What has changed in the rental market? Answers to landlords’ biggest questions

How long will the rent freeze and tenancy protections last?

Since New Zealand entered Alert Level 4 lockdown, arguably the policy changes with the greatest impact on the rental market have been the rent freeze and stronger protections for tenants against tenancy termination. 

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Landlords cannot increase rent or terminate tenancies without grounds. Even notices already issued by landlords are invalid unless they took effect before 26 March. Previously, landlords could apply to the Tenancy Tribunal once a tenant was 21 days in arrears; now they must wait until more than 60 days have passed. At present, landlords have little scope to terminate a tenancy unless the tenant engages in antisocial behaviour. Tenants’ rights have otherwise remained unchanged during this period.

The rent freeze will last 6 months, and protections against tenancy termination will last 3 months. At the end of each period, the Government will reassess whether to extend the measures.

Remember that the six-month rent freeze means landlords cannot raise rent during this period. Unless the Government extends it, the period is fixed, meaning rent can be adjusted after 26 September. Rent changes require 60 days’ notice. Landlords can therefore issue tenants with a rent increase notice before the period ends, provided it takes effect after day 26 of month 9.

The same applies to protections against tenancy termination. Landlords must give tenants 90 days’ notice to terminate without grounds, so the termination need only take effect after the protection period ends—that is, after 26 June.

How are property managers currently conducting inspections and viewings?

We are currently inspecting properties remotely with tenants by video call. When problems arise, we also use video calls to discuss and identify the issue with tenants on site before arranging an appropriate tradesperson to carry out repairs. This is highly effective: it gives us more interaction with tenants and allows us to assess conditions remotely. It has actually improved a problem we often encountered previously, when repairs were delayed because tenants did not know how, or were unable, to explain an issue effectively by email or telephone.

For viewings, we are also using video to offer virtual tours. Interested applicants then complete the application process online, followed by a contactless key handover. We have found that virtual video viewings filter out many unproductive enquiries, while those who still want to view in person are generally serious applicants. 

Has tenants’ ability to pay rent been significantly affected?

During this period, we have received many requests from tenants for rent reductions or waivers. By the end of last month, the proportion with rent overdue by more than 5 days had risen from less than 1% to around 3%. Many tenants on the arrears list were there for the first time. Some had been stood down, some had lost their jobs, and others could no longer operate their businesses. Tenants in these circumstances accounted for around 10%. Fortunately, many of our landlords have been pragmatic and willing to negotiate mutually acceptable arrangements. Some agreed to rent reductions, some to deferred payments, and others to rent waivers.

We expect little improvement in the short term, and conditions may deteriorate further. It is therefore essential for landlords to stay in close contact with tenants over the next 6–8 weeks.

What should landlords do if tenants struggle to pay rent?

Reach a new, mutually acceptable agreement with the tenant as soon as possible and apply for a mediation order recording it to protect your interests. At the same time, try to retain tenants who can still pay rent, as current vacancy rates mean finding a replacement could take several weeks.                     

Are there many vacant rental properties in Auckland?

Vacancy rates are indeed higher than before, particularly in central Auckland, where the rate has doubled. We have also noticed many former short-term rentals entering the long-term market, especially in central Auckland and Warkworth, although this requires further investigation. Enquiries about viewings have increased, but by less than expected.

Which rental properties are currently most popular?

We have found that compact studios are currently the most popular, followed by family rental homes with 3 bedrooms and a living room, particularly in the lower to middle price range. There are very few enquiries about high-end rentals. This reflects how price-sensitive people are at present and their caution about their finances.

It is worth stressing that, whatever the market trend, comfortable rental properties in good condition will eventually find tenants, even if the rent is slightly below the desired level.

What advice do you have for owners of vacant properties?

Compete in the market. This is currently a tenants’ market, so if reducing the rent by $10–$30 would secure a new tenant, take the opportunity. Conditions are changing rapidly: advice given two weeks ago may no longer apply, and finding the next prospective tenant could take longer.

The next stage of the Healthy Homes Standards is approaching. What should landlords be aware of?

After 1 July this year, all new or renewed tenancy agreements must include a Healthy Homes Standards compliance statement. This primarily sets out which standards the property already meets. Landlords also have only a year left to prepare, because from 1 July next year, all properties with new or renewed tenancies must meet the required standards. For existing tenancies, tenants are entitled to request this statement from landlords, just as they can request insurance information. Landlords should therefore address this as early as possible.

Do newly built homes automatically meet the Healthy Homes Standards?

Not necessarily. New homes are built to the Building Code, whose requirements differ from the Healthy Homes Standards. The biggest difference concerns heating. A new home may need a heat pump or fixed heater installed before it can be rented out.

Lv2 continues. How should contact tracing records be kept at properties?

After the move to Alert Level 2, people regained their freedom to travel and no longer had to remain within their bubbles. This also means that if a case is confirmed, further infections may emerge in succession. To help prevent a second outbreak, the Government therefore requires everyone, including businesses and tradespeople, to keep contact tracing records.

Compared with recording details using pen and paper, the Government’s new NZ COVID Tracer app is very useful. Once a property owner registers and generates a QR code, visitors can scan it to open a pop-up and enter their details directly. If a case arises, health authorities can access the information directly, protecting privacy while making the process more direct and effective. We therefore recommend downloading and using it. Further details are available at https://covid19.govt.nz/. 

How will contact tracing records be kept in residential complexes and apartment buildings?

Many apartment buildings and townhouse complexes have a body corporate, responsible for managing common areas such as lifts and corridors. Owners elect a committee from among the body corporate’s members to manage its affairs on behalf of all owners. Most apartment buildings also employ a building manager, specifically responsible for maintaining and repairing the building and common areas.

Each complex or apartment property is different. Some combine commercial and residential premises, while others contain multiple buildings, so arrangements and requirements vary and cannot be generalised. However, our basic recommendations for contact tracing records are as follows: 

Contact tracing recommendations:

What other changes are owners in residential complexes and apartment buildings facing?

New Zealand’s Parliament recently passed an amendment to the Unit Titles Act 2010. Its main provision allows owners to attend general meetings in person or by video or audio link. The amendment applies from 25 March until 12 weeks after the Epidemic Preparedness (COVID-19) Notice 2020 is revoked. This means all body corporate meetings may be held by online video during this period.

After the end of each financial year, a body corporate must hold an owners’ general meeting as soon as possible to set the following year’s administrative levies. These funds are needed to pay property expenses such as insurance, fire safety and cleaning. The law also requires that no more than 15 months elapse between annual general meetings. With no certainty about when large gatherings can resume, this amendment was introduced.

Author: Franklyn Yang