came to the conclusion as to what was acceptable or uninhabitable. The reality is that they made rulings based on a Ministry of Health document written back in 2010 for Guidelines for the Remediation of Clandestine Methamphetamine Laboratory Sites. This document stated that levels of contamination for labs should not exceed 0.5 micrograms.

In the Tribunal’s eyes, once a property had sufficient traces of meth, it was deemed to be health risk even though the likelihood is that it was through use rather than manufacturing and this was the first big mistake.

A prime example is when you get a reading of 212 micrograms as we saw in one case late last year, you can presume that it is a lab. Yet these cases are few and far between.

By making that decision the Tenancy Tribunal opened the floodgates.

The media

The media often printed images such as this but rarely questioned the validity of the statistics.

There is a sense of hypocrisy from certain media outlets when you read the scandalous stories about how millions have been wasted, tenants have been unnecessarily evicted and landlords have been left out of pocket.

Yet the same outlets that are writing these stories were quick to run the shock and horror stories around how 40% of properties tested are contaminated by Meth. The Meth Map was a clever marketing technique developed by Methsolutions. They used to release it every quarter and it was lapped up by media outlets highlighting the ‘Scourge of Meth Contamination’. The big headlines that you saw only lead to more and more fear and played into the hands of the companies that did the testing. Some reporting simply threw paraffin over the flame and this fed the frenzy and moral panic.

It was only in the Spring of 2017 that more and more scrutiny was being put into the industry by the media.

The Meth Map was a particular irritant to me. The reality is that amounts as minuscule as 0.05 micrograms were identified on the Meth Map as a contaminated property. A microgram is one-millionth of a gram. 0.05 micrograms are 500,000,000 of a gram. Yet even after the updated standards, 1.5 micrograms were set, we still saw the Meth Map highlighting that 40% of properties were contaminated. This, in my opinion, is deceptive and misleading. Yet no one from the media ever questioned it.

Standards New Zealand

Regardless of your political position, some of the responsibility lies with the National Party. This happened on their watch and they were too slow to act. You also have to look at the selection process for the Standards Committee that was set up in 2016.

Why was Sir Peter Gluckman not involved in this or Dr Nick Kim who has long been outspoken about the money being wasted. In retrospect, the committee should have been made up purely by scientists because, at the end of the day, this is what it is about.

How can people involved in property contribute on something that they have no knowledge about? Were people with a commercial interest in the industry appropriately balanced out by more independent experts?

The selection of the committee appears to be flawed. It was decided that trying to differentiate between Labs and third-hand smoke was too difficult, so an unworkable standard was set.

The testing an decontamination companies

At some point, you have to look at how some of these operators have gone about their business. I often heard cases of testing companies making recommendations as to who to use in regards to decontamination. An industry that went from having a handful of operators in 2015 exploded into well over 100 by the end of 2016. Some of the training was through a two-hour Skype session and away you go, you are now a professional tester.

Not all operators are bad, and I have met some good, hard-working people within the industry. But the reality is that many joined it as they saw the gravy train running out of the station and they had to get onboard.

What happens next?

Is this the beginning of the end for many in this industry? It has certainly been dealt a devastating blow as I simply do not see the need for composite testing anymore and the NZS 8510 Guidelines must surely change to reflect this.

Would I rent out a property if it had readings of under 15 micrograms which is the new guideline being recommended in the Gluckman report? Yes, I would, and more importantly, I would be happy to live in it.

The reality is though many wouldn’t and the stigma that goes with a property will stick.

No one wants to be the Property Manager who rented out the contaminated property to the young solo mum whose toddler got sick and nearly died. The fear of litigation and recrimination is too great and as such a risk-averse approach has evolved.

Sir Peter Gluckman's report leads to some fascinating reading. Only two people in New Zealand are linked to poisoning through Methamphetamine intake via a contaminated container. No other confirmed cases have been reported.

Yet the numbers do not lie, and we should as an industry move on. The Gluckman report does have some compelling facts to back up its validity.

  • Of over 13,000 surface swipes taken over 75% had methamphetamine levels under 1.5 micrograms
  • The average level for positive samples was only 2.7 micrograms
  • Less than 1% tested above 30 micrograms suggesting a low prevalence of properties potentially used for manufacturing.
  • Since 2013 a national register monitoring diseases, injuries and illnesses from hazardous substances has been maintained. Between 2014 and 2016, two cases of food poisoning (from the same household) were attributed to methamphetamine intake via a contaminated container. No other confirmed cases have been reported.
  • 74 meth labs were detected in 2016 and 50 of those were in rental properties. This number is decreasing as most methamphetamine is imported. In 2009 it was 135.
  • There are currently 680,000 rental properties in New Zealand. Let’s say that Police identified 50% of the meth labs and there are 100 in rental properties in New Zealand. This means that you have 0.015% chance of having a rental property used as a meth lab.

My views are as follows

  • Standards New Zealand guidelines implemented for testing and decontamination of methamphetamine-contaminated properties needs to be reviewed and updated, immediately. In the meantime, Tenancy Tribunal adjudicators must read and understand the Gluckman report as soon they can so they can take into account in the cases coming before them.
  • REA has stated that Real Estate agents are not obligated to disclose confirmed results below 15 micrograms per 100cm2 unless asked.
  • Insurance companies will be reviewing this report at great length with meetings and discussions taking place up and down the country. My view is that they will eventually stop taking the approach that Meth Testing should be compulsory due to the fact that the latest report makes the recommendation to stop doing composite testing.
  • Tenants should not expect compensation because, at the end of the day, many of them have committed an unlawful act in the property they were renting by smoking meth in the property. That itself gives the landlord the right to ask the tenancy tribunal to terminate the tenancy.

In conclusion

I am fully aware that the default mindset for many Property Management businesses will be to take a ‘risk-averse’ approach until we hear otherwise. However, in my opinion, this report provides enough evidence to think otherwise. Some people have suggested that the report is ‘politically motivated’ to release more state housing. There may be some truth in that, however, some people have made suggestions that Sir Peter Gluckman is being influenced by the Government.  I totally reject this suggestion, he is a man of integrity and accusing the Government of having no regard for the health and well-being of the occupants of these properties is a nonsense. No Government of this country would take such an approach.

HNZ has spent $100 million alone in cleaning and decontamination. This is taxpayer’s money. How many houses could have been installed with central heating or double glazing? If you had allocated $15,000 on heating for each of these houses you would have covered over 6,500 properties. This is more beneficial to people of New Zealand. Just ask the family of Emma Lita-Bourne.

18 degrees celsius. Putting the heat on landlords

  • Why the Healthy Homes Guarantee Bill is going to be a game changer for landlords and tenants in New Zealand
  • Tens of thousands of rental properties may soon become non-compliant

“This is my generation’s nuclear-free moment and I am determined that we will tackle it head on.

— Prime Minister Jacinda Arden talking about climate change

As winter approaches, few will dispute that the majority of rental properties in New Zealand are not up to standard.
Thousands of tenants up and down the country live in cold, damp properties that makes a mockery of our global clean green image.

Late last year a bill was passed through Parliament that will literally change the face the housing in New Zealand forever, yet many people are unaware as to the true impact of this legislation and the cost of compliance.

How warm is your rent roll? Take our one minute survey

The Healthy Homes Guarantee Bill became law in December 2017 and many landlords are utterly oblivious as to the impact of this bill. The Labour backed bill passed through Parliament at the second attempt late last year due to the fact that it had support from the previous National Government coalition partners the Maori Party and from United Futures. Because of this, it passed through the first reading by one vote.
This bill is in our opinion, the single biggest piece of legislation for tenancy law since the introduction of the Residential Tenancies Act back in 1986. It is simply going to change the face of renting forever.
Along with Labour stating that they are going to build 100,000 new houses, we are seeing the largest and probably most ambitious undertaking by any government surrounding housing in New Zealand since the Labour Savage Government of 1936.

Why is this bill so significant and what is going to be the impact for both landlords and tenants?

The bill focuses on the ability of tenants to be able to keep their rental property warm and dry using energy efficient heating. The penalties for landlords who do not comply with this bill will be severe and we believe that the majority of rental properties across this country would not meet the criteria if it was set today.

What does the bill focus on?

The Healthy Homes Guarantee bill states that all rental properties must meet the following standards.

  • Standards about the indoor temperatures that must be capable of being achieved in the premises. We believe that this will be 18 degree Celsius.
  • Probably likely that the source of heating must be energy efficient.
  • These standards have already been set.
  • Moisture ingress.
  • Draught stopping.

If landlords fail to meet obligations in respect of healthy homes standards, then they may potentially face exemplary damages of up to $4,000 plus they will face a work order instructing them to get the property to the standards before they can rent it out.

18 Degree Celsius

World Health Organisation recommendation for minimum indoor temperature

How many rentals many rentals will comply?

The big question we are all asking at the moment is what are the standards going to be? As yet we do not know but if you read between the lines one can assume that the indoor temperature capable of being achieved will be 18 degrees Celsius. This is the temperature set by the World Health Organisation as to what constitutes a suitable minimum indoor temperature for a home.

Many properties around New Zealand simply would not be able to achieve this and to get our current rental stock up to standard is going to be a monumental task. Particularly as we have a shortage of skilled tradespeople and the Government is promising to deliver 100,000 new homes over the next ten years. If you're looking for a new business opportunity, heat pumps, central heating and double glazing is probably the way to go.

We are unsure as to when the standards will be set yet they will become enforceable at the earliest 1st July 2019 but no later than 1st July 2024. Each Tenancy Agreement and renewal or variation will need to have a statement on it stating that the property complies with the Healthy Homes Guarantee Bill. Failure to do so is also an unlawful act with exemplary damages up to $500.

Baby boomer landlords struggle to accept change

It was interesting to gauge the response of an audience of investors that I recently spoke to at an Investor Evening in Christchurch about the changes that they will face. As I explained the impact of this bill and the potential costs associated with improving the current rental stock I watched carefully assessing what the audience thought about it. I think it is fair to say that most of the audience, particularly the older generation really struggled with what I was telling them.

Baby Boomer landlords have generally been able to do what they like with regards to their investment portfolio, but things have changed and many of them don’t like it. I remember being a Property Manager about 10 years ago. When a landlord told you to do something you simply did it without question. Now, it is not so simple, taking shortcuts with regards to maintenance treating tenants poorly could see you end up in Tenancy Tribunal as tenants become more aware of their rights. Do not expect a warm greeting from your local adjudicator if you breach this legislation. The temperature in Tribunal will be as cold as the property you provide for your tenants.

This student flat in Dunedin will not cut the mustard when it comes to the HHG Bill. If tenants cannot achieve an indoor temperature of 18 Degrees Celsius, landlords may face exemplary damages of up to $4,000.

Landlords face double blow as negative gearing to go

The amount that landlords budget for repairs, maintenance and improvements will likely more than double over the next few years to ensure that their stock meets the criteria set in the Healthy Homes Guarantee Bill. Many older properties may simply end up being demolished as the cost of making them compliant will simply not add up.

What will be a double whammy for landlords will be the removal of negative gearing. This is when landlords can offset their losses from their rental investment against their own personal income. Many, including myself think this is a bad move. In some cases investors may be able to offset about $4,000 to $5,000 from tax rebates on a single rental property.

This would go a long way to helping landlords front up with the added costs around compliance. Instead, many small Mum and Dad investors are going to be punished. Labour's policy around negative gearing is to remove tax loopholes which they claim the biggest users are large-scale speculators who own multiple rentals and use losses on new acquisitions to continually reduce their tax. Some may do so, but in our opinion it is the small Mum and Dad investors who own one or two properties that will be hurt the most. Some may be forced into selling their asset when they realise the costs associated with compliance no longer make it financially viable to own it.

Rental warrant of fitness to become compulsory

We have long suspected that the Rental Warrant of Fitness (RWOF) will at some stage be written into law and we believe the Healthy Homes Guarantee Bill will be the instrument for this to happen. Why else would the recent national census ask the question as to whether the property you live in has more than an A4 piece the size of mould in it? This is one of the criteria's under the Rental Warrant of Fitness.

Although the rollout of the scheme in Wellington has been a flop, there is enough support for the RWOF across the power brokers of New Zealand politics and expect it to be incorporated into the standards set around the Healthy Homes Guarantee Bill.

This will mean that every rental property will have to meet the criteria set by the RWOF and have assessments carried out probably every three years at a cost of around $250 to landlords.

This could become a new revenue stream for Property Managers as we see no reason as to why they cannot carry out these checks.

There is no doubt that successful Property Management is based primarily around people skills. However, we predict that more emphasis will be placed on Property Managers having more in-depth knowledge of the property that they manage and eventually move towards Asset Management.

Short term pain for long term gain

Overall, we believe that the Healthy Homes Guarantee Bill in conjunction with the Rental Warrant of Fitness will benefit New Zealand long term. Housing is a basic human necessity and everyone should live in a warm, dry, compliant property. However, the cost of this exercise will be born by everybody. Landlords will have more costs, taxpayers will have to contribute to housing supplements and tenants are already facing greater hikes in rents.

Long term though, it is an investment worth making. It will contribute to a healthier nation with less pressure put on our already straining healthcare system. We will also see a more productive economy with a happier, healthier workforce taking less time off for sicknesses caused by unhealthy housing.

However, Labour could have done better by not hitting investors hard by removing negative gearing. One feels at times they are out of touch with the thousands of property investors up and down the country. Do they really think that they are all evil, wealthy capitalists, pouring hot tar on the poor peasant tenants below? This is the impression we get, particularly when you read their policies on the Labour party website. Many landlords will find themselves being pushed to the limit.

The reality is often opposite. Instead, Mum and Dad investors who own one property simply see an investment in property as a way of funding their retirement. They are about to get hit with a sledgehammer, penalised for being proactive and not looking at the state to look after them in retirement. That simply isn't fair.