Rental rule changes: what they mean for investors and how a property inspection report can make all the difference

For both investors and tenants, the Residential Tenancies Act (RTA) is the be all and end all of anything involving a rental property. Having stayed mostly the same since its introduction in 1986, any changes to it are going to have a huge impact on the responsibilities landlords and tenants have to each other.

And with a new decade comes new rental rules, apparently. Last November the government announced a whole heap of ‘practical changes’ to the act in order to make renting fairer and more secure for tenants, and they’re set to be rolled out within the first half of this year. So, how will these changes affect investors and how can a property inspection report help? 

What’s changing and why?

The main amendments to the RTA are: 

• Limiting rent increases to once every 12 months rather than every six months.
• The banning of rental bidding.
• Ending no-cause evictions (at the moment, periodic tenancies can be terminated without a reason as long as the landlord provides 90 days notice – now, the RTA will have a set list of possible reasons for termination). 
• Letting tenants make minor changes or add small fittings to the property (like baby proofing, hanging pictures or installing fire alarms). 
• An increase to financial penalties (the Tenancy Tribunal can now award compensation or order work to be done up to the value of $100,000 instead of $50,000). 

The reality is that when the act was first introduced in the 80s, renting was generally a temporary situation for many people. But with house prices rising increasingly in recent years, there are now around 1.5 million New Zealanders living in rental properties – and plenty of those will spend their entire lifetimes in rented homes. With more and more people relying on rentals, the government decided that it was time for changes to make renting more fair and secure for tenants (in theory).

What does this all mean for investors?

While all of these changes make renting more comfortable for tenants, they also mean that as an investor, you’ll have less control over what is a pretty hefty investment. The main concern is around the lack of no-cause evictions and how it’ll become much more difficult to evict anti-social tenants. It will mean you’ll have to be more selective about who you have living in your properties and approach new tenancies with a bit more caution then you might already. 

What can you do from here?

While some commentators predict some investors will sell up because of the law changes, there’s no need to make any rash decisions. New Zealand still has a growing population and a strong economy, which bodes well for the future of the property market. They’ll always be people looking for rental properties, and with the right precautions and preparation, property investing should still be relatively smooth sailing.

To prepare yourself for the changes, it’s best to be a bit more vigilant. That might mean doing more extensive interviews with possible tenants, as well as having a building inspection completed on any property you’re looking to purchase as an investment.

A building inspection not only gives you an idea of the general condition of the property, it also lets you know what kind of work might need to be done in the future to meet tenant needs. A thorough property inspection report completed by a qualified inspector can identify problems before they get too serious and ensure that you’re not over-capitalising on something that will cost you more in the future, avoiding a messy and potentially expensive situation. 

Property laws can sometimes be a bit of a balancing act between what’s best for the tenant and what’s best for the landlord, and these particular changes may be leaning towards benefitting the tenant more than you right now. But, being a property investor and a landlord has always been a challenging yet rewarding job – and there’s no reason you can’t keep reaping the rewards.

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