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Covid-19 crisis: what landlords need to know

[UPDATED] The Covid-19 crisis means that New Zealand is now in a State of National Emergency and the nationwide lockdown begins tonight.

Wednesday, March 25th 2020, 3:29PM 1 Comment

by Miriam Bell

While we will all need to be confined to our homes for, at least, the next four weeks, life will still go on. But, for landlords, there are many questions about what that means and how they can conduct their business in a practical manner.

To help out, we’ve compiled a lengthy, but comprehensive, guide to the questions we’ve been asked the most often. Bear in mind, that the situation is still evolving so we’ll be updating this guide as and when more details emerge.

In the meantime, read on and, hopefully, our guide will help you out…

What if my tenant loses their job because of Covid-19 and struggles to pay the rent?

The Government has put an extensive Covid-19 economic response package - to help support people who lose their jobs because of the virus – in place. It contains billions in wage subsidies for affected businesses in all sectors and regions and for leave and self-isolation support; as well as provision for a permanent $25 per week benefit increase.

That means the first port of call for anyone whose employment has been affected by Covid-19 should be to apply to Work & Income NZ for income support and accommodation assistance.

It’s also worth noting that many tenants will not lose their job because of, or have their source of income affected by, Covid-19. Also, Government backed / social housing tenancies are far less likely to be affected than those involving private rents from people who work in industries like tourism and hospitality.

However, if your tenant’s employment and/or income is affected by Covid-19, landlord advocates suggest that showing compassion and empathy is critical. As is keeping the lines of communication with your tenant open.

Many landlords have already reached out to their tenants asking them to talk to them if they are having financial problems due to Covid-29.

For landlords who are in a financial position to do so, there are options they might want to offer to a struggling tenant. An alternative payment schedule, where tenants are granted more time to make rent payments in full, is one option. Another is a temporary rent reduction for an agreed-on period of time. Any such agreements should be made in writing and signed by both parties.

But not all landlords will be in a financial position to do this – especially as most will still need to cover the mortgage, rates, insurance and other costs. So if, as a landlord you are not in a position to offer different arrangements to an affected tenant, you should not feel pressured to agree to something you can’t afford.

Read more: How to address tenant job loss in the age of coronavirus

What does the Government’s “rent freeze” mean?

The Government has announced that there will be a six month freeze on rent increases. This means that, for that period of time, landlords can not increase the rents that they currently charge for their rental properties.

It does not mean that there is a freeze on paying rent. Tenants will still have to pay their rent during this period. 

Tenants are also still liable for rent arrears. But landlords will be unable to terminate tenancies due to rent arrears of less than 60 days.

Housing Minister Megan Woods says that landlords do need to be aware that breaching rent increase provisions constitutes an unlawful act, with exemplary damages of up to $6,500 payable in each case.

REINZ chief executive Bindi  Norwell says they believe that where landlords have already spoken to tenants about a rental increase in the previous few weeks, the increase will be unable to go ahead.

Woods has confirmed that. She says that regardless of when notice of a rent increase was provided, no increase is permitted if the effective date is after the date this law comes into effect.

However, some landlords have already notified their tenants that rent increases signalled earlier in the year will not be enforced at this point.

Read more: Rent freeze introduced - temporarily and Emergency rules boost tenant protection

Can tenancies be terminated during the lockdown period?

No, they can’t. Along with the freeze on rent increases, the Government has announced that tenants will have increased protection from having their tenancies terminated. That means it will not be possible to terminate tenancies during the lockdown period - unless the parties agree, or for a limited set of reasons.

Further, tenants who have previously been given notice can stay in their rental properties if they need to stay in the tenancy during the lock-down period. However, tenants will still be able to terminate their tenancy as normal, if they wish.

The limited reasons a tenancy can be terminated include where a tenant:

• Substantially damages the premises;
• Assaults or threatens to assault the landlord, their family, or the neighbours;
• Abandons the property;
• Engages in significant antisocial behaviour (defined as harassment; or any intentional act, if the act reasonably causes significant alarm, distress, or nuisance); or
• Is 60 days behind in rent, which is increased from 21 days (and the Tribunal will need to consider fairness and whether the tenant is making reasonable efforts to pay the rent).

The Tenancy Tribunal will act as a check to ensure that the limited and specific termination grounds are being used lawfully.

Again, landlords need to be aware that breaching the tenancy termination provisions constitutes an unlawful act, with exemplary damages of up to $6,500 payable in each case.

The tenancy termination measures apply for three months and may be extended if necessary.

Landlord advocates are not happy about this as they are concerned that the Government might be trying to push through its controversial tenancy law reforms without going through the Select Committee process.

Read more: Rent freeze introduced - temporarily and Emergency rules boost tenant protection.  

Is there any support for property owners struggling to pay their mortgage?

Yes – potentially. The Government, retail banks and Reserve Bank have announced a finance package for borrowers affected by the fallout from the Covid-19 lockdown. It includes a six-month principal and interest mortgage holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption.

However, the Government has, so far, declined to comment on whether only owner-occupiers are eligible for the scheme. More details about the scheme will be made available over the coming week.

It’s worth noting that a “mortgage holiday” is not quite what it sounds. It doesn’t mean that you just don’t pay your mortgage for six months.

What it actually means is that while you can stop making repayments on your mortgage, the interest will continue to build up. You will still have to pay that money to the bank at the end of the six months. So it’s just a delay in paying the costs of the mortgage. The amount that eventually has to be paid remains the same, if not a bit more due to the extension of the loan time.

For this reason, many property owners prefer not to take “mortgage holidays” if they can avoid them.

Read more: Six month mortgage holiday for borrowers and Banks roll out mortgage holiday

Is it possible to do maintenance or inspections on my rental property?

Neither routine maintenance or inspections are essential services. That mean you should put off any routine maintenance work until after the lockdown period. Likewise, routine quarterly inspections should be deferred until after the lockdown period. But, if you do have an inspection scheduled during this period, you should talk to your insurer about it.

The NZ Property Investors Federation executive officer Sharon Cullwick has consulted with the Insurance Council of NZ on this topic.

They told her that periodic inspections should remain a business as usual response for any property owner but that due to the lockdown inspections should take place as soon as is practical after health clearances. If in any doubt ICNZ recommends that landlords check with their own insurer about their specific requirements and how they are treating it.

However, when it comes to urgent repairs, the situation could be a bit different, Norwell says. If the urgent repair is related to an essential service - such as power, water, waste, or gas - then it is likely it can be undertaken during the lockdown period. They are awaiting final confirmation from MBIE on this, she adds.

If I’m trying to rent out my property is it still possible to have rental viewings?

Rental viewings are not considered essential services so they can’t take place during the lockdown. But Norwell says they could be done if they are done using virtual reality tours, pre-recorded video/photos or other technology.

What about if I want to move back into my rental property during the lockdown period?

There’s some uncertainty here. That’s because, under current tenancy law, a landlord must give 42 days’ notice if they wish to move into their rental property. But under the proposed changes to tenancy law, this would increase to 63 days’ notice. REINZ is waiting for confirmation on which notice period should be used if this is required during the lockdown period.

Also, travel will be restricted to essential travel only (eg: pharmacy/supermarket trip), so moving house should be deferred until after the Alert Level 4 lockdown restriction is lifted.

If I have a tenancy which is due to start or end during the lockdown can that happen?

Travel will be restricted to essential travel only (eg: pharmacy/supermarket trip), so moving house should be deferred until after the Alert Level 4 lockdown restriction is lifted. But the details and requirements around this situation remain unclear.

The Ministry of Housing & Urban Development’s (HUD’s) guidelines seem to suggest that if tenants must move during the Level 4 Alert lockdown period they should follow the Ministry of Health guidelines and ensure they do not have physical contact with anyone outside their “bubble”.

However, Norwell says this seems to contradict the Level 4 Alert guidance instructing people to stay home and severely limit travel. So, again, REINZ is waiting for clarification from MBIE on what the situation is. They will issue an update on this as soon as they can.

Tenancy Services has now issued some advice on tenants moving properties during the lockdown period. That advice is that moving rental properties is not prohibited under the COVID-19 Response but it is only allowed in extreme circumstances, like someone returning from overseas.

Tenancy Services information and education manager Jennifer Sykes says that if parties do have to move in extreme circumstances, then they must exercise extreme caution, follow Ministry of Health guidelines and follow the Alert System when moving.

“If parties cannot work together to plan a move within the rules set by the Alert System, then the move must not take place.”

Read more: Moving properties during Covid-19 lockdown 

Will the Tenancy Tribunal still be operating during the lockdown period?

New Zealand’s Courts, Tribunals, and the justice system are classed as an essential service.

The Ministry of Justice (MOJ) website says: “Priority justice services will continue to operate during COVID-19 alert level 4. More information will follow soon to explain what these services are and where they will be available from.”

With regards to the Tenancy Tribunal the MoJ website currently says that “more information on these services will be provided shortly”.

However, HUD’s new guidelines say the Tribunal is operating and is working to try and accommodate as many hearings as possible.

“The Tribunal has the power to have hearings on the papers, without attendance from parties, if necessary. The Tribunal may also have hearings by telephone or videoconference. This is to give the Tribunal some flexibility in its proceedings during this period. It will be up to the Tribunal how it manages this flexibility.”

Now that the tourism market is out of action, what should I do with properties I’ve been renting as short-term accommodation via service providers like Airbnb?

Some people have been advertising their former short-term rentals as available for self-isolation periods. There’s a limited market in that though, especially once the country is in lockdown.

Others are rushing to turn their short-term rentals back into long-term rentals. During the lockdown period, there will be constraints around this.

It will also mean that many more rentals come onto the market in some areas, in particular tourism hotspots like Queenstown and Rotorua. With more choices available to tenants, it could impact on rents. In fact, in some areas it already appears to have done so with reports of rentals offering significantly discounted rates.

Cullwick says she thinks landlords should look at their business model and make decisions fast as it may be several years before a holiday market will turn and the tourists will return again.

It’s also worth noting that if a short-term rental is back on the long-term rental market and the Government’s proposed tenancy law reforms go through, it will be much harder to end tenancies. That means it may be harder than you think to return a rental property to the short-term market down the track a bit.

Also, be aware that if you have been renting a property long-term at reduced rates to get tenants in during the Covid-19 crisis, should the tenancy law reform proposals go through you, your ability to increase rents significantly is likely to be restricted.

I’m in the process of buying &/or selling a property will there still be open homes, private viewings and auctions?

Like rental viewings, open homes and private viewings are not considered essential services so they can’t take place in person. But, again, Norwell suggests that they could take place via online virtual tours or video conferencing type software. This technology means people aren't required to leave their homes and no in-person contact will occur.

Auctions are also not considered essential services so they can only take place via the phone or online bidding methods.

What will happen if I settle on a property during the lockdown?

During the lockdown, vendors and purchasers will not be able to move in and out of their houses. Travel will be restricted to essential travel only (eg: pharmacy/supermarket trips).

That means the Auckland District Law Society (ADLS) and the New Zealand Law Society (NZLS) are recommending that the vast majority of settlements should be deferred until after the Alert Level 4 restriction is lifted. Each parties’ lawyers will make appropriate amendments to the contract to facilitate this.

What about if I buy or sell a tenanted property?

The ADLS has considered situations where sales may not involve people leaving their home or any in-person contact. For example, where a property is tenanted and the tenancy will continue after settlement.

They advise that while settlement can occur where no one has to have contact, purchasers and vendors may encounter difficulties when trying to get A&I, mortgage instruction, and other legal forms issued and signed. So, again, deferring settlement may still be the safest option.

The ADLS also strongly recommends that the parties involved seek and follow the advice of their lawyers and not assume that settlement can or will be able to occur. They add that physical property inspections cannot occur when under Level 4 lockdown.

What will happen with some of other issues involved with the business of buying & selling property?

REINZ has issued the following guidelines for these buying & selling issues:

Bridging finance: Vendors/purchasers should talk to their bank or financial services provider in the first instance.

Conditional contracts: These can still be confirmed during lockdown provided no travel/face-to-face meetings are required. If the condition(s) cannot be met during the Alert Level 4 period, then both the buyer and seller should take legal advice and either extend the condition until after the lockdown period or cancel the contract. The parties’ lawyers will make appropriate amendments to the contract to facilitate this.

Pre-settlement inspections: These are unable to take place in person during lockdown. However, if both parties agree, these could take place using video conferencing.

Will Parliament close for the lockdown period and, if so, what will happen with the Government’s tenancy law reform proposals?

Parliament had its final pre-lockdown sitting on Wednesday 25 March. It has now adjourned until April 28. Parliament will resume on April 28 – although the Business Committee, chaired by Speaker Trevor Mallard, has been given authority to adjust sitting dates if, for example, the Alert level remains at level 4 after April 28.

In its last session before adjourning, Parliament discussed emergency legislation to address the Covid-19 crisis, including a motion to establish a special Select Committee to run for four to five weeks at least.

The Epidemic Response committee, which will be chaired by Opposition leader Simon Bridges, is intended to hold to the Government to account in its response to Covid-19. It will meet remotely and will include 11 members in total, six of whom will be Opposition MPs.

Select Committees have deadlines to complete their work on Bills and other business before reporting back to Parliament. But these deadlines have been extended while the COVID-19 alert status is at level 4. Some Select Committees might continue their work remotely using video-conferencing.

Speaker Trevor Mallard has told media there is no point having legislation back in Parliament because the legislative programme has been suspended. He also said that “if Parliament is not sitting, legislation will not be progressed”.

The submission cut-off date for the Government’s proposed tenancy law reforms, which are contained in the Residential Tenancies Amendment Bill, is midnight of March 25.

To date, that has not been changed so landlord advocates are encouraging people to make their submissions on the Bill by the cut-off point. You can make a submission here.

But the progress of the Bill is likely to be affected by the current legislative situation. At this point, the Select Committee is still scheduled to report back on June 22, so interested parties should keep an ear out for any changes or developments on this one.

And remember you can also still sign the NZPIF’s petition against the proposed tenancy law reforms here.

Where can you find updated information on the issues that affect landlords?

If you want to keep tabs on what’s happening yourself here are some useful resources to find out more:

Also, remember the NZPIF and your local property investors associations are there to help you out. Contact them (remotely) if you have more specific questions.

Tags: compliance conduct coronavirus housing market insurance investment Kris Pedersen landlords mortgages NZPIF property investment property management REINZ rental market rents supply tenancy reform Tenancy Services Tenancy Tribunal tenants

« Freeze on rent rises introduced - temporarilyLandlords’ plea: don’t unfairly target us »

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Comments from our readers

On 26 March 2020 at 12:52 am SGinvestor said:
Just a point of clarification. Landlords rights have been weakened by the COVID 19 RTA amendments. Landlords or their family members are not able to move back into their rented properties during the next 3 months - with possibilities of further extension(s) to that. The Government wishes to provide stable housing to tenants during this challenging time.

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AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
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BNZ - Mortgage One 8.69 - - -
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China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
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Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
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Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
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Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.09 6.95
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
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TSB Bank 9.44 7.79 7.55 7.45
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TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
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Westpac Offset 8.64 - - -
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Median 8.64 7.19 7.17 6.65

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