Good Foundations

05 February 2021

“​The best landlord/tenant relationships are built on transparency and good communication.”

 

Let’s imagine you’re looking for tenants for your new investment property. You discover that your neighbour’s cousin is looking for a place to live. You’ve met them and they seem decent people. Is a handshake is enough to seal the deal?


Actually, it’s not. If you want a positive landlord-tenant relationship, you need to set the standard from the start. That means formalising expectations and obligations on both sides with a tenancy agreement.

 

It is important to note that Phase Two of the RTAA 2020 will be effective from 11 February 2021. Refer to this handy fact sheet for information regarding all the changes. 

 

WHAT DOES A TENANCY AGREEMENT DO?
A tenancy agreement is a legal contract between a tenant and a landlord. It’s required for all tenancies in New Zealand and you may be fined if you don’t have one in place when you rent out a property. 

The best landlord/tenant relationships are built on transparency and good communication. Discussing the terms ​and conditions of a tenancy agreement gives you the perfect opportunity to establish a positive and professional relationship.

 

 

WHAT TYPE OF AGREEMENT SHOULD WE CHOOSE?

There are two different types of tenancy agreements: fixed term (where the tenancy is a fixed period, such as six to 12 months) or periodic.

A fixed term tenancy can only end early by mutual agreement. It gives both landlord and tenant security for the duration of the lease. Currently, we find that tenants prefer this type.

With a fixed term tenancy, you must notify the tenant in writing at least 28 days (but not longer than 90 days) before the tenancy end date, if you would like to extend the tenancy for a further fixed period. If you don’t extend the tenancy it becomes a periodic tenancy.

Under a periodic tenancy agreement, your tenant must give you 28 days' notice in writing if they wish to move out. Landlords can give tenants 63 days' notice if you require the property for yourself or an immediate relative, or if the property has sold. It is required that you (or your relative) move in within 90 days and remain in the property for at least 90 days. In all other cases for periodic tenancies, landlords may give notice for specific reasons as outlined in the RTAA 2020.  

If you’re not sure of your circumstances - if you’re considering selling the property, moving back in or renovating it, for example - then a periodic tenancy may be a better option. Your property manager can advise you here.

 

WHAT TO INCLUDE IN YOUR AGREEMENT

Landlords must provide statements about the property’s insulation, insurance and healthy homes status to prove that it complies with government standards for New Zealand rental properties.

You can choose to add many other clauses, such as septic tank management, swimming pool maintenance, parking or body corporate rules, depending on the property. These are all good things to discuss before the tenancy begins.

Be aware that any clauses you add are only enforceable if they are covered by the Residential Tenancies Act (RTA). For example, you can’t add in a clause that the carpets must be professionally cleaned at the end of the tenancy, because this isn’t specified by the law.

We recommend listing the approved occupants for the property and stating the maximum number of people to ordinarily live there, in case there are any issues later on with subletting tenants.

 

KNOW YOUR OBLIGATIONS

We often hear tales of DIY landlords who fail to do their due diligence before a tenancy begins, or who neglect repairs and maintenance. Even worse, some make empty promises to prospective tenants about upgrading the property and fail to follow through.

Remember that regular inspections protect you, your property and the tenant. If you’re checking a property on a regular three-month basis, you’re more likely to be covered by insurance if there is a problem like a leak or structural issue.

Responsible landlords know what’s expected of them and make sure that their properties comply with the tenancy agreement and the RTA. Operating in a decent and professional manner will go a long way to ensuring a good experience for everyone involved.

 

Andrea Phelan is the general manager of ​Quinovic Property Management (Whangarei), which won runner up in the Best Performer and Best Customer Satisfaction categories of the 2019 Quinovic Awards.

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