Hawke's Bay Property Investors' Association

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20-07-2015

Stiffer penalties for landlords

While landlords will all heave a sigh of relief over rejection of the Warrant of Fitness, there is no doubt that the Government is seeking to introduce policies intended to encourage our industry to smarten up its act. The two key proposals are increasing the consequences of retaliatory action and giving  Ministry of Business Innovation and Employment greater powers to prosecute landlords who provide substandard rental property. Another concerns changes to breaching a work order.

Consequences of retaliatory action

Section 54 of the RTA says that the Tribunal may declare a retaliatory notice of no effect. This means that the Tribunal can overturn a landlord’s notice to end a tenancy if they believe that the landlord gave the notice as a consequence of actions taken by the tenant in exercising their rights.

As an example, consider a landlord who hasn't undertaken repair work requested by a tenant. The tenant issue their landlord with a 14 notice to undertake repairs to their property. If the landlord then issues the tenant with a 90 day notice to end the tenancy, then this could be judged to be in retaliation to the tenant’s notice.

If this was to occur, the tenant would currently have 14 days after receiving the notice to apply to the Tenancy Tribunal claiming the notice to be retaliatory and of no affect.

Tenant groups have been concerned that tenants seeking to have their rental properties maintained to the standard allowed for in the RTA, are at risk from this type of behaviour by their landlord. Government appears to agree with them.

Briefing papers to Parliament on proposed minimum standard legislation says that "anecdotal evidence indicates that some tenants are reluctant to take cases to the Tribunal for fear of being given notice by their landlord”.

"I recognise that, based on anecdotal evidence, vulnerable tenants may be reluctant to complain for fear of eviction, despite the RTA prohibiting ‘retaliatory notice’. ... However, the tenant only has 14 days to apply. Currently tenants often contact MBIE too late to pursue this option" says Smith. Read more here.

The proposals plan to strengthen the RTA provisions prohibiting ‘retaliatory notice‘ by:

·       extending the period during which a tenant can apply to the Tribunal on the grounds of retaliatory notice from 14 to 28 days, and

·       making giving retaliatory notice an unlawful act with a maximum penalty of $2000 (consistent with existing penalties for tenant harassment).

"Establishing that notice is retaliatory can be difficult (because under the RTA landlords are entitled to give 90 days’ notice with no reason), but these measures, combined with better information to tenants, will reduce barriers" says Smith.

 

Extra powers for Ministry of Business Innovation and Employment (MBIE)

Nick Smith believes that there is likely to be a public expectation that government will actively enforce smoke alarm and insulation standards. However, the RTA is currently based on contractual relationships between landlords and tenants, with a limited role for government.

The MBIE provides guidance to tenants and landlords to enable parties to resolve disputes directly. If direct resolution is unsuccessful, MBIE advises parties on how they can take appropriate action through mediation and the Tenancy Tribunal.

Under the RTA, the Chief Executive of MBIE is able to commence or take over Tenancy Tribunal proceedings on behalf of a tenant or landlord, where this is in the public interest. This power has only been used twice in the past two decades and relies in practice on the party being willing to provide necessary evidence to the Chief Executive. A party must also be willing to have their name associated with the proceedings and (in most cases) published on the Tenancy Tribunal decisions database. Anecdotal evidence indicates that fear of retribution may dissuade some tenants from pursuing complaints.

The proposed legislation plans to amend the RTA to allow MBIE to investigate and take direct action (for example Tenancy Tribunal proceedings) where severe breaches of the RTA are alleged, and there is a significant risk to tenant health and safety.

Minister of Housing, Nick Smith, is seeking additional funding for MBIE of up to $1million annually to carry out these investigations.

"I believe the increased funding is justified to help ensure decent living standards for the most vulnerable tenants" says Smith. Read more here.

Details of the necessary amendments need to be worked through, including ensuring compliance with the Bill of Rights Act.

An example provided in the cabinet briefing paper where MBIE might consider taking direct action was reported in February 2015.  A Christchurch landlord was housing 20 tenants in huts and caravans on his car wrecking yard, with portaloos, and showers in a converted container.

Although the New Zealand Property Investors’ Federation (NZPIF) does not support substandard accommodation, we also want to protect tenants rights and also allow for special events such as the Canterbury earthquakes.

Changes to breaching a work order

Another change aimed at landlords is a tweak to the standard for convicting landlords who don't comply with a works order.

Currently an ‘intentional breach’ of a work order is an unlawful act, with a maximum penalty of up to $3,000. This standard will be lowered so that a ‘breach without reasonable excuse’ will be an unlawful act. The $3,000 penalty will remain unchanged.  The intention of this change is to remove a potential landlord defence of ‘forgetfulness’.

Tags: rta - residential tenancy amendment bill

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