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WELLINGTON PROPERTY INVESTORS ASSOCIATION
OUTPUT OF MEMBERS DISCUSSION ON THE RTA REWRITE
26 JULY 2004.
A member’s session dedicated time to the things that they would like to see in the rewrite of the Residential Tenancy Act planned to get underway this year.
The discussion was loosely based around the following four headings:
• Principles to underpin the act – what the objectives are
• Comparisons to other legislation – are we getting a fair go?
• Are the processes working and what should be done about it
• Sorting out the bureaucracy – getting an end to end service
The current situation
A large number of tenancies run for long periods of time with tremendous goodwill between the tenants and landlords.
It is becoming clear that a minority of tenants are “repeat offenders” and do not enjoy any long term stability of tenancy. The media have highlighted some of these over the last year. Examples have included using outright misrepresentation (a fancy name for lying) and fraud to enter into tenancies, as well as some tenants who are practiced in slipping through the loopholes in the tenancy law and administrative practice.
The amount of grief and the cost of accommodating this minority have become unacceptable to landlords. This is at a time that fewer New Zealanders own their own home and more and more investment capital is being sourced from the private sector to provide the necessary rental accommodation.
A recent analysis by the Ministry of Housing showed that of (figures approximate only) of 5000 tenancies ended in the 2002 calendar year that the spread of durations was:
50% less than 10 months
33% less than 3 months
13% less than 13 weeks.
This showed a pattern amongst the 13% of tenants failing and moving on.
Of 45,000 tenancy tribunal orders, 80% were about rent arrears, and 77% of these were from private landlords.
The Wellington Property Investors Association WNPIA will represent its members in the RTA rewrite process to provide a balanced legislative framework for a better long term relationship between landlords and tenants, with appropriate management tools for landlords to manage this growing undesirable element.
The Swing of the Pendulum
An older member noted that when the RTA was last updated in a major way in 1986, it was the landlords who were perhaps in need of the greatest curbing to balance rights. He feels that this time it is time to give the landlords more rights, and to give tenants more obligations.
Timings
Consider the unequal timings for giving notice to end the tenancy
Comparisons made are between employer and employee – where requirements are equal?
What amount of notice should be required?
Bond notice – four weeks
Incentives / Penalties
Currently any incentive for on time payment is illegal. Rent rebates for good property maintenance are also illegal.
Compare this to power or gas suppliers. They have considerable additional charges (up to 10%) for late payment, structured as on time discounts. They also offer discounts for direct debit authority. Interest can be charged on accounts. You are responsible for all collection costs. They also have the right to withdraw supply.
Compare that to the lot of the landlord.
No penalties / discounts at all allowed
Limited rights to withdraw services
Must use state services to withdraw services
Must use state services to prove debt
Not allowed to charge interest
Limited collection costs allowed to be recovered
Where are the behavioural incentives for the tenant to keep their side of the bargain?
Unequal Penalties
JP’s write up notes that the penalties the act provides are unequal between landlords and tenants. The landlords face by far the more severe penalties, yet the majority of the breaches of the act and tenancy agreements are by the tenants.
Dealing with Tenant Inaction
The act needs to be careful with the behaviours it encourages. A member noted that presently the tenant only has to not attend certain hearings / examinations and the whole process is delayed or possibly avoided altogether.
For example if a beneficiary does not attend an order for examination why cannot a default attachment order be issued for some minimum amount? For starters an automatic attachment to a benefit of $10 a week was suggested.
This is how it works with a mediation turning into a hearing if not attended, but let’s take out any delay due to even considering mediation
Abandoned Goods
The current act does not appear to require the tenant to look after their own goods. The landlord has to secure and store at their own cost abandoned goods. The period that these have to be stored needs to be reduced, or removed altogether.
Timings on death of a tenant
A member noted that on the death of a tenant the tenancy ceases immediately. Why cannot this also be the case for other events, especially criminal events such as P Labs?
Unequal risk between landlord and tenant
The landlord has a considerable capital asset at risk, and all of their cashflow, often servicing substantial debt. The tenant has their accommodation at risk, something they can take with them, often quite easily and quickly.
Current perils for tenants do not encourage appropriate behaviours.
Rent Arrears to terminate
Need to balance this against the amount of bond held. Note tenancy tribunal encouragement to hold more bond, average noted as moving from 2 weeks to 2.5 weeks.
21 days considered too long by many. 14 days usually has tremendous predictive value. Make 14 days the amount of rent arrears required to terminate.
After three weeks it doesn’t get any better,
Suggest 6 weeks bond. Extra interest earned can be put to use in providing better tribunal access, and information on TT orders.
This fits with the increasing cost of repairs and the rent growth not keeping pace with this.
What can landlords do to assist tenants?
Keen to understand this and see what can be done.
Interest on overdue debts
Charging of interest should be allowed, outside current district court constraint.
Only to be applied on amounts subject to a tenancy tribunal order, or end of tenancy if done outside tribunal under a new streamlined approach.
Prescribed rate, use as a benchmark the IRD Use of Money Interest rate, rounded from the present (rather precise 11.93%) to 12 percent.
WINZ to be able to calculate in deducting from benefits.
This is an important tool for prioritising the rent money amongst competing payments. Acts in the tenants interest in making the right decisions. This brings the rights of landlords up to those of others who provide credit.
Recovery Costs
All recovery costs should be recoverable from the tenant, not just the state administrative fees.
Approach to the rewriting act
Do we adopt the style of specifying every balance of rights, or just remove some subjects from the act where they do not need to be “controlled”
Improvements in processes
The 60% success rate in address matching is noted as an example of what is possible.
There was a general plea to solidify the administrative capability of all concerned.
It was noted that some departments / agencies of government assist with address matching, but others do not. Does the bond centre participate in the present matching?
Identification of tenants
There was a need recognised to properly identify tenants. A greater use of photo ID’s and digital cameras was suggested.
Absolute proof of identity was also needed at Court time, perhaps for both landlord and tenant, but certainly for the tenant. Legal names very important and the worrying minority has a tendency to mix and match identities.
Online Tribunal
The suggestion was made that the tenancy tribunal could be made into an on line activity for simple rent arrears cases. The online tribunal could provide speedy access for landlords, could provide paperwork to be served on the tenant, avoiding the mail notification delays in the present process. The tenant can have the right to respond and force a manned hearing. If they choose not to then the tenancy automatically terminates in 7 days. Administrative niceties still to be worked through, but it is all possible!
This could prioritise hearings away from the (Majority?) of hearings being undefended rent arrears / termination of tenancy hearings.
When does a tenancy start
Members called for greater clarity around when a tenancy starts. Generally landlords wanted the tenancy not to be a complete agreement until bond and initial rent was paid.
There was some acceptance by the group that occupation by a tenant allowed by the landlord did start the tenancy, and this would need to override any other provisions.
Bond Transfers
This was noted as a service that landlords should avoid. A practice of signing the bond over to the landlord at the end of the tenancy in exchange for cash was noted as being a virtuous circle for the next landlord. There is a need to have some confidence in the system and the tenant before doing this.
The Bond transfer system was not seen as an acceptable alternative for landlords for payment of bond before occupancy.
Accepting a cheque for Bonds is also poorly regarded with the long clearance time or cost of special answers.
WINZ Bond Payments
This is also seen as a poor system for landlords, with no reliance able to be placed on it before occupation. Behaviourally it also seems to fund repeated failure of tenants, rather than assist tenants in trouble. Direct credit of rent from benefits is a better idea.
Again for landlords “cash is king” for all bond and rent before occupation.
Direct Credit of Benefits to pay rent
This is generally seen to be a great service that is keeping beneficiaries in accommodation. It does still seem hard to make happen. Use of a 10 day letter on arrears with this suggestion included noted as helpful by some.
There was a call for this to be allowed as condition of tenancy for beneficiaries.
Standard Tenancy Services Rental agreement
There was a call for a bigger space for special conditions on the current form next time it is revised.
Must a tenancy agreement be in writing
Some confusion noted with complex double negative sentences in the act currently. While an agreement does not need to be in writing, it must be for any District Court appeals, but it is still enforceable if not in writing elsewhere. Please can this be tidied by and made to read in plain English. One simple rule for all please.
Making potential tenant accountable for their claims on applications.
A member suggested that tenancy applications could be sworn documents, which would men that misrepresentations would be enforceable as perjury.
Certainly the comparison to the insurance industry is relevant here. The insurance contract is voided and no claims can be made if material representations are incorrect, so as to change the insurers mind about whether they would have accept ed the purchaser as a good risk. This is exactly the same as a tenant not admitting they have a series of rent arrears and damaged properties behind them.
If the tenancy is not to be terminated forthwith then what sanction is appropriate?
Fostering discussion of the rewrite
Members suggested that the notes of the session be available on the WNPIA website
It was also suggested that the websites of other interested parties be checked for their thoughts on the rewrite to identify common interests, and be prepared to counter unhelpful suggestions.
Protecting investment capital of landlords
This needs to be achieved if landlords are to be continued to be drawn in to the fold and provide the growing accommodation needed as home ownership falls.
Accommodation as an essential service
How do the provisions of the RAT compare with other essential services?
If the tenant does not pay for the service and the right to withdraw it forthwith is not present what protection does the landlord get?
Is it theft to not pay the rent but enjoy the services?
Note that the landlord is required by law at present to provide credit as a provider of last resort. Credit information must be available to balance that obligation.
Compare this with commercial tenants, where 1 week possession orders occur.
Getting rent up there on the “must pay” list
All credit managers know that their challenge is to get their payments to the head of the queue. If the aim of the legislation is to assist tenants to manage themselves better then the rent, as the means to getting the essential service of accommodation, needs to be ahead of things of lesser need.
Currently the power bill and hire purchase will rank ahead of rent. This is due to the more immediate repossession / withdrawal of service provisions, as well as the interest and other penalty costs associated with those other services.
In the interest of the tenant this must be balanced.
Clear Law, Clear administration, Clear punishments
A member made the point that the law needs to be clear, and the administration free of political correctness. Some consequence must be attached to the actions of tenants or no improvement in their ongoing relationships will occur.
This was greeted with widespread applause.
Some consequence must be found for bad tenants, either monetary or hard labour related.
The dilemma for the state
What are this hardcore of bad tenants going to do for accommodation when the private landlords unite to not re-house them?
This is an increasing likelihood as more and more landlords join property investment organisations and share information on scams and bad tenants.
Information on tenancy Tribunal orders
These are a public document made available after a public hearing.
They are a vital source of behavioural scoring for prospective tenants. We applaud the moves afoot to make these electronic documents, moving into the 20th century.
Also to be applauded are the moves to make these available on a website. This reinforces the importance of using proven identities for tenants and landlords. The court / tribunal needs to prove the identities as part of all hearings.
These public documents need also to be indexed so they can be searched by applicant and defendant.
This will be a key part of their eventual use to society to train the poor tenants out there to be better tenants.
Allowing payment of rent monthly
A member asked that the act be checked to see it allows monthly payment of rent. Many people are paid monthly, so let’s allow this to be aligned.
Amount of bond and rent in advance
Why is the maximum amount limited?
Let’s abolish the maximum.
Ability to waive rights
Let’s have equal ability to waive rights under Section 9.
Compare with Australian Law
What can we learn from a comparison to Australian Law?
What about the law in other places?
Damage to Property
Wilful damage to a rented property should be a criminal offence.
OUTPUT OF MEMBERS DISCUSSION ON THE RTA REWRITE
26 JULY 2004.
A member’s session dedicated time to the things that they would like to see in the rewrite of the Residential Tenancy Act planned to get underway this year.
The discussion was loosely based around the following four headings:
• Principles to underpin the act – what the objectives are
• Comparisons to other legislation – are we getting a fair go?
• Are the processes working and what should be done about it
• Sorting out the bureaucracy – getting an end to end service
The current situation
A large number of tenancies run for long periods of time with tremendous goodwill between the tenants and landlords.
It is becoming clear that a minority of tenants are “repeat offenders” and do not enjoy any long term stability of tenancy. The media have highlighted some of these over the last year. Examples have included using outright misrepresentation (a fancy name for lying) and fraud to enter into tenancies, as well as some tenants who are practiced in slipping through the loopholes in the tenancy law and administrative practice.
The amount of grief and the cost of accommodating this minority have become unacceptable to landlords. This is at a time that fewer New Zealanders own their own home and more and more investment capital is being sourced from the private sector to provide the necessary rental accommodation.
A recent analysis by the Ministry of Housing showed that of (figures approximate only) of 5000 tenancies ended in the 2002 calendar year that the spread of durations was:
50% less than 10 months
33% less than 3 months
13% less than 13 weeks.
This showed a pattern amongst the 13% of tenants failing and moving on.
Of 45,000 tenancy tribunal orders, 80% were about rent arrears, and 77% of these were from private landlords.
The Wellington Property Investors Association WNPIA will represent its members in the RTA rewrite process to provide a balanced legislative framework for a better long term relationship between landlords and tenants, with appropriate management tools for landlords to manage this growing undesirable element.
The Swing of the Pendulum
An older member noted that when the RTA was last updated in a major way in 1986, it was the landlords who were perhaps in need of the greatest curbing to balance rights. He feels that this time it is time to give the landlords more rights, and to give tenants more obligations.
Timings
Consider the unequal timings for giving notice to end the tenancy
Comparisons made are between employer and employee – where requirements are equal?
What amount of notice should be required?
Bond notice – four weeks
Incentives / Penalties
Currently any incentive for on time payment is illegal. Rent rebates for good property maintenance are also illegal.
Compare this to power or gas suppliers. They have considerable additional charges (up to 10%) for late payment, structured as on time discounts. They also offer discounts for direct debit authority. Interest can be charged on accounts. You are responsible for all collection costs. They also have the right to withdraw supply.
Compare that to the lot of the landlord.
No penalties / discounts at all allowed
Limited rights to withdraw services
Must use state services to withdraw services
Must use state services to prove debt
Not allowed to charge interest
Limited collection costs allowed to be recovered
Where are the behavioural incentives for the tenant to keep their side of the bargain?
Unequal Penalties
JP’s write up notes that the penalties the act provides are unequal between landlords and tenants. The landlords face by far the more severe penalties, yet the majority of the breaches of the act and tenancy agreements are by the tenants.
Dealing with Tenant Inaction
The act needs to be careful with the behaviours it encourages. A member noted that presently the tenant only has to not attend certain hearings / examinations and the whole process is delayed or possibly avoided altogether.
For example if a beneficiary does not attend an order for examination why cannot a default attachment order be issued for some minimum amount? For starters an automatic attachment to a benefit of $10 a week was suggested.
This is how it works with a mediation turning into a hearing if not attended, but let’s take out any delay due to even considering mediation
Abandoned Goods
The current act does not appear to require the tenant to look after their own goods. The landlord has to secure and store at their own cost abandoned goods. The period that these have to be stored needs to be reduced, or removed altogether.
Timings on death of a tenant
A member noted that on the death of a tenant the tenancy ceases immediately. Why cannot this also be the case for other events, especially criminal events such as P Labs?
Unequal risk between landlord and tenant
The landlord has a considerable capital asset at risk, and all of their cashflow, often servicing substantial debt. The tenant has their accommodation at risk, something they can take with them, often quite easily and quickly.
Current perils for tenants do not encourage appropriate behaviours.
Rent Arrears to terminate
Need to balance this against the amount of bond held. Note tenancy tribunal encouragement to hold more bond, average noted as moving from 2 weeks to 2.5 weeks.
21 days considered too long by many. 14 days usually has tremendous predictive value. Make 14 days the amount of rent arrears required to terminate.
After three weeks it doesn’t get any better,
Suggest 6 weeks bond. Extra interest earned can be put to use in providing better tribunal access, and information on TT orders.
This fits with the increasing cost of repairs and the rent growth not keeping pace with this.
What can landlords do to assist tenants?
Keen to understand this and see what can be done.
Interest on overdue debts
Charging of interest should be allowed, outside current district court constraint.
Only to be applied on amounts subject to a tenancy tribunal order, or end of tenancy if done outside tribunal under a new streamlined approach.
Prescribed rate, use as a benchmark the IRD Use of Money Interest rate, rounded from the present (rather precise 11.93%) to 12 percent.
WINZ to be able to calculate in deducting from benefits.
This is an important tool for prioritising the rent money amongst competing payments. Acts in the tenants interest in making the right decisions. This brings the rights of landlords up to those of others who provide credit.
Recovery Costs
All recovery costs should be recoverable from the tenant, not just the state administrative fees.
Approach to the rewriting act
Do we adopt the style of specifying every balance of rights, or just remove some subjects from the act where they do not need to be “controlled”
Improvements in processes
The 60% success rate in address matching is noted as an example of what is possible.
There was a general plea to solidify the administrative capability of all concerned.
It was noted that some departments / agencies of government assist with address matching, but others do not. Does the bond centre participate in the present matching?
Identification of tenants
There was a need recognised to properly identify tenants. A greater use of photo ID’s and digital cameras was suggested.
Absolute proof of identity was also needed at Court time, perhaps for both landlord and tenant, but certainly for the tenant. Legal names very important and the worrying minority has a tendency to mix and match identities.
Online Tribunal
The suggestion was made that the tenancy tribunal could be made into an on line activity for simple rent arrears cases. The online tribunal could provide speedy access for landlords, could provide paperwork to be served on the tenant, avoiding the mail notification delays in the present process. The tenant can have the right to respond and force a manned hearing. If they choose not to then the tenancy automatically terminates in 7 days. Administrative niceties still to be worked through, but it is all possible!
This could prioritise hearings away from the (Majority?) of hearings being undefended rent arrears / termination of tenancy hearings.
When does a tenancy start
Members called for greater clarity around when a tenancy starts. Generally landlords wanted the tenancy not to be a complete agreement until bond and initial rent was paid.
There was some acceptance by the group that occupation by a tenant allowed by the landlord did start the tenancy, and this would need to override any other provisions.
Bond Transfers
This was noted as a service that landlords should avoid. A practice of signing the bond over to the landlord at the end of the tenancy in exchange for cash was noted as being a virtuous circle for the next landlord. There is a need to have some confidence in the system and the tenant before doing this.
The Bond transfer system was not seen as an acceptable alternative for landlords for payment of bond before occupancy.
Accepting a cheque for Bonds is also poorly regarded with the long clearance time or cost of special answers.
WINZ Bond Payments
This is also seen as a poor system for landlords, with no reliance able to be placed on it before occupation. Behaviourally it also seems to fund repeated failure of tenants, rather than assist tenants in trouble. Direct credit of rent from benefits is a better idea.
Again for landlords “cash is king” for all bond and rent before occupation.
Direct Credit of Benefits to pay rent
This is generally seen to be a great service that is keeping beneficiaries in accommodation. It does still seem hard to make happen. Use of a 10 day letter on arrears with this suggestion included noted as helpful by some.
There was a call for this to be allowed as condition of tenancy for beneficiaries.
Standard Tenancy Services Rental agreement
There was a call for a bigger space for special conditions on the current form next time it is revised.
Must a tenancy agreement be in writing
Some confusion noted with complex double negative sentences in the act currently. While an agreement does not need to be in writing, it must be for any District Court appeals, but it is still enforceable if not in writing elsewhere. Please can this be tidied by and made to read in plain English. One simple rule for all please.
Making potential tenant accountable for their claims on applications.
A member suggested that tenancy applications could be sworn documents, which would men that misrepresentations would be enforceable as perjury.
Certainly the comparison to the insurance industry is relevant here. The insurance contract is voided and no claims can be made if material representations are incorrect, so as to change the insurers mind about whether they would have accept ed the purchaser as a good risk. This is exactly the same as a tenant not admitting they have a series of rent arrears and damaged properties behind them.
If the tenancy is not to be terminated forthwith then what sanction is appropriate?
Fostering discussion of the rewrite
Members suggested that the notes of the session be available on the WNPIA website
It was also suggested that the websites of other interested parties be checked for their thoughts on the rewrite to identify common interests, and be prepared to counter unhelpful suggestions.
Protecting investment capital of landlords
This needs to be achieved if landlords are to be continued to be drawn in to the fold and provide the growing accommodation needed as home ownership falls.
Accommodation as an essential service
How do the provisions of the RAT compare with other essential services?
If the tenant does not pay for the service and the right to withdraw it forthwith is not present what protection does the landlord get?
Is it theft to not pay the rent but enjoy the services?
Note that the landlord is required by law at present to provide credit as a provider of last resort. Credit information must be available to balance that obligation.
Compare this with commercial tenants, where 1 week possession orders occur.
Getting rent up there on the “must pay” list
All credit managers know that their challenge is to get their payments to the head of the queue. If the aim of the legislation is to assist tenants to manage themselves better then the rent, as the means to getting the essential service of accommodation, needs to be ahead of things of lesser need.
Currently the power bill and hire purchase will rank ahead of rent. This is due to the more immediate repossession / withdrawal of service provisions, as well as the interest and other penalty costs associated with those other services.
In the interest of the tenant this must be balanced.
Clear Law, Clear administration, Clear punishments
A member made the point that the law needs to be clear, and the administration free of political correctness. Some consequence must be attached to the actions of tenants or no improvement in their ongoing relationships will occur.
This was greeted with widespread applause.
Some consequence must be found for bad tenants, either monetary or hard labour related.
The dilemma for the state
What are this hardcore of bad tenants going to do for accommodation when the private landlords unite to not re-house them?
This is an increasing likelihood as more and more landlords join property investment organisations and share information on scams and bad tenants.
Information on tenancy Tribunal orders
These are a public document made available after a public hearing.
They are a vital source of behavioural scoring for prospective tenants. We applaud the moves afoot to make these electronic documents, moving into the 20th century.
Also to be applauded are the moves to make these available on a website. This reinforces the importance of using proven identities for tenants and landlords. The court / tribunal needs to prove the identities as part of all hearings.
These public documents need also to be indexed so they can be searched by applicant and defendant.
This will be a key part of their eventual use to society to train the poor tenants out there to be better tenants.
Allowing payment of rent monthly
A member asked that the act be checked to see it allows monthly payment of rent. Many people are paid monthly, so let’s allow this to be aligned.
Amount of bond and rent in advance
Why is the maximum amount limited?
Let’s abolish the maximum.
Ability to waive rights
Let’s have equal ability to waive rights under Section 9.
Compare with Australian Law
What can we learn from a comparison to Australian Law?
What about the law in other places?
Damage to Property
Wilful damage to a rented property should be a criminal offence.
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