Residential Tenancies and the Covid-19 Response (Urgent Management Measures) Legislation Act 2020

Residential Tenancies and the Covid-19 Response (Urgent Management Measures) Legislation Act 2020

The Covid-19 Response (Urgent Management Measures) Legislation Act 2020 ('the Covid-19 Act') came into effect on 26 March 2020. The single broad policy objective of the Act is to put in place the necessary arrangements in order to implement Covid-19 Alert Level 4.

The Covid-19 Act amends a number of pieces of legislation in order to implement Alert Level 4/respond effectively to Covid-19, including the adoption of the following measures:

  • adding District Court Judges to the list of those that can alter the rules of the Court;
  • enabling Local Government and Civil Defence Emergency Management Groups to attend meetings by audio or audiovisual link; and
  • enacting rent and eviction freezes.

Amendment to the Residential Tenancies Act 1986

Part of the proposal of the Covid-19 Act was aimed at lessening the economic impacts suffered by tenants from Covid-19.

The Covid-19 Act amends the Residential Tenancies Act 1986 ('the RTA') by inserting a new Schedule 5. This schedule imposes two significant changes: (1) limiting the grounds on which a landlord may terminate a lease; and (2) freezing rent increases. Landlords could face exemplary damages of up to $6,500.00 if they take steps to terminate a tenancy without grounds or if they attempt to increase rent.

Freeze on Rent Increases

As noted the new Schedule 5 of the RTA prevents a landlord from increasing rent for residential tenants.  In practice, a rent increase notice issued by a landlord before the lockdown will not have the effect of increasing a tenant’s rent, unless that rent increase had already taken effect before the commencement of the lockdown (ie rent was increased prior to 26 March 2020).

The rent freeze provision applies for an initial period of six months, after which the Government will evaluate whether it needs to be extended.

Terminating a Tenancy

The new Schedule 5 of the RTA also provides that tenancies cannot be terminated by the landlord for a period of three months beginning 26 March 2020, except in limited circumstances. Further, the legislation also provides the possibility for an increase in the period by a further three months. Every fixed-term tenancy that expires during this period continues as a periodic tenancy in accordance with existing provisions of the RTA.

The limited circumstances in which a landlord is able to terminate a tenancy include (but are not limited to):

  • where the tenancy is terminated on the initiative of the tenant; or
  • where the tenancy is terminated by written agreement of the landlord and the tenant; or
  • where a breach renders the premises uninhabitable; or
  • where the rent is at least 60 days in arrears and the landlord applies to the Tenancy Tribunal (the 'Tribunal') to make an order terminating the tenancy (note that this has increased from 21 days in arrears); or
    [NB: The new Schedule 5 of the RTA provides that even if rent is 60 days or more  in arrears the Tribunal can refuse to terminate a tenancy if it is satisfied that “reasonable endeavours” are being made to pay and, after balancing the interests of the tenant and the landlord, the Tribunal considers that an order terminating the tenancy is not justified.]
  • the landlord applies to the Tribunal for an order terminating a tenancy on the ground of anti-social behaviour.

Importantly, tenants will still be able to terminate their tenancy as normal (if they wish to do so). Clause 7 of the new Schedule 5 further provides that where a tenant has given: (1) notice to terminate a tenancy; or (2) obtained an order to terminate; or (3) agreed with the landlord to terminate a tenancy, before 26 March 2020, they are able to give the landlord written notice of their intention to remain in the premises and the tenancy continues, provided this notice is given before the termination date in the original notice/order/agreement.

Tenancy Services have noted a tenant is not required to notify their landlord if they test positive for Covid-19. However, Tenancy Services has encouraged tenants to advise their landlord if the landlord needs to attend the property while the tenant is self-isolating(eg if the landlord needs to undertake urgent repairs at the property).

Impact

This may impact landlords who, prior to the Alert Level 4 lockdown, have entered into unconditional agreements to sell their tenanted property stipulating that the property will be sold with 'vacant possession' as a landlord can no longer give 42 days' notice to terminate the lease on this basis. A tenant may also choose to remain in the premises despite having given notice or agreed to the termination before the 26th of March.

Although many settlements (especially those involving the movement of people) have been deferred until 10 working days after the Covid-19 Level is reduced to Level 2 or below, there is potential that this may occur before the expiry of the three month limitation on the grounds for terminating a tenancy (ie on the basis of an unconditional agreement). If this is the case it will likely be a matter of good faith negotiations between the parties to resolve the situation, taking everyone's best interests into account.

If you are a landlord or tenant affected by these changes or are confused about where you stand in relation to any of the above please feel free to get in touch with Melanie Morris (mmorris@mcveaghfleming.co.nz) or Brandon Cullen (bcullen@mcveaghfleming.co.nz) or your usual McVeagh Fleming solicitor.

Please stay safe and look after yourselves during these difficult times.

See our Expertise pages

Residential Property

Land and Property Disputes

© McVeagh Fleming 2020

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.