Insulate before it’s too late
Landlords, if you haven’t made your rentals safe and healthy for tenants, now is the time to get busy. Otherwise, you will be looking down the barrel of a hefty fine. Although there is a grace period for landlords to bring their rentals up to standard, the Ministry of Business, Innovation and Employment has already shown it means business when it comes to enforcing the new standards.
If you’re not aware of the changes, several amendments to the Residential Tenancies Act 1986 came into effect on 1 July 2016. These focused on requiring landlords to make rental properties safe and healthy for tenants: including installing ceiling and underfloor insulation, and smoke alarms within three metres of each bedroom. The lead time to get this work done will end on 1 July 2019.
Here’s where it’ll hurt you in the pocket if you don’t comply. The Ministry of Business, Innovation and Employment (MBIE) has already brought a claim against Mrs Liu for failing to meet the standards set out in the amendments to the act. Mrs Liu did not insulate her tenanted properties and was fined $4,000. She was also fined $100 for failing to complete an insulation statement as part of the tenancy agreement.
Not all homes are built equal
The regulations recognise there is a need to make exemptions. These include properties which have concrete floors or no ceiling access for example. Other exemptions include properties that have been scheduled for demolition or a significant rebuild within a year.
Once you enter into a new tenancy agreement, you have 90 days to make your property compliant with the new regulations. By 1 July 2019, all rental properties must be compliant. Time is ticking. Don’t let this job slip to the bottom of your list.
Changes to tenancy agreements
All new tenancy agreements must now include an insulation statement. You can download this statement from the MBIE Website and read more about what you need to do to comply with the new regulations. Standard tenancy agreements can be downloaded as a PDF from the MBIE Website.
In brief, the insulation statement identifies whether your property meets the minimum standards set out in the Building Act 2004. You will need to find out what insulation is installed in your property as some forms are no longer acceptable. Underfloor foil, for example, is acceptable if already installed, but not acceptable as a new insulation option. It can be non-compliant if worn and you could be looking down the barrel of a $200,000 fine if the foil comes into contact with electrical wires and starts a fire.
It’s not all bad news
At this point, you’re probably thinking it’s all bad news for landlords, but help is available as upgrading rentals to the new standards can be financially stressful.
Check with your local council to see if they have a loan scheme. Many councils offer a low interest loan scheme which can be repaid as small increases to your rates payments. These loans are specifically for improving heating and insulation.
If your tenants have community services cards or special health needs, you can also apply for a 50% subsidy for the cost insulating the property from the Energy Efficiency and Conservation Authority. Again, don’t leave it too late. These grants are only available until 30 June 2018.
We can’t stress this point enough. The decision against Mrs Liu sends a strong and clear warning to landlords that there will be fines for non-compliance. If you’re wondering how the regulations will be enforced, the MBIE set up the Tenancy Compliance and Investigations Team in 2016 for the specific task of auditing landlord compliance. Last year, this team audited five of New Zealand’s largest property management companies. Getting audited by this team is just a matter of time.
The Healthy Homes Guarantee Act 2017 came into effect in November last year. It states that non-compliant insulation and smoke alarms will be punished with fines of up to $3,000. Remember, you will also have the cost of remedying the problem too.
There is more information on the MBIE Website and help to guide you through the process. Act sooner rather than later. If you have any questions, contact our property lawyers for answers.