Landlords looking to sell up over proposed changes to rental rules




It didn’t need to end this way.

Damaged exterior cladding, walls, ceilings and kitchen drawers, broken glass, plus new carpet needed in two bedrooms and the hallway.

A $26,358 repair bill.

The end result of one Northland landlord’s attempt to evict an “antisocial and problematic” tenant.

That was meant to take 90 days, ending on October 28. It ended up taking 122.

“On the 90th day we turn up and the tenant hasn’t moved out, had no intention of moving out,” says Adrian Dermer, managing director of Haze Property Management in Kaitaia.

“So now we’ve lodged to the tribunal, saying we’ve got an urgent matter … the tribunal then gives us a date that’s approximately 4-5 weeks away.”

It turns out the hearing wasn’t necessary; 32 days after the initial 90-day notice fell due, the tenant delivered her own judgment.

“We got a call from a contractor saying there’s a bunch of people at the property causing damage, that have just threatened him, that have weapons, so we turn up, call the police and when we arrive, the entire property has been trashed,” Dermer says.

“Which could have been easily avoided if we were able to enforce the 90-day notice on that day, right then and there.

“It’s a prime example of how the current legislation isn’t working, and it’s going to be made ridiculously harder.”

A window smashed in this rental property in Kaitaia is part of $26,000 worth of damage done.
A window smashed in this rental property in Kaitaia is part of $26,000 worth of damage done.

By harder, Dermer means the end of no-cause 90-day evictions, one of the proposed changes to the 1986 Residential Tenancies Act announced by Associate Housing Minister Kris Faafoi.

Under those reforms landlords would need to have a reason to evict a tenant, and evidence of at least three infractions justifying the move.

Other changes include the rolling over of fixed-term contracts to periodic ones, the end of rental bidding, and annual rent increases rather than once every six months.

Tenants would gain more freedom to own pets and make minor alterations. Even hang pictures. And they would be allowed greater anonymity in Tenancy Tribunal hearings.

The Government is likely to start drafting the legislation in the new year.

The proposals are worrying landlords. Having forked out for better insulation, heating and ventilation under the Healthy Homes regime, they now face new rules and restrictions that challenge strongly held perceptions of ownership. They feel picked on, unfairly targeted.

Many are considering cashing up on their capital gains and getting out.

That’s what the Northland landlord is doing.

“He owns two properties, investment for his retirement,” says Dermer.

“Unfortunately, he’s of the view that he should get out of property management because the laws are changing and everything’s just getting too difficult for landlords and now he’s had this experience.”

Further south, a tenant also wants out.

Sandra has lived in a dozen houses during the past 13 years, pushed out and moved on by a combination of unaffordable rent rises, landlords with other plans for their properties, and the slings and arrows of everyday life and relationships.

The previous tenancy lasted just 12 months, when the landlord decided it was time to sell up; the one before that was three years, but the property manager was “increasing the rent every six months, to a point that it was unsustainable”.

That pushed the family out of Auckland, to Tauranga and a house costing $600 a week.

“But if the owner of this house decides to sell it, then we will have to find another house, which will be a setback.”

Sandra has had enough.

“I’m really over renting,” she says. “I’m sick of someone dictating to me what I can and cannot stick on my walls, or what baby-proofing products I can stick in, or what pets I’m allowed.

“We’ve had to rehome a family dog because one rental said yes and then we couldn’t get anywhere else.”

“I didn’t see myself renting for this long in my life,” says the 34-year-old mother of four.

She is not alone in that lament; renting used to be a temporary inconvenience, a rite of passage on the path to home ownership.

But now, with the national average sale price of a house topping $700,000, it has become a way of life for many.

Faafoi says the changes recognise that societal shift and “present-day realities of renting in New Zealand”.

Statistics NZ figures show the number of home owners actually grew by 7900 in the year to June. But that was roughly half the 15,400 rise in renters.

There are now more than 600,000 rental households in New Zealand, up from 388,000 in 2006. The 28 per cent of people renting in 1999 has become 34 per cent 20 years later.

Sandra faces a few more years yet in rental housing, but she is at least heartened by the proposed changes, including the greater anonymity for tenants taking landlords to the Tenancy Tribunal.

“Tenants are scared, because as soon as you go to the tribunal now, whether you are right or wrong, your name gets put on that list.”

It’s a public list, searchable by landlords and property managers. “Essentially that creates a blacklist for tenants.”

Which is why Stuff has chosen not to disclose her surname. She’s been to the tribunal before, and is taking a case against a landlord at the moment, over an alleged failure to meet the new healthy home standards.

But Sandra is a rarity.

About three-quarters of the cases considered by the tribunal are taken by landlords, and the majority of those are claims for unpaid rent.

That suggests either Sandra is right that tenants are worried about being blacklisted, or that they deserve to be and that landlords are getting the short end of the stick.

Either way, she believes the proposed law changes could mean better, happier tenants, and longer, more secure tenancies for landlords.

“If you had a tenant who’s looking after your home, if you let them do those things, they are actually going to look after it more, because it’s more like a home,” she says.

“Tenants are going to stay longer and I don’t think landlords are going to have issues.”

That’s another objective of the reform, says Faafoi.

The changes are “aimed at achieving an effective balance of the rights and responsibilities of landlords and tenants”, he says. “They are designed to stop exploitative behaviour by a minority of landlords.”

But it’s the landlords who now feel exploited.

“They believe they are being targeted, that the Government has got something against them,” says Dermer.

Haze Property Management surveyed the owners of its 70 properties.

Of those who replied, most agreed with ending “unethical” rental bidding, and with pushing out rent reviews to once a year, but 62 per cent disagreed that they should have to provide a reason, and evidence, for a 90-day eviction, and 78 per cent voted against notice extending from 42 days to 63 if they wanted to move into the house.

Comments from landlords ranged from “it’s too much power to the tenant” to “who owns the place – them or us?”

Dermer believes making it harder to use the 90-day eviction provision to remove an antisocial and sometimes dangerous tenants creates a “real safety issue for us” and the potential for “significant loss” to a landlord’s property, as demonstrated by the damage to the Kaitaia house.

And given that it is used in just 3 per cent of tenancies, it “seems like an irrelevant piece of legislation to change”.

Worse still, if enough landlords cash up and get out, that will mean even fewer houses available for renters and more pressure on emergency housing and costly motel stays. Especially in Northland, where accommodation is particularly hard to find.

“In Kaitaia, around 60 per cent of residential is rental property. There isn’t enough property up here to provide for the demand. There are 10-20 people applying for a single property.”

The damage to Peter Spitters' rental property in Te Aroha is likely to cost more than $25,000 to fix.
The damage to Peter Spitters’ rental property in Te Aroha is likely to cost more than $25,000 to fix.

It’s a similar story in the Waikato, where another landlord is considering a messy end to a tenancy, a considerable damage bill and the end of his property career.

Peter Spitters owns a dozen properties in and around Te Aroha.

He’s been to the tribunal nearly 100 times in the past 35 years, over damages and unpaid rent.

He was back before the tribunal earlier this year after a tenant caused $25,000 worth of damage to one of his properties.

But the adjudicator put most of it down to wear and tear, handing Spitters the bond and just $50.44 to fix it.

So he’s selling up and getting out. Depending on who buys the properties, that could mean fewer opportunities for renters in the area.

“When I started, in the Piako Post there was between 30 and 40 houses for rent,” he says. “Now there’s none [a later check on Trade Me found just two in Te Aroha].

“That means the Government can’t go without the private landlord.”

Interviews with other property managers around the country confirmed that many landlords were troubled by the proposed changes.

Investors with one or two properties, in particular, were either placing their properties with managers for professional support, or were seeking a way out.

Tim Clark, a sales consultant with Wellington real estate firm Tommy’s, is seeing a growing interest in appraisals.

“We are noticing a definite change in the wind,” he says. “Mums and dads are getting out.

“And landlords with 2-3 properties are starting to sit on their hands, worried. It’s the prospect of having tenants for life and other potential changes.”

Faafoi says the numbers don’t suggest an exodus of landlords from the market.

“If some landlords choose to leave the market, they could be selling the property to another landlord, or to someone purchasing a home,” he says.

“In either case, this has a close to neutral effect on the country’s housing stock.”

He says CoreLogic figures show the percentage of residential property transferred to multiple property owners actually increased by 1.9 per cent between February 2018 and August 2019, and the number of active rental bonds recorded by MBIE increased 2.4 per cent between May 2018 and October 2019.