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Investor tax burden already affecting rental property

The removal of mortgage interest as a tax deductible expense for property investors with older existing property is already starting to affect rental property.

Tuesday, January 10th 2023, 10:00AM 2 Comments

by Sally Lindsay

Property Investors Federation executive committee member Tim Horsbrugh told Parliament’s Finance and Expenditure Committee at the end of last year although the Government’s objective of removing interest deductibility was to improve affordability for first home buyers by knocking back investor demand for existing housing this has not happened.

“Instead, the shortage of rental property has been made worse, leading to higher levels of homelessness, reduced availability of rental property and higher rents.”

He pointed out by allowing large build-to-rent developers, investors and operators to claim mortgage interest as a deductible expense if they allow tenancies of 10 years, this flies in the face of private investors being able to do the same through a plan the federation has already put to the Government and other political parties.

The plan to fix the rental crisis includes a new long-term tenancy option in addition to the existing periodic and fixed-term options available. This option would then be more widely available to tenants wanting security of tenure.

The new tenancy would be for a minimum of three years allowing the tenant to decorate the property as of right and making gardens as long as the property is returned to its original state when the tenant leaves. There will be no obligation for the landlords to provide floor coverings, curtains, light fittings or appliances, including stoves in return for a long-term tenancy, landlords can charge a bond of 12 weeks and tenants must pay all insurance premiums, rates, and the costs (both fixed and variable) of services to the property (including water).

The suggested terms of the new tenancy option are:

  • tenancy term negotiable between the parties, but must be for a minimum of three years;
  • tenants may give three months’ notice to end the tenancy;
  • landlords can only end the tenancy for tenant default for rent arrears, damage to the property, illegal activity, antisocial behaviour, property uninhabitable or subject to mortgagee sale. (Landlords cannot end the tenancy to move into or sell the property with a requirement for the tenant to vacate).
  • if ending a tenancy for antisocial behaviour or disturbing neighbours, landlords must issue a warning notice describing the antisocial behaviour/ neighbour disturbance (without having to name effected neighbours), making it clear that they will end the tenancy if the behaviour/disturbance continues. If the behaviour/disturbance continues, landlords can issue a 90-day notice to end the tenancy;
  • tenants can decorate the property as of right, but must return it to exactly the same state it was provided in, with no allowance for wear-and-tear, unless otherwise agreed to by the landlord;
  • if practical, tenants can make gardens as of right, but must return it to the state it was provided in at the end of the tenancy, unless agreed to by the landlord;
  • landlords can charge a bond equivalent to up to twelve weeks rent;
  • there is no obligation for the landlord to provide floor coverings, curtains, light fittings or appliances, including stoves. Walls are painted white at the commencement of the tenancy;
  • tenants are responsible for the payment of all insurance premiums, rates, and the costs (both fixed and variable) of services to the property (including water); and
  • tenants can only assign their lease with the landlords’ consent or on application to the Tenancy Tribunal on grounds of hardship. Hardship provisions also apply to the landlord. Landlords can prohibit tenants subletting the property.

This tenancy will appeal to tenants who want a rental that is more like their own property while providing compensation to landlord’s for giving up their ability to terminate the tenancy.

Tags: landlords

« Regulations on family violence and assaults at tenancies explainedTribunal decisions interfering with landlords rents »

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Comments from our readers

On 9 January 2023 at 9:54 pm Mark Berghan said:
Not a bad plan, but a bit over complicated. And why would landlord not be obliged to provide floor coverings, light fittings, fixed heating and a stove? These are not things a tenant can usually take with them when they move from a previous rental, just does not seem logical or practicable e.g. how would landlord ensure waterproofing in wet areas without fixed floor coverings? And the property insurance and rates should always stay with the landlord; I can see a landlord getting into a big hole where a tenant gets into arrears on these and then does a runner.
On 14 January 2023 at 9:19 pm two cents said:
Being chained to a property long term with all the responsibilities and expenses of ownership...what are the perks exactly?

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.49 7.35
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 6.89 6.75
ASB Bank 8.64 7.39 6.89 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - ▼7.29 ▼6.85 ▼6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 ▼7.89 ▼7.45 ▼7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.15 - -
Co-operative Bank - Owner Occ 8.40 7.35 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.85 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
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 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 6.89 6.75
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.39 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.55 7.55
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.77

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