Insulation risk for investors

While property managers are viewed quite separately from real estate salespeople, there is often a cross over with services offered within an office or organisation.

Property managers should be aware that if they are working with investors who are buying property to ultimately rent out, they need to understand the legal requirements around insulation.

Unlike property managers, insulation compliance has not really been an issue front of mind for real estate salespeople. However, now more than ever it’s important that the investor is made aware of the status of the insulation in the potential investment property they are looking to purchase. Ideally a statement of insulation from the vendor would give the purchaser a clear indication of whether they need to allow for costs to insulate or upgrade.

If a property is not insulated to the current requirements and it is bought with an existing tenant, the buyer and property manager could face potential fines. The property should not be rented out until the insulation is fully compliant. A proactive property manager should be working with their investor clients to ensure there are no surprises after they have settled the purchase of their property.

Click here for more information.

---

Residential Tenancies Amendment Bill (No 2)

Following last week’s newsletter which mentioned the Residential Tenancies Amendment Bill (No 2) being read for the third time, Parliament has decided to pass the Bill into law.

The Bill has several commencement dates and amends the Residential Tenancies Act 1986 to address tenant liability for damage, contamination of rental properties and unlawful residential premises.

Some key points are stipulated below for each major change:

Tenant liability for damage

• The Bill provides that tenants will be liable for careless damage to their rentals
• Tenants will have to pay for the landlord’s insurance excess or four week’s rent, whichever is lower. This change addresses a previous court ruling which created confusion as to tenant liability. The relevant case was Holler v Osaki [2016] NZCA 130, [2016] 2 NZLR 811 which declared that a residential tenant who damaged their landlord’s property carelessly could not be sued by their landlord in respect of the damage
• Landlords will need to provide information about their insurance in tenancy agreements
• A landlord’s failure to comply with their obligations will be deemed to be an unlawful act with a penalty of $500 which is aligned with the failure to provide an insulation statement with tenancy agreements.

Contaminated rental properties

• The Bill includes changes to protect tenants and landlords from the harmful effects of contaminants such as, methamphetamine
• Any contaminant which is identified as a risk to health will be able to be dealt with by Regulations made under the Bill. Regulations have not yet been made. REINZ will be involved in the consultation process around these regulations
• The regulations, once developed and passed, will set out the maximum acceptable levels for those contaminants and will provide testing and decontamination practices and will ensure that testers and decontaminators are competent
• Landlords will need to provide 48 hours’ notice to enter the premises to test for methamphetamine however, they only need to provide 24 hours’ notice in relation to decontamination.

Unlawful residential premises

• The Tenancy Tribunal will have full jurisdiction over cases concerning premises that are unlawful for residential purposes for example, unconsented garage
• This change will enable the Tribunal to take appropriate compliance action against landlords who rent out unlawful rental properties.

---

Case Update: Bed Bugs in Auckland Apartment

The tenant in this case was a newly employed pilot and decided to rent a furnished apartment in downtown Auckland. Soon after moving into the apartment, he found himself covered in unexplainable bites on his body.

The tenant then went to a doctor to get the bite marks checked out and the doctor speculated that the cause of the bites could have been from chickenpox, however, the tenant had already had chickenpox before, and this was an unlikely cause.

The tenant was supposed to fly out to Australia for a course, however, it was airline protocol that he be quarantined and not board a plane to attend the course.

It was then established that the apartment was infested with bed bugs. The landlord’s property manager engaged a pest-control contractor to treat the premises twice, however, the bed bugs were not completely eradicated before the tenancy had ended. The property manager queried whether the tenant had brought the bed bugs with him to the apartment by nature of being a pilot who resides in hotels when flying internationally. The tenant responded by stating that he was a recently admitted pilot and had not started flying in this respect.

Law

Section 45(1)(a) of the Residential Tenancies Act 1976 (Act) states that a landlord must provide the premises in a reasonable state of cleanliness.

Section 45(1)(c) of the Act states that every landlord must comply with all requirements in respect of buildings, health and safety under any enactment so far as they apply to the premises.

Section 29(q) of the Health Act 1956 indicates that a nuisance is deemed to be created by any condition on land or premises that can give rise to the breeding of flies or mosquitos, mites or ticks and are capable of causing or transmitting disease.

Section 30 of the Health Act provides that it is an offence where any person’s act, default, or sufferance gives to or continues a nuisance.

Finding

Given the above, the Tenancy Tribunal stated that it was more probable than not that the apartment was infested prior to the commencement of the tenancy despite being unintentional.

The Tribunal found that section 45(1) of the Act was breached given that the apartment that was infested with bed bugs was not reasonably clean and/or a nuisance existed. Compensation was awarded.

You can find the full decision here.

Tips:

1. Before renting out a property, landlords/property managers should carefully inspect that the property meets the reasonably clean standard, this usually means that the property requires cleaning prior the tenant moving in
2. Keeping an eye out for pests/nuisances will assist you in meeting this obligation.

---

Residential Property Management Qualification - Second Intake

Due to high demand, there will be a second intake starting 9 September.

Book here | Poster here

---

REINZ Residential Rental Review - June 2019

The June REINZ Residential Rental Review is available here.