Top 10 things not to do, as a private landlord.
Private landlords make up the majority of landlords in New Zealand. At last count 60% of rentals are managed by private landlords i.e. the owner.
That means only 40% are managed by professional property managers. This is changing however, and now more than ever private landlords have to keep informed about the rules.
The majority of private landlords are trying their best to manage their rental properties. Many however, make mistakes and put themselves at risk. Below is the Top 10 list of things Not To Do as a private landlord.
1. Not inspecting the property on a quarterly basis
This is easily the most common failure by private landlords. Once they have a tenant that is good then they slowly decrease their frequency of inspections until often they don’t inspect at all. This problem here is that insurance company may not pay out on issues if the property has not been inspected on a regular basis (i.e. every 3 months).
2. Not understanding the minimum standards required for their property to be rented
Healthy Homes Standards is the most commonly misunderstood issue for private landlords. It made large changes to the requirements needed to rent a home. They vary hugely to what is acceptable living standards for someone who lives in a home they own. We recommend visiting the tenancy services website and reading our blog to get a better grasp of what is required.
3. Not increasing the rent on a regular basis
When we take over a rental from a private landlord it is almost always below market rent by more than 25%. This is often due to two reasons a) lack of knowledge of current market prices, and b) the owner wanting to keep the tenant. The problem compounds however, as time goes by. Often the rent starts at market rent but then does not keep pace with the market. Each year it may drop 5% below the market and suddenly in 7 years it’s 35% below market rate. At that point it becomes difficult to make a large increase and the tenant will often leave. If the rent was increased a small amount each year then the tenant does not feel the pain. Then instead of giving a discount you provide some other reward to reflect the good status of the tenant e.g. a one off gift. This has the same impact on retaining the tenant without discounting the rent.
4. Entering the rental property without proper notice
The most common breach we see from private landlords is entering the property without property notice. The intentions are often completely innocent. They are repairing a maintenance issue or conducting a property inspection. Entering the tenant's home without providing sufficient notice and without obtaining tenants permission is breaking the law. This could result in a fine if it ends up in the Tenancy Tribunal.
The amount of notice required varies depending on the reasons for entry. Landlords generally need to give at least 24-hour notice to gain access to the property to fix something or to let workers in and only do it between hours of 8 am and 7 pm. Inspection requires 48-hour notice.
Landlords don't need to give the notice to access the land to mow the lawns or clean gutters (if landlords are looking after these tasks as per tenancy agreement). Permissions to enter the house are also not required in emergency situations (e.g. serious flooding concern or gas leak) and if the landlord has a Tenancy Tribunal order.
5. Not completing required repairs in reasonable timeframe
The second most common issue is not completing repairs in a reasonable. This is particularly valid at the moment with the waiting time for work from tradespeople being very long. A private landlord is required to keep the rental property in a habitable condition, so it is illegal to refuse to make repairs or to ignore tenants' requests, especially the ones affecting health or safety. If repairs are urgent, a tenant can organise repairs themselves and ask the landlord to reimburse them. If it's not urgent but their requests are being ignored, tenants can issue landlords a 14-days' notice to remedy. Landlords get 14 days to remedy the situation, or the matter is passed on to the Tenancy Tribunal.
6. Issuing a Retaliatory Notice
Private Landlords often believe they have more rights than they do just because they own the property. As such, if the tenant becomes too difficult or complaints to the tenancy tribunal they will often say something like “Get rid of that tenant”.
A ‘retaliatory notice’ is where a landlord gives a notice to a tenant to end a tenancy in retaliation for a tenant standing up for their rights. For example, if they make a complaint about the tenancy.
It is an unlawful act for a landlord to issue a retaliatory notice. The Tenancy Tribunal can award exemplary damages of up to $4,000 if a landlord does this.
If a landlord issues a retaliatory notice the tenant can apply to the Tribunal to have the notice set aside. The tenant has to apply within 28 working days of receiving the notice.
7. Adding a clause requiring tenants to professionally clean carpets
Landlords are allowed to customise and add clauses to their tenancy agreements as long as they're consistent with the law. Even if terms are added to the tenancy agreement, signed and agreed by both landlords and tenants, they are unenforceable if they contradict the Residential Tenancies Act. And so, landlords should expect tenants to leave the house in reasonably clean and tidy condition but they cannot force tenants to do more than required if it's not necessary including professionally clean carpets.
Exceptions: Some conditions you may decide to add are: no smoking, nominating number of people who can live at the property, or number and type of pets allowed.
8. Charging a pet bond
Pets do damage to properties. If you have a new home then we recommend not allowing pets. If you do however, you can’t charge a specific pet bond because In NZ charging bond in excess of 4 weeks' rent is considered illegal. If you don’t want the tenant to have a Pet then you can stipulate that in the Tenancy Agreement. You can also explicitly state what pet is allowed in the details so to avoid a menargie on the property.
9. Giving the wrong notice to increase rent
Raising rent is not illegal if it's done at the right time and the right way. A landlord must give a tenant no less than 60 days written notice. They can't increase the rent within 180 days of the tenancy commencement date or within 180 days of the last increase. If the rent increase is significantly more than for similar properties, the Tenancy Tribunal can force landlords to reduce it. Also if it is a fixed-term tenancy, rent can only be increased if there is an appropriate provision in the tenancy agreement.
As of February 1st 2021, the Residential Tenancies Amendment Act 2020 comes in to force there is change from 180 days to 12 months for the minimum period between increases.
In situations where the landlord and tenant agree to a rent increase outside of the usual 180-day period then it can be approved and this only applies if significant improvements warranting an increase was made to the property.
10. Selling the rental property and asking tenants to move out as soon as possible
The landlords can sell the property whenever they want even with tenants in. However, they can't force the tenants out. No notices can be given to end a fixed-term tenancy. Landlords have to wait until the end of the fixed term tenancy for tenants to move out. Otherwise, 42 day notice should be given if the house has been sold and the new owners want 'vacant possession'.
There are many rules and regulations that landlords need to stay on top of to make sure they're not breaking the law. It is much easier and often more profitable to employ a professional property manager to do the job. If you’d like to speak with us about it, we’re happy to help.