If you’ve ever rented a property, you should be familiar with rent control. Property investment New Zealand experts share their knowledge of rent control – what the causes and implications are, for those only just entering the industry.
What Is Rent Control, And How Does It Affect The Landlord And Tenants?
Rent control is a term for when landlords can increase or decrease their rental charges for the properties they manage. That means that even though you started renting a property from a landlord for a specific amount of money every month, that amount might change over time. Think about it – if you start renting a house and intend on staying there for as long as possible, it’s unrealistic to expect the rent to remain the same. Why? Because of inflation.
Inflation affects everything and everyone. Landlords provide you with a service and are expected to pay rates, property taxes, and utilities, which increase with inflation. If you rented the same house for twenty years without a change to your rent, it would mean that your landlord would be earning less profit as inflation increases.
What The Law In New Zealand Says About Rent Control
In New Zealand, the law about rent control is very clear, and aims to be fair for all parties involved; that is, the tenant and the landlord.
For example, a landlord can increase their rent within the following stipulations:
- Only if the rental agreement allows for it, or stipulates that rent will increase by a certain percentage every year, and only for fixed-term tenancies
- Landlords must give adequate written notice of up to 60 days for when rental prices will increase, with dates specifying when the increase is expected to come into effect
- Rent can only be increased after the first 180 days of occupancy
- Rent cannot be increased if the previous increase was implemented fewer than 180 days ago
How Much Will The Rent Increase?
There are no limits to how much a landlord in New Zealand can increase their rent. However, the inflation rate can be used as a guideline of how much to increase their rental fees. If the tenant doesn’t agree with the new amount, or can’t afford to pay it, they can agree to a rental increase that falls outside of the typical 180-day period if:
- The landlord has made efforts to improve the property to increase the value and benefit the tenant. It’s important to note that this does not fall within general or necessary repairs or maintenance which the landlord should be doing already
- The landlord has changed the rental agreement to benefit his or her tenant
- The landlord has improved the facilities, amenities or services of the property for the tenant, going beyond general maintenance which should be performed regardless.
What Happens If The Tenant Does Not Agree To The Increase?
In New Zealand, the Tenancy Tribunal protects both landlords and tenants in cases like this. If the landlord can prove that he or she has provided improvements above and beyond typical repairs and maintenance and the tenant still doesn’t agree to the increase, they can approach the Tenancy Tribunal. The landlord would need to prove that they have had unexpected expenses, which is why they’re implemented such a high increase.
The tenant can also apply to the Tenancy Tribunal if the amount being charged is too high in comparison to similar rental properties in the area. If correct, the Tribunal can order the landlord to decrease their asking price if they can’t prove why their rental charges are so high.
Can Rental Rates Be Reduced?
Yes! Rent can be reduced in certain circumstances, for example, if extensive renovations are being done on the property. The reduction can span over a specific period, or permanently. If the rent reduction is permanent, they will need to draft a new rental agreement for both parties to sign, and the tenant and landlord should get a copy of the new contract.
If the rent reduction only extends over a short time, the landlord and the tenant need to agree on both the amount charged and the period of time over which this reduction applies. After the reduction period ends, the tenant will be expected to go back to paying the original amount in rent.
Rent control is a part of life, for property investment moguls who own properties across New Zealand, and for their tenants. Make sure to be aware of what the law states about rent control so that you can provide fair rental prices to your new tenants.