Are the recent changes to the residential property market law changes with a stick? Do politics have sent again wrong signals or will this time law changes resolve the housing crisis?
Tenancy Law Changes 2016
Hard Times ahead for Landlords and Investors
Landlords under pressure – are you giving up?
Don’t be fooled though, while the seller’s market is booming mid 2016 nation wide because of the shortage of properties in the market, informed investors are cautious. Are the recent changes to the residential property market law changes with a stick?
During the last decade the property market has become for politicians a crucial part of survival towards the election next year and due to cumulating problems. I know from table discussions that prepared investors are not worried about the coming “storm flood”. But not all property investors are well wired to make the best out of a situation that has not fully surfaced yet. In the past even simple up and down cycles have caused casualties. Do politics have sent again wrong signals?
The recent changes go in three directions; firstly to slow down the demand by making it more difficult for investors, secondly to put pressure on landlords to upgrade the rental housing stock, and thirdly to ensure tenants have greater rights.
Outside of the pre-election activities the tax system has been given more teeth to bite investors, the Residential Tenancy Act has been changed and a new safety law for landlords came into force. Well, it does not stop here when following the discussions about methamphetamine residue testing (meth testing) of rentals between tenancies and reducing the liability for tenants as shown in a High Court case.
Apart from all the changes already made lobbying groups and parties look for new fuel to introduce the warrant of fitness scheme for rental properties and to restrict property investments even more (keywords ring fencing, negative geared investments). Fact is, all those changes are very crucial for passive buy and hold investors who work for a day-job and don’t have much time to be familiar with everything. That is why they rely on services such as property managers, trades people, accountants—but the landlord remains full responsible. Becomes being a property investor more and more a risky business?
What is new for investors and landlords?
New lending rules (LVR Rules)
Especially for new investors the reduced Loan to Value Ratios impacts the borrowing capacity as banks assess serviceability and debt level differently. Investors need to find a larger deposit – either in savings or as equity in a family home. For detail visit the Reserve Bank.
Bright-line testing and taxation rules
When it come to investing in properties there are a lot of taxation rules where a change in policies can sink a boat such as bright-line testing, association and tainting rules, exclusion of depreciation and non-rent deductible expenses. See details on the Inland Revenue page.
Health and Safety at Work Act reform bill
In April 2016, the Health and Safety at Work Act reform bill came into force with significant changes to New Zealand's health and safety legislation.
New under this Act a landlord is classified as a “Person Conducting a Business or Undertaking" and must provide and maintain a work environment that is without risk to health and safety for tenants, trades people and contractors. To enforce workplace safety penalties have been increased significantly. That is a new risk for the unwary landlord.
Law changes to the Residential Tenancy Act
 For safer, warmer and healthier rental homes.
· The smoke alarm requirements came into effect on 1 July 2016.
· New insulation requirements will come into effect for all residential tenancies (including boarding houses) from 1 July 2019.
· From 1 July 2016, all new tenancy agreements will have to include a statement from the landlord about the extent of insulation in ceilings, under-floor and walls of their property.
 For enforcement of the tenancy law (RTA)
· The new law makes it an unlawful act for a landlord to end a tenancy in retaliation for a tenant exercising a right under the tenancy agreement, the Residential Tenancy Act, or by making a complaint relating to the tenancy. This is called a ‘retaliatory notice’ under the Residential Tenancies Act.
· Tenants who take direct action against landlords will now be able to challenge an alleged retaliatory notice up to 28 working days after it has been issued.
New risks and costs for landlords
· Meth testing between tenancies is now looking like it will be a requirement to meet the monitoring and due diligence amendments of the new Health and Safety at Work Act 2015.
· Reduced liability for tenants—The Court of Appeal recently said tenants who damaged rental properties were not necessarily liable to pay for that, following a case where AMI sought $216,000 from tenants over a fire-damaged home. The High Court had previously ruled that tenants were liable but the appeal court overturned that.
To take away
The Government is progressing to strengthen the tenancy law and new power is targeting landlords who are breaking the new regulations. But the risk of failing increases especially when engaging services like a property manager. What happens if the tenant makes a complaint related to the level of insulation, but under property management the investor might not have even seen the tenancy agreement, is it the PM’s job to verify (checking ceiling and under-floor insulation) the disclosure statement, or is it ultimately the landlord’s/investor’s responsibility? How we do reduce risks – follow our posts, good luck.
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