Penalties for landlords dragging the chain
New laws came into effect on 1 July 2016 that require landlords to make their properties safe and healthy for tenants. These new laws provide some lead time for properties to be brought up to standard; they will apply to all rented properties from 1 July 2019. Will your rental property meet the new standard?
A recent Tenancy Tribunal decision shows that the Ministry of Business, Innovation and Employment (MBIE) is not shy of showing its teeth to ensure that tenants have safe and healthy homes by complying with the health and safety amendments to the Residential Tenancies Act 1986. The Residential Tenancies (Smoke Alarms and Insulation) Regulations 2016 outline requirements for rental properties, including underfloor and ceiling insulation, and requiring smoke alarms within three metres of each bedroom.
Hefty fines
MBIE brought a claim against Mrs Liu, a landlord in breach of the recent building standards implemented in July 2016. Mrs Liu was fined $4,000 for failing to insulate her tenanted properties, and there was an additional $100 fine for failing to complete an insulation statement as part of the tenancy agreement.
Exemptions
There are some exemptions to the new regulations. These can be properties that, for example, cannot be insulated because they have concrete floors or no ceiling access. Properties that are to be demolished or to be substantially rebuilt within 12 months also do not need to comply.
Unless your property is exempt you will have 90 days to make your property compliant once you enter into a new tenancy agreement. All properties must be compliant from 1 July 2019 – just over a year away.
Must include insulation statement
All new tenancy agreements must also include an insulation statement, that can be downloaded from here (along with the standard tenancy agreement form here). The insulation statement identifies whether your property meets the minimum standards under the Building Act 2004. It’s important for landlords to understand what insulation they have in their property as some types will be unacceptable. For example, underfloor foil is no longer allowed to be installed (but will be acceptable if already installed): it can be non-compliant if worn. You may be liable for fines up to an eye-watering $200,000 if deteriorating foil creates a fire risk when it comes in contact with electrical wires.
Financial help is available
Upgrading a rental property to meet these new standards can be financially stressful. Thankfully, many local councils offer low interest loans for property owners looking to improve heating and insulation in their properties; the loan can be repaid through a small increase in periodic rates payments. We recommend that you check with your local council to find out about your local scheme.
The Energy Efficiency and Conservation Authority also provides subsidies of up to 50% off the costs of insulating tenanted and owner-occupied homes. These grants are available to landlords whose tenants have community services cards or special health needs. You will, however, need to be quick; these grants are only available until 30 June 2018.
Landlords – get cracking
The Tribunal’s decision against Mrs Liu sets a warning to landlords. MBIE set up the Tenancy Compliance and Investigations Team in 2016 specifically to audit landlord compliance. In 2017 alone this team audited five of the country’s largest property management companies; it found varying levels of compliance across the sector.
The regulations are set out in the Healthy Homes Guarantee Act 2017 which came into force on 5 November 2017. This legislation states that non-compliance with the new insulation and smoke alarm requirements is punishable with fines of up to $3,000.
All of these new laws and obligations can seem overwhelming, but there is help available to guide you through this process. We recommend that you take the first step towards meeting your obligations sooner rather than later. More information can be found here. Alternatively you can discuss these requirements with your local council, or get in touch with us.
DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2018. Editor: Adrienne Olsen. E-mail: adrienne@adroite.co.nz. Ph: 029 286 3650 or 04 496 5513.
