Landlords: Could your rental be deemed an ‘unlawful property’?

Landlords, including farmers who provide accommodation as part of an employment package, will be affected by the Residential Tenancies Amendment Bill, which is currently before a parliamentary select committee.

In addition to changes around methamphetamine contamination and liability for careless damage, the Residential Tenancies Amendment Bill (No.2) seeks to make further changes to the Residential Tenancies Act to help ensure our tenancy laws better manage the tenancy of unsuitable properties – ones that are deemed unlawful for residential use.

Unlawful residential premises are deemed a problem because they are likely to have adverse effects on the health and safety of tenants, do not provide adequate living facilities, or because the occupation of the premises breaches a resource consent or the relevant district plan.

What are unlawful residential premises?

Unlawful residential premises include dwellings within a property which have been constructed for another purpose, such as a garage or a commercial building, or properties which do not comply with relevant building health and safety legislation.

A rental property could also be unlawful if the particular occupation of the premises breaches a condition of a resource consent or the relevant district plan.

Some examples include:

• A dwelling without a building consent eg. garage or small cottage
• A dwelling that does have building consent but does not have a COC e.g. Granny Flat
• A property with a building consent but which is not approved for human residence eg. converted garage, a mezzanine floor in commercial premises
• A dwelling that has consent for human residence but where the owner has added facilities that do not comply eg kitchenette
• A dwelling that has consent but the owner has added facilities such as bedrooms so it is partially non-compliant

The Tenancy Tribunal has come across a range of health and safety issues with unlawful residential premises, including: water dripping through electrical sockets and light fittings; lack of insulation, damp-proofing and water-tightness; inadequate fire separation; mould and mushrooms growing on the carpet; mice and rat infestations; inadequate safety barriers; holes in the floor; and electrical wires hanging from the ceiling.

What are the proposed new changes?

The Bill strengthens the law for prosecuting landlords who tenant unsuitable properties. The Tenancy Tribunal’s jurisdiction is currently limited to residential buildings, meaning those who rent out unlawfully converted garages, warehouses or industrial buildings as living spaces can avoid accountability.

The changes will give the Tenancy Tribunal full jurisdiction over cases concerning unlawful premises, allowing for enforcement action against landlords found to be in breach.

The Bill allows for specific remedies, including:

• ordering a full or partial rent repayment in favour of the tenant
• making a work order for the landlord to comply with relevant enactments so that the premises are made lawful.

In the tenants favour, the Tenancy Tribunal will be able to impose:

• an order of exemplary damages for committing an unlawful act for failing to comply with such a work order (up to $4,000), or other breaches
• an order terminating the tenancy.

Can the tenant legally stop paying rent?

No – a tenant cannot stop paying rent and must continue paying rent until the tenancy is terminated. However a tenant could still apply to the Tenancy Tribunal for a rent reduction or other orders until the breach is remedied.

Can the tenancy be automatically terminated?

If the rental property was unlawful for residential use at the start of the tenancy and continues to be unlawful, a tenant will be able to terminate the tenancy giving two days’ notice to the landlord.

If the rental property was initially lawful for residential use, but becomes unlawful for residential use during the tenancy, the tenant or landlord may apply to the Tribunal for an order terminating the tenancy.

Can tenants apply for a refund?

The tenant can apply to the Tenancy Tribunal for a full or partial rent repayment from the landlord for the period of the time that the rental property was unlawful for residential use.

Don’t get caught out

If you’re renting out a sleep out converted into a separate dwelling, a converted garage semi-attached to a house, a small cabin next to your house, a flat beneath a house that had been converted into a ‘granny flat’ or are simply unsure if your property will be affected by the new Bill – talk to us today.

Stay ahead of the changes to ensure you don’t breach your obligations as a landlord under the Residential Tenancies Act. Call us on 09 430 3300 for more information.