The German tenancy model gives tenants long-term security, and is often touted by those of leftish views. But they seldom mention German tenants’ obligations.
One of the many frequent complaints about rental housing in New Zealand is the insecurity of tenure. While security of property occupation is one of the many benefits of home ownership, such security is said to be a benefit that many tenants in New Zealand never experience.
The Residential Tenancies Act is currently written with the unspoken implication that renting is a fairly short-term exercise.
The traditional pattern has been that when people leave the parental nest they move into rental accommodation. This rental was often either a bit trashed when they moved in, or youthful parties and rough living soon resulted in it being trashed anyway.
After just a few years of living this sort of nomadic existence most people then partnered up and moved off into their own home.
Reflecting this assumption, right now a landlord can offer either a periodic tenancy (which can be terminated at short notice by either tenant or landlord) or a fixed-term tenancy, which seems to be intended to create a finite tenancy of just one or two years.
No other types of tenancies are permitted under the Act as it is now written.
Last November, associate housing minister Kris Faafoi announced several more proposed changes to the Residential Tenancies Act. Among these was the requirement that all fixed-term tenancy agreements must automatically become periodic tenancy agreements upon expiry unless both tenant and landlord jointly agree.
This proposal would mean that the landlord would be unable to unilaterally terminate the tenancy on expiry. Instead, the tenant would be able to decide to stay in or depart from the tenancy as they desire without any consideration at all for the wishes of the landlord.
An accompanying proposal is to remove the ability for landlords to end a periodic tenancy agreement without stating a specific cause. The legislation would instead provide for a range of justified reasons to end a periodic tenancy, each of which will need to be proved with evidence at a Tenancy Tribunal hearing.
Effectively, if implemented, these two proposals would mean a lifetime tenancy for the tenant unless they could be proved to have failed to meet their obligations under either the Residential Tenancies Act or the Tenancy Agreement.
Can you imagine the uproar if the Government ruled that, when you rent a car from Avis or Hertz, you could either return it on the date specified in the hire agreement or you could chose to keep that car for just as long as you liked?
Fundamental to these proposals is the belief that once a property becomes a residential rental it will stay that way permanently.
Once a rental, always a rental.
There is no consideration for the substantial number of properties that have, in the past, been rented out for a set time period while the owner is temporarily absent. In many cases, the owners of such properties may be away for work, health or other reasons but have the firm intention of returning to and reoccupying the property at some set future time.
We already have some publicity around so-called “ghost houses“. Will the owners of these properties rush to rent them out if they then face the prospect of never being able to move back into these properties themselves?
The New Zealand Property Investors Federation has suggested that landlords, if they wish, could be empowered to offer a third option, a residential tenancy of some 5-10 years duration, thus giving willing tenants security of tenure.
Those tenants who value the security of a long lease could accept this type of tenancy.
In return for such security they would be responsible for payment of all the overheads of the property (such as rates and insurance cover) in addition to their rent, and would also be able to fit out the interior of the property with their own fixtures and fittings at the commencement of the tenancy.
When the tenancy eventually ends, the tenant would then remove all of their own fixtures and fittings and return the interior of the property to the condition it was in the day they started their tenancy.
Thus those tenants who choose this option would be able to decorate and redecorate their rental as and how they like, keep pets as they wish, hang pictures on the walls and even fasten mirrors to the bedroom ceiling should they be so inclined without any reference to or obligations by their landlord.
The landlord would maintain the exterior of the building and any interior maintenance or repair would then be entirely the tenant’s responsibility, relieving the landlord of this burden and giving scope for large-scale professionally run residential rental businesses that could offer a marketable return on investment to the public market.
The German tenancy model
This would be in accord with the German tenancy model, of which the benefits to the tenant are frequently promoted by those of leftish views who, as they do so, seldom mention the obligations that go along with it.
This form of tenancy, which is the norm available to tenants in several countries, once given legislative approval here, may increase the supply of social housing and go some way towards easing our housing crisis.
Representatives of the NZPIF met with Minister Faafoi in December and showed him the ramifications for marginal tenants if his proposed changes are enacted, plus the expected consequential decrease in supply of rentals and the resultant increase in rental prices.
They then outlined this long-term tenancy model and confirmed that the NZPIF would be happy to work with both tenant groups and government officials to refine it and make sure it was balanced and worked for both landlords and tenants.
However, throughout the meeting the Minister said these parts of the RTA Review were not negotiable.
So it would seem that we are about to be stuck with yet another ill-considered tinkering with the current 44-year-old legislation, somewhat along the lines of fitting air-bags to a Morris Minor.
No doubt there will be the usual cries of surprise, horror and claims of exploitation when the usual unforeseen consequences again become so glaring evident in a few years’ time.
Why, oh why, can we not learn from the German tenancy model?