Lawyer to landlords: Beware from this Thursday when new law comes in

Landlords can't use fixed-term tenancies to over-ride an end to no-cause termination from Thursday, a lawyer says.

Harriet Krebs of K3 Legal in Auckland said landlords cannot rely on fixed-term tenancies, or even insist on them, to avoid the new limited termination rights under the new residential tenancy legislation.

The Residential Tenancies Amendment Act 2020 was passed to amend the Residential Tenancy Act 1986 and changes take effect in two phases, the first was last August and the next is on Thursday, they said.

From this Thursday, February 11, crucial changes to the process of terminating tenancies become effective.

"These changes may go further than landlords currently realise," Krebs said.

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Previously, a fixed-term tenancy continued after it expired, converting into a periodic tenancy. But the landlord could give notice to the tenant that the fixed-term lease would terminate on the expiry date by giving notice no later than 21 days before that date, Krebs said.

Under a periodic tenancy, landlords must give 90 days' notice to terminate the tenancy, although they need not present a reason for termination as the law stands now, she said.

That all changes on Thursday. Once the new law is in, a fixed-term tenancy will automatically continue as a periodic tenancy unless one of the following four things happen:

• The parties renew or extend the existing tenancy agreement.

• The parties agree not to continue with the tenancy.

• The tenant gives the landlord written notice of their intention not to continue with the tenancy at least 28 days before the expiry of the term.

• Before the tenancy ends, one of the parties gives a notice of termination on or before it expires. Alternatively, parties can provide a notice that would be acceptable under certain periodic tenancy provisions (but not sale, personal use or development).

Krebs said landlords must from next Thursday give either 63 days' or 90 days' notice, and they must present a reason for termination that is based on "specific statutory reasons as outlined in the provision".

The new process complicates a landlord's position because they can no longer simply end a fixed-term tenancy without reason by giving either a 90-day or the 21-day notice, she said. Nor can they insist that a fixed-term tenancy is followed by another fixed term.

Krebs said: "So while fixed terms are beneficial in providing both parties certainty, it makes life very difficult for landlords who want to terminate fixed-term tenancies, for commercial reasons."

Two scenarios highlighted how matters could play out in future.

"A landlord wants to ensure they can terminate a tenancy if they don't think the tenants are suitable, so they enter into a one-year fixed-term tenancy. When it ends, the tenancy can be terminated and the tenant removed. But that will no longer be possible," she said.

From Thursday, that tenancy must continue as a periodic tenancy after the fixed term expires. To terminate the agreement, the landlord is obliged to provide 90 days' notice, same as previously.

But more crucially, the landlord must also give specific reasons for the termination and those are now limited to a specific set of circumstances.

The second scenario involves a property being sold. The landlord might want it to stay tenanted until settlement, but have the tenancy terminated at that time because the settlement requires vacant possession.

"Until next Thursday, landlords would have been able to agree to a fixed-term tenancy due to expire close to the settlement date and give vacant possession. This will soon no longer be the case," she said.

To ensure that the property is vacated in time, Krebs said that the best option from next Thursday is to strike a periodic tenancy agreement and then give the tenant 90 days' notice before the settlement date. Sale of a property is a reason to give notice to a tenant from next Thursday.

The third phase of tenancy law changes comes in on August 21 and deals with family violence and assault on a landlord, she said.