National tweaks tenancy laws, but Labour and Green want bigger reforms

A state house owned by Housing New Zealand. Photo by Lynn Grieveson for Newsroom.

The National Government is amending the law for landlords and tenants, but other parties say it is too timid and in the wrong direction. Baz Macdonald reports.

In the face of fast-rising rents and hundreds of deaths from unhealthy homes, the National government presented an amendment to the 1986 Residential Tenancies Act last month which Labour and the Green Party said was too narrow.

Essentially, the amendments overrule two recent court decisions against landlords and allow landlords the right to get into properties to test for meth, albeit with standards that are less sensitive to meth usage (rather than meth production). The Opposition would have preferred tenancies reform to bring in a Warrant of Fitness system, which the Government has argued would cost $100 million and be passed on in higher rents.

The amendment addresses three issues:

  • It presents a new approach to determining who pays for careless damage caused by a tenant.

  • Sets new standards for measuring meth contamination in rental properties.

  • And removes a loophole that meant tenants living in commercial buildings couldn't use the residential tenancies law.

Minister for Building and Housing Nick Smith said the amendment builds on the government's previous work in residential law - including compulsory smoke alarms, requirements for rental properties to be insulated (for social housing from July 1 last year and all other rentals from July 1 2019) and establishing a tenancy compliance and investigation unit.

The amendment passed its first reading on July 4 with 105 votes of ‘Aye’ and 14 votes of ‘No’ - from the Green Party - and was passed for consideration to the Local Government and Environment select committee.

Green party co-leader Metiria Turei said the party could not support this amendment considering the negative impact meth testing rental properties has had on families. She said that there had been instances where families had been evicted with nowhere to go, and no evidence they were at fault for the presence of meth.

Turei said while amendments on non-residential properties legislation were needed, she couldn’t understand why it was being prioritised before the standards of residential properties had been addressed.

“What about some decent law from National that holds residential properties to a higher quality standard?,” said Turei.

Labour Housing spokesman Phil Twyford said despite the party's vote of ‘aye’, he thought it was strange National would present such a minor amendment to residential law “when the housing and rental market are in a state of meltdown”.

He said a significant number of renters are “living in despair at the moment, because they are desperately trying to keep their heads above water in the face of skyrocketing rents, poor quality housing and what is essentially an unregulated market.”

NZ First MP Denis O’Rourke joked that his speech would be a little different than others because he intends to focus on “what is actually in the bill”. However, he too questioned National’s amendment, asking why it had taken them so long to address some of these issues.

Despite the prevalent debate around what the amendment lacked, MP’s from all parties, except Green, said they supported the amendment for what was in it.

Meth testing and contamination

The most contentious article in the amendment clarifies the rights of entry when testing for meth and the disclosure of those test results. It also presents the new standard, developed with Standards NZ, which determines the level of meth contamination at which a property becomes unfit for occupation. Nick Smith said the use and manufacture of meth is a serious issue in both social and private rentals because of the health risks it poses to occupants.

The amendment said a landlord can enter their tenant’s property to test for the presence of meth anytime between 8am and 7pm, as long as they had given at least 48 hours’ notice, but no more than 14 days.

Smith told Newsroom the presence of meth itself does not make a building uninhabitable, rather it is the chemicals involved in the manufacture that are at issue. As such, the testing for meth is used as an indicator that chemicals could have been there. If meth is identified, a series of tests should follow to determine whether the harmful chemicals involved in meth manufacture had been present.

However, the levels set by Standards New Zealand are based on the presumption of smoking and not manufacture, Smith said. This means, even though it is the chemicals involved in manufacture that deem a building uninhabitable, these new standards mean a property can still be considered untenable from the presence of meth only, he said.

Previous guidelines set by the Ministry of Health set the maximum acceptable level of Meth at 0.5 micrograms per 100cm2. The new standards have raised that limit to 1.5 micrograms per 100cm2.

Metiria Turei said she was dubious, not only of the quality of companies who conduct these tests, but also of the approach used by Housing New Zealand.

“Housing New Zealand has been using an approach that has been discredited by the Ministry of Health,” said Turei.

“I’m not prepared to accept the governments assurances about the standard or about the approach given that is has proven to be a failure so far.”

Turei said Housing New Zealand has been deeming houses uninhabitable despite the Ministry of Health’s discrediting of their approach, evicting families with nowhere else to go and, in some cases, blaming them for the contamination “whether they have got evidence for that or not”.

Non-residential properties

The second part of the amendment changes a precedent which had meant the New Zealand Tenancy tribunal lacked jurisdiction over cases involving non-residential property such as commercial buildings.

This loophole was created in a 2013 High Court decision which ruled that if a property is not lawfully classified as residential, then anyone with a tenancy in that property is not covered by the tenancy tribunal.

Smith said, particularly in light of the Kaikoura earthquake, instances of people paying to dwell in non-residential spaces had been an issue that the tenancy tribunal was legally unequipped to deal with.

“There have been examples around the country of garages and other properties that are being rented out that don’t go anywhere near meeting the requirements of the residential tenancies act,” said Smith.

This amendment will allow tenants access to the tenancy tribunal regardless of the classification of the property they are living.

At the first reading, Metiria Turei said she was pleased to see this issue legislated, but called out National for focusing on “a sliver of the issues that matter”, highlighting how they were looking to legislate non-residential buildings when there is no law to ensure residential properties are held to high standards.

“Wouldn’t it be great if that was the law that we were discussing today? Because that would mean that New Zealand families could guarantee that the homes they are renting, that are supposed to be homes that are warm, safe and dry, actually would be...”

Turei has been beating this drum for years now, calling on the Government to institute a warrant of fitness for homes that would guarantee a property as healthy and liveable. She said a warrant would set minimum modern standards for both the components and standard of a home.

“The government recently legislated to require a 1978 standard of home insulation for rental houses, which is frankly pathetic,” said Turei.

Smith said National did not support a warrant of fitness because the costs involved would get passed down the line, ultimately raising rents.

“We worked out that the cost of [running a warrant of fitness] within the residential sector would be over $100m a year.”

He said poor quality rental properties had been brought to his attention and that “the problem hasn’t been the standards; the problem has been that the standards haven’t been enforced”. He said that there was a difference between what is legal and what is good.

“Not that different to a car, you’ve got a car on the road that has a warrant of fitness, but it is not necessarily of what you would say is a great standard.”

The National government decided it would be more effective to enforce current property standards regulations than to create a new bureaucratic system. As an example, Smith pointed to the tenancy compliance and investigation unit which was funded for $200m last year and has brought “nearly 300 cases before the tribunal."

Tenant Liability for damages

The third part of this amendment seeks to mitigate the effect of the landmark Holler v Osaki case from the Court of Appeals last year, which in its ruling created a precedent that made tenants immune to liability for damage caused by carelessness or negligence. This amendment would remove this precedent by legislating tenants' liability for careless damage to property.

“That decision changed the previously understood legal settings for liability for damage in rental properties. As a result, tenants are now largely free from the cost of careless damage that they cause… and landlords are bearing most of those costs,” said Smith.

“Landlords should not be paying for damage to their rental properties that they have not caused, and what’s more, its provides the wrong incentive if tenants don’t have some level of responsibility for their actions.”

The amendment means tenants will be liable for each case of careless property damage to the limit of their landlord’s insurance excess, but with a cap of four weeks rent. Smith notes this amendment refers only to careless damage, and that tenants will remain fully liable for intentional damage, or if insurance claims are irrecoverable because of a tenant’s act of omission.

However, Smith said National agreed tenants should not be vulnerable to litigation from insurance companies in the event of catastrophic damage, as was the case in the Osaki case.

Turei said this amendment would swing the balance too far in favour of landlords and that it was too large a burden to ask tenants to pay for every incident of damage done, as opposed to a more realistic approach of judging an overall cost.

“The government is basically taking a sledgehammer to the problem,” Turei said.

Public submissions are currently open for the amendment until August 22, which is when Parliament is dissolved for the election. The house rises on August 17.

Smith expected it would pass before the end of the year, but said that was subject to what was said in public submissions.