Building Issues Minister Clayton Cosgrove today announced a package of reforms to ensure landlords and tenants are treated fairly and equally, and to revamp the outdated law concerning apartments and other multi-unit properties.

“New Zealand’s housing landscape is changing fast, and the law should keep up with the needs of New Zealanders, whether they rent or own property,” Mr Cosgrove said.

The reforms aim to ensure a fairer rental market through changes to the Residential Tenancies Act 1986, and to establish a broader and more adaptable framework for multi-unit living through a complete revamp of the Unit Titles Act 1972.

The latest proposed changes to the Residential Tenancies Act include:

• limiting the liability of tenants for damage that they did not cause and could not reasonably have prevented
• extending the coverage of the Act and access to tenancy dispute resolution services to sectors of the community not currently protected

‘If you are a good tenant, as the vast majority are, and someone else in your flat damages the property, you should not have to carry the full cost of their behaviour,” Mr Cosgrove said. “These reforms seek to rectify potentially unjust situations.”

Mr Cosgrove emphasised, however, that it was crucial that property owners were able to recover the costs of damage to their property.

“We have made sure that landlords won’t lose out. They will be getting more damages from the people most at fault, rather than from innocent tenants who have done no damage,” he said. “Landlords need to know their properties are protected and respected, in order to have confidence in the rental market.”

Mr Cosgrove said extending access to tenancy dispute resolution services was another step in creating a fairer rental market for tenants and landlords.

“Everyone who rents – tenants and landlords alike – should have the same support when sorting out tenancy problems. Tenancies in retirement villages, boarding houses and other tenancies with a high service component such as supported living,

have been brought into the legislation to ensure a fair go for all. The aim is to deliver fast, fair and inexpensive dispute resolution.”

Mr Cosgrove said these latest proposals are in addition to other proposed reforms of the Residential Tenancies Act that he announced in September this year.

Mr Cosgrove said today’s announcement was also good news for New Zealanders living in multi-unit dwellings.

“It is estimated that within 50 years there will be half a million people living in apartments, townhouses and high-rise buildings in Auckland alone – the traditional three-bedroom family home on a quarter acre section is increasingly becoming a thing of the past,” Mr Cosgrove said. “The new Unit Titles Act will establish a broader and more adaptable means for setting up and managing multi-unit living.”

Mr Cosgrove said the current Act is 34 years old and out of date with modern needs.

“People in multi-unit developments should be able to make joint decisions effectively and be confident and secure in their living or working arrangements. The proposals seek to create up-to-date legislation that reflects our changing urban landscape.”

Key principles of the proposed new legislation include:

• Clarity around the rights and obligations of unit owners and bodies corporate

• Encouraging sound property management practices that will protect long-term value and investments

• Making joint decision making by the body corporate easier

• Effective ways to sort out problems and move forward

• Making information more readily available to purchasers and unit owners so they can make informed choices

• Making survey and title processes more streamlined for surveyors and developers

• Allowing large, staged or complex developments to be set up and managed more easily

“We need up-to-date laws that reflect the realities of New Zealand life and ensure a fair deal for everyone,” said Mr Cosgrove.

Mr Cosgrove said he expects to introduce two separate Bills that reform both Acts into Parliament next year.

Other reforms by the Government to improve standards and services across the building and housing sector include the review of the Building Code, the licensing of building practitioners while protecting the Do-It-Yourself (DIY) tradition, auditing and accrediting Building Consent Authorities, a major shake up of the Weathertight Homes Resolution Service, the introduction of a financial assistance pilot for the worst affected owners of leaky homes, a revamp of the Property Law Act 1952, product certification and investigating a home warranty insurance scheme.

Media contact: Robyn Cubie, Press Secretary for Hon Clayton Cosgrove, MP

Minister for Building Issues, 04 471 9136 or 021 227 9136

Background Information – The Residential Tenancies Act

What does the Residential Tenancies Act 1986 do?

The Act sets out the rights and obligations of people who rent their homes and the landlords they rent from. It covers rent, bond payments, property repairs and giving notice. The Act also sets out dispute resolution procedures.

Why has the government reviewed the Residential Tenancies Act?

The aim of the review is to improve the regulations governing the residential rental market. This is important given the changes in the nature and scale of the market since the Act was introduced in 1986. In particular:

• the increasing importance of rental housing in New Zealand (now around a third of New Zealand households rent)

• rental accommodation becoming long-term for more households

• changes in demographic structure – for example an “ageing population” is joining the rental market

What has already been proposed?

In September 2006 the Government proposed amendments to the Act including:

• introducing new sanctions for landlords and tenants who breach their obligations

• allowing landlords to recover reasonable debt collection costs incurred in enforcing Tenancy Tribunal orders
• allowing the Tenancy Tribunal to make orders against guarantors

• new grounds for ending fixed-term tenancies and clearer processes for renewing them

• new rights of entry for appraisals by real estate agents and building inspectors

• requiring landlords to appoint a New Zealand based agent if they are outside New Zealand for more than three weeks

• clarifying responsibility for outgoings, such as water charges.

What is the tenant’s liability for damage to rental property?

A tenant’s liability for damage will be limited to four times the weekly rent if they can prove that:

• the damage was caused carelessly, rather than recklessly or intentionally; or

• they did not personally cause the damage, or personally fail to take reasonable steps to prevent it

Any tenant that cannot do this may have to pay more than four weeks rent.

This proposal addresses the issues raised by Labour MP Maryan Street’s recent private member’s bill Residential Tenancies (Damage Insurance) Amendment Bill. It aimed to protect tenants against personal liability for substantial damage.

Will boarding house tenants be treated the same as other tenants?

Boarding house tenants will have access to the same services as other tenants, such as tenancy advice, mediation and the Tenancy Tribunal. However, some of the rights and obligations of boarding house tenants will differ from other tenants, because of the different dynamics created by communal living. These differences include the way tenancies are terminated, the process for dealing with abandoned goods and the ability for landlords to make house rules.

Background Information – the Unit Titles Act

What is the Unit Titles Act 1972?

The Unit Titles Act covers the setting up, ownership and management of properties with unit title ownership. These are commonly apartments, flats, townhouses and office blocks with shops below. The Act covers the ownership of unit titles by unit owners; and the formation, rights and responsibilities of the body corporate.

What is a Unit Title?

A unit title is a form of joint property ownership where unit owners own a defined part of a building, such as an apartment, and have shared ownership of areas of common use such as lobbies and lifts.

What is a body corporate?

A body corporate is a collective of all the owners in a unit title development. The body corporate manages the common property and aspects of the building development as a whole.

Why was the Act reviewed?

Thirty years ago, when the Act was first introduced, unit title developments were new. Now the variety of ways in which these units are used, and their scale, has broadened considerably. The current Act does not provide well for the rapidly growing diversity of uses and complexity of unit title developments in New Zealand.

What are the key proposed changes?

The key proposed changes are to:

• remove requirements for unanimous resolution for body corporate decisions

• clarify the rights and responsibilities of unit owners, the body corporate, developers and tenants

• introduce requirements for the establishment and management of long-term maintenance plans and long-term maintenance funds by the body corporate

• introduce disclosure requirements for vendors and developers

• provide for the Government to establish a dispute resolution service for unit title matters covering education and information, mediation and adjudication

• broaden the role of the body corporate in relation to maintaining and managing the building as a whole

• make the staged development process more flexible

• allow for large, staged or complex developments to be set up and managed more easily.

How will this benefit people?

The changes will:

• establish a flexible and responsive regime for the management of unit title developments

• ensure that potential unit owners, current unit owners and bodies corporate have access to sufficient information to make informed decisions about their unit title development or investment

• provide an efficient and effective process for resolving disputes relating to unit title developments for bodies corporate and unit owners

• provide for effective and equitable decision making by bodies corporate and unit owners

• promote participation by unit owners in body corporate matters

• promote functional unit title communities with workable relationships between bodies corporate, unit owners and occupiers

· ensure that bodies corporate make appropriate provision over time for the maintenance and repair of buildings and other improvements within their unit title development

What happens next?

Two separate Bills to amend both the Unit Titles Act and the Residential Tenancies Act will be taken out for targeted consultation with specialist stakeholders. Both Bills will be introduced into Parliament from mid-2007, where the wider public will be able to have its say through the normal select committee process.

ENDS

Rental returns for professional property investors across the country are beginning to show a slight decline some aspects of the property market reflect an oversupply.

The New Zealand Property Investors Federation convened in Christchurch during the weekend for the bi-monthly meeting of its nine-person executive.

The Dunedin-based national president of the federation, Craig Paddon, said a downturn of up to 5% in rental income was reported from areas throughout the country, including Nelson, undefined undefined where some rentals were down 15% to 20% on some homes.

The building and supply of “executive-style” homes to rent to business people had begun to outstrip demand and some of those homes would now have to be rented more cheaply, Mr Paddon said.

Predictions the official cash rate would increase were not causing too much concern, but if interest rates hit 10% or more, there would be casualties as recent investors found themselves too heavily in debt.

“The experienced investor would sit it out. They will be positioning themselves for a downturn and be ready to pick up the pieces,” he said.

Yesterday, the Real Estate Institute of New Zealand reported Otago’s median house price in June, compared with June the previous year, had increased from $124,000 to $187,000 – a rise of more than 50%.

Mr Paddon believed Otago had reached a “false peak”, and prices would increase again during the next 12 to 18 months before beginning to plateau.

He attributed the predicted strength to strong commodity prices, a high level of investment in southern apartments and increased Government spending.

Otago’s strength could also be attributed in part to fewer homes being on the market, which was sustaining prices.

However, Mr Paddon said there had been less interest shown in southern investments by North Island people recently and, while he was still getting inquiries from Australia, the numbers were dwindling.

The federation represents more than 600 landlords in Otago and 4000 members nationally.

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