Are bad tenancy break-ups looming further in the horizon? A bill that prohibits landlords from terminating a lease without a valid reason is up for debate in parliament this year. The proposed measure was unveiled by Associate Housing Minister Kris Faafoi last November.
It contains several modifications to the Residential Tenancies Act (RTA), including the removal of the 90-day no-cause termination.
Currently, the RTA allows landlords to end a lease without cause provided they give the tenant a notice to vacate 90 days before the intended termination of tenancy.
However, the 90-day no-cause termination has arguably been used unfairly by landlords who break up with tenants only because the latter have exercised their rights to request important repairs and maintenance.
Such terminations may be deemed retaliatory.
Under Section 53 of the RTA, landlords can be ordered to pay up to $4,000 in exemplary damages for retaliatory notices. The amount is expected to rise significantly with the amendments to the tenancy rules.
If approved, the reforms mean that landlords can no longer end a lease without giving the tenant a valid reason for the termination.
Property owners and investors are not happy about the proposed reforms, which provide greater security to lessees while increasing requirements for landlords. We at Rentals.Co don’t believe this heavy handed approach is in the interests of landlords or tenants.
Besides the prospect of higher exemplary costs in case of retaliatory notices, the amendments also put a limit on the number of times landlords can increase rents.
Taking Disputes to the Tenancy Tribunal
Terminating a tenancy can be a long and complicated process. A landlord may end a lease if he or she wishes to live on the property or sell it. If a landlord wants to evict a troublesome tenant, a case may be filed with the Tenancy Tribunal.
But this route has some disadvantages. Tenancy Tribunal cases move slow and decisions are inconsistent. Gathering evidence is another problem. Neighbors are afraid to talk because the resolution takes long—about seven to eight weeks—and they can get caught in the middle.
These downsides make landlords resort to the 90-day no-cause termination option because it expedites the whole process.
Rentals.Co have knowledge and experience of tribunals and are used to collecting evidence as well as providing information in the most efficient way for the courts. We understand that the process however can be daunting for those who are not aware of the process or have poor representation from other Rental Agencies.
If the reforms pass through parliament, landlords will have no choice but to go to the Tenancy Tribunal.
This will likely increase the Tribunal’s load and the powers of the Tenancy Compliance Investigation Team (TCIT).
The TCIT is responsible for enforcing the tenancy laws in the residential rental sector.
With the amendments to the RTA, the TCIT may be given the authority to issue orders and damages on minor infractions to clear the Tribunal’s dock.
Another way to reduce wait time is to remove cases involving rent arrears only from the Tenancy Tribunal.
Most Tribunal filings are made by landlords—about 85% of cases—and rent arrears represent a large proportion of the total.
In the collection of rent arrears, a common problem is non-attendance of the tenant.
To streamline the process, if the landlord can provide evidence that the tenant is more than three weeks in arrears, a possession order may already be issued.
The Future of Fixed Term Tenancy
The Government, in addition to removing the 90-day no-cause termination, is also modifying the provision on fixed term tenancies. The landlord cannot just wait for the contract to end then decide not to renew it.
The Government is adding a new requirement if the landlord wants to end the tenancy: he or she must give a valid reason for non-renewal or the tenant must have no objection to ending the tenancy. If either condition is not met, the tenancy will continue.
This is a cause for concern among landlords who have students as tenants. Students usually lease a place for 12 months. However, they leave at the end of the 11th month when the exam period is over.
Under an amended RTA, it is likely that students will no longer wait until the 12th month, the end of the tenancy term. Instead they will give notice two months earlier, avoiding having to pay 10 weeks rent.
Another possible consequence of the proposed changes is the trend in favor of long-fixed term tenancies for like three to five years.
The Government is also seeking to revise the notice requirements where the landlord wants to move back into the property or sell it. In the first case, the 42 days’ notice will be adjusted to 63 days. In the other case, the landlord should give the tenant 90 days’ notice, which is twice longer than the current requirement of 42 days.
The proposed changes underscore the need for property owners to adapt and exercise prudence in choosing their Rental Agency so to avoid messy breakups.
Whatever the decision the Government takes, Rentals.Co will be guiding and assisting landlords with accurate information, advice and knowledge, as always.