Key Points of Labour’s Renting Law Changes

Mike 09/09/2017

“May you live in interesting times”

This is a famous quotation which is often seen as a positive expression. Sadly, the saying is really an old Chinese curse. We certainly live in interesting times here in New Zealand right now.

The Labour party, having consistently aimed a gun at their foot and pulled the trigger repeatedly, has suddenly leapt up in the people’s popularity stakes by disposing of the charisma bypass patient Andrew Little, and brought forward the glittering and bejeweled Jacinda Ardern.

And with an election looming later this month, property investors, landlords, real estate agents, property managers, tenants, mortgage brokers, insurance consultants, developers, builders, architects, and anyone wanting a roof over their head are apprehensively digesting Labour’s election buying ideas.

Below are the main points, with my view of each point. You may agree or disagree with my opinion, but be aware that change is a-comin’!

Key points of Labour’s renting plan

  • Extend Landlords’ minimum notice periods from 42 days to 90 days

….and tenants only have to give 21 days notice “for no cause”? This redefines the term “unbalanced”. This would mean that if you buy a property with a tenant in it, whether you intend to rent it out or live in it, you’ll have to wait 90 days before you can move in, and that means you can’t move out of the house that you’ve already sold for 90 days, and that means the purchaser of your house can’t move out of their property for 90 days, and Labour will have created the dreaded property ladder that strangles the UK housing market.

D’oh!

  • Abolish “no-cause” Terminations

Sounds good. Might even win votes. But this is a toothless dog and is not really anything at all. It won’t change anything and it don’t mean a thing. All you’ll have to do as a landlord is give a good reason for terminating a tenancy. Face it, most landlords don’t want to terminate a tenancy, and when they do they would generally have a really good reason to do so.

What could those reasons be?

  1. The property has been sold
  2. The property needs major renovation
  3. The property is being demolished
  4. The owner is moving back in to the property
  5. And on and on and on…..

Woof woof.

  • Limit rent increases to once a year (up from six monthly now)

Again, this also sounds good, and is a vote winner, but it’s that toothless dog again. Savvy landlords are not like the tax department – trying to squeeze every last dollar out of tenants. Most (let’s face it, ALL) rental owners that I deal with like to keep their tenants happy by not trying to put the squeeze on them. Under the RTA you can raise the rent every six months, and then only give 60 days notice for that rent change to come into effect. I don’t know of ANY landlords who would want to raise the rent more than once a year as an annual practice.

Woof woof.

  • Set the formula for rent increases in Tenancy Agreements

Does this mean negotiate individual tenancy rent increases? Or does this mean the government wants to create a mathematical formula for rent rates which actually operate in an open market? Who can tell?

If the Labour Government wants to introduce a set formula for rent increases, investors will shed their properties in droves, rents will go through the roof, and the number of available rental properties will plummet.

D’oh!

  • Ban Letting fees

This may be because a letting fee is seen by tenants as money for jam. Well no, that fee covers quite a lot of things, and when I say “covers” I really mean “mitigates” a fairly long list of costs.

Those costs include:

  • Ensuring the property is compliant and up to code – smoke alarms, insulation, heating, etc
  • Photographs and copy writing for advertising
  • Placing the adverts online, in the media
  • Signage at the property
  • Multiple visits to the property for viewings
  • Out of working hours communication and weekend work
  • Co-ordinating viewings with the current tenants
  • Dealing with enquiries – Phone calls, emails, texts
  • Processing applications – background checks (phone, email, etc), credit checks, ID verification
  • Negotiating the Tenancy Agreement
  • Preparation and completion of the Tenancy Agreement and Bond Lodgement form
  • Signing up the tenant and providing copies of the paperwork
  • Receipting the first rent payment
  • Setting up their tenancy records
  • Receiving the Bond and lodging it with MBIE
  • The opening inspection and providing a copy to the tenant

Often all this work is done while a property is vacant and so there is no rent money coming in which the property manager can take a percentage of. The letting fee covers all of this. If it’s not charged, property management companies will simply expect rental owners to cover this, and rental owners will simply expect the rent to go up to recoup this expense. And so the rents will go up. D’oh!

  • Allow minor alterations, such as painting or hanging pictures, if a higher bond is paid and property returned to original state

And the toothless dog is sucking gummily on your leg again. Good landlords already allow picture hanging, painting and small improvements like veggie gardens, and the RTA currently prevents landlords from asking for more than four weeks rent as bond. This “key point” will simply raise the upfront cost for tenants. Landlords and property managers will just ask for the higher bond amount as a default.

Woof woof.

If the rental market was not already in bad shape from a tenant’s point of view, then Labour’s new plans will certainly finish it off. Think long and hard before you “stick it to the man” with a “she seems really nice” vote.

 

managemyproperty is an independent Property Management company based in Wellington, New Zealand.

Richard Horne remains a tireless and energetic investor and commentator, running an experienced eye over the property market