Rental property management

What new landlords need to know

Managing a rental can be a rewarding experience and, when done right, can turn into a healthy money-maker for an investor portfolio. However, the rental landscape is in a constant state of flux. New laws and regulations, including changes to the Residential Tenancies Act 2016 and the introduction of the Healthy Homes Standards, are causing many landlords to reassess their properties and how they want to manage them going forward. 

In this guide, we delve into the common FAQs new landlords often ask:

• Is my property suitable for renting?
• What type of tenancy is best for me?
• What do I include in a tenancy agreement?
• What documentation and records do I need to keep?
• What is the average rental return in Hamilton?
• How long should I budget for my property to be vacant?
• How much bond can I charge?
• Can I charge a letting fee or key money fee?
• How often should I inspect the property?
• What are my repair and maintenance responsibilities?
• How often can I increase the rent and by how much?
• What if my tenant misses a rent payment?
• Can I end a tenancy agreement early?

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Is my property suitable for renting?

New Zealand has a history of poor quality rental stock, which is why as a landlord of today, you must ensure any property you rent is warm, dry and safe. The recently introduced Healthy Homes Standards provides a set of minimum benchmarks for heating, insulation, moisture and drainage, and draught-stopping that your property must either meet now, or in the near future. 

Read more: Healthy Homes Standards: what every private landlord needs to know

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What type of tenancy is best for me?

There are two types of tenancies landlords can offer tenants: periodic and fixed-term. Below we run through the pros and cons of each.

Periodic tenancy agreement

A periodic tenancy is a tenancy that has no end date. It continues until either you, the landlord, or the tenant gives notice. 

Pros:

• Flexibility. You do not need to wait for the lease to run out before giving notice to tenants, particularly if your circumstances change and you decide to sell or move in yourself.
• Easier to evict troublesome tenants—again, because you don’t need to worry about breaking the fixed-term lease agreement. 

Cons:

• Tenants can leave unexpectedly and quickly since they only need to give 21 days notice. This could leave you scrambling to find new tenants and potentially have the property vacant for longer than you would prefer.
• Higher tenant turnover, which means:
• Extra costs of finding new tenants (a longer fixed-term tenancy avoids this).
• Greater wear and tear on the property.
• Harder to plan property maintenance, since you don’t know when the property will be vacant in advance.

Fixed-term tenancy agreement

As its name suggests, a fixed-term tenancy locks both you and the tenants into a contract for a fixed period of time. This can be anywhere between six months to five years. Once a fixed-term tenancy ends, it automatically becomes a periodic tenancy.

Pros:

• Ideal for securing good tenants for the long-term. 
• Easier to plan and budget property maintenance.
• Easier to plan property upgrades required by the Healthy Homes Standards, especially when certain standards must be met within 90 days of a new or renewing contract from 1 July 2019. Read more here.

Cons:

• You are locked into a contract. However, it is possible to null the agreement in these circumstances:
• Both landlord and tenant agree to end the tenancy.
• The tenant agrees to assign or sublet the property.
• If the landlord or tenant applies to the Tenancy Tribunal for severe hardship (e.g. if you or they have an unexpected change in circumstances).

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What should I include in a tenancy agreement?

A tenancy agreement is a legal document, so it’s important to get it right. This is why many landlords enlist the help of a property management professional or, at the very least, make use of the tenancy agreement template from Tenancy Services.

With this in mind, all tenancy agreements should contain the following:

• Full names and contact addresses of both tenant and landlord
• Rental property address
• Date the tenancy begins
• Date the tenancy ends, if it’s for a fixed term
• Bond to be paid (if any)
• Rent amount and frequency of payments
• How the rent will be paid (e.g. bank transfer)
• Any chattels (e.g. furniture or appliances, provided by the landlord)
• Information about insulation in the ceilings, floors, or walls
• An insurance statement.

Important! The tenancy agreement must be in writing and signed by both the landlord and tenant. That said, if you do not put the formal agreement in writing, the Residential Tenancies Act will still apply to the tenancy and your property.¹

Under the Healthy Homes Standards, landlords are now also legally required to include:

• An insulation statement (mentioned above)
• A statement of intent to comply with the new standards.

You can read more here.

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What documentation and records do I need to keep?

As a landlord, you will need to keep records of:

• All property inspection reports
• Rents and receipts
• Water bills (if applicable) 
• Cleaning, maintenance and repair invoices for any work done on the property
• All communications
• Any records of issues that have occurred—even if resolved.

You should keep these general records during and for 12 months after the tenancy.

The recently introduced Healthy Homes Standards also require landlords to be able to produce evidence that their rental property is compliant with the new minimum standards. This could include the following documents: 

• Code compliance certificate
• Records of calculations of a living room’s required heating capacity, including a printout from the heating assessment tool
• Receipts and invoices from builders or tradespeople for building work carried out on the property
• Receipts for any building materials and/or elements
• Photographic evidence of compliance
• Records of work from building practitioners or Independently Qualified Persons
• A professional evaluation performed by a Licensed Building Practitioner, Independent Qualified Person or any other relevant professional
• A Building Warrant of Fitness or Compliance Schedule, where the extractor fans are part of a larger ventilation system and the ventilation system is a specified system
• Land Information Memorandum (LIM) or Building information reports or part of these reports that reasonably shows compliance
• Product manuals/schedules for devices installed for the purpose of complying with the standards
• Any other documents/records that will reasonably show compliance.

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What is the average rental return in Hamilton?

The table below highlights the medium rent for  Hamilton’s main suburbs. Remember, this is only a guide. What you can charge for rent is dependent on the type of property, what condition it’s in and its unique features (such as school zoning, low maintenance materials, or modern kitchen).

Source: QV.com, September 2019. 

Read more: 6 steps to work out how much rent you should charge

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How long should I budget for my property to be vacant?

A property can remain vacant between tenancies anywhere from a few weeks to several months, particularly if the home needs maintenance and repair work done to bring it up to standard. 

At Lodge, we recommend having two to four months of mortgage payments saved as a precaution and budgeting for a two-week vacancy every two years if you have a fixed-term tenancy agreement. 

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How much bond can I charge?

The maximum bond you can charge is the equivalent of four weeks’ rent. 

Note: If you increase your rent, you can request your tenants “top up” the bond to reflect the increase.

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Can I charge letting fees or a key money fee?

No. Under the Residential Tenancies Act, landlords are not permitted to pass on the cost of a letting agent or solicitor to their tenants. 

Read more here.

Under the same law, landlords are prohibited from asking for key money to grant or change a tenancy.

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How often should I inspect the property?

Legally, a landlord can only carry out one inspection every four weeks.² 

That said, some insurance companies require landlords to conduct quarterly property inspections as a condition of their landlord insurance.

At Lodge, we recommend conducting quarterly inspections for new tenancies, then extending it to once every six months where appropriate.

Read more: How much time and effort goes into a property inspection?

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What are my repair and maintenance responsibilities?

Read more: Landlord or tenant: who’s responsible for property maintenance? | 3 formulas to help you budget your rental property maintenance | Who is responsible for pest control in a rental property?

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How often can I increase the rent and by how much?

There’s no limit on how much you can increase your rent. However, increasing the rent too much or too frequently can drive away good tenants and make it difficult to get new ones. 

Legally, you cannot increase the rent:

• within the first 180 days of a tenancy, and,
• within 180 days of your last rent increase.

The only exceptions to the 180-day rule is if you’ve made improvements to the property (e.g. installed a new kitchen) that increases the value of the property and is beneficial to the tenant. Or if you change the tenancy agreement in a way that benefits the tenant.

You must also give 60 days written notice of the increase. This notice must include:

• how much the rent is increasing by, and,
• the day the increased rent is due.

At Lodge, we recommend undertaking a rental appraisal once a year and adjusting your rent to reflect the market rate for the suburb, the type of property (e.g. house, apartment, unit etc) and its condition.

Read more: 6 steps to work out how much you should charge for rent

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What if my tenant misses a rent payment?

Get in touch with your tenant first and find out if they’re aware they’ve missed a payment. Often it is a case of a transaction not going through. 

If your tenant is having difficulty paying, see if they are willing to pay their missed rent in instalments until they’ve cleared the debt.

Important! Always record any agreement in writing.

If the issue remains unresolved, and the tenant owes less than 21 days rent, you can send a notice to remedy. 

If the notice to remedy is ignored, or if the tenant owes more than 21 days of rent, you can apply to the Tenancy Tribunal for termination of the tenancy.

Read more: How do I evict tenants from my rental property?

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Can I end a tenancy agreement early?

If you are using a periodic tenancy agreement, you need to give your tenants:

• 42 days' notice if you have sold the property and the new owners want a vacant property, OR if you or a family member want to move into the property.
• 90 days' notice for all other circumstances.

If you are using a fixed-term tenancy agreement, you can only end the tenancy early if:

• Both you and your tenant agree.
• The tenant agrees to assign or sublet the property until the end of the contract
• If you or your tenant applies to the Tenancy Tribunal for severe hardship (e.g. if you or the tenant have an unexpected change in circumstances).

Read more: How do I give notice to end a tenancy agreement? | How do I evict tenants from my rental property? | Selling a tenanted property: your responsibilities as a landlord

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Learning to manage a rental property can be a steep learning curve, but with the right guidance—or a professional property manager—you can make the curve smoother and less stressful.

To learn how Lodge can help you manage your rental, get in touch with us. We're always happy to chat! 

1. Tenancy Services, 2019.

2. Community Law NZ, 2019.