Bach owners denied use of own property under tenancy law

An already tight rental market has left more tenants without homes as bach owners grapple with new Government rules over how they use their property.

A law change in February is having a knock-on effect on workers, contractors and business owners.

“It’s the worst it’s ever been,” letting agent Kylie Tohaia of Whangamata Real Estate said.

When she does get rental properties, she said there are nine or 10 prospective tenants on her books – “painters, teachers, carers and groundskeepers” – whose applications aren’t successful.

“There’s a massive shortage. It’s a whole lot of people in the same boat, with good jobs and children.

“When we had those two rentals come up, I was inundated,” she said.

From February 11, 2021, landlords can no longer end a periodic tenancy without cause.

It has prevented landlords from taking back their property for use as a holiday home unless moving in as their primary place of residence for a minimum of 90 days.

Kylie said unsurprisingly, some landlords didn’t like the idea they could not use their holiday home as a bach potentially in future.

“Lots of people may want to rent their [holiday] home out for a couple of years but they can’t come back unless they need it and it becomes their place of residence for a minimum 90 days,” says Kylie.

Steve Watson, MBIE national manager tenancy compliance and investigations, said Tenancy Services acknowledged this was a new area of rental law.

He said operational policy regarding the use of the ‘commercial premises’ termination ground in the RTAA is under development in conjunction with Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development.

Depending on the circumstances of the alleged breach, a landlord acting to terminate a tenancy without grounds may face exemplary damages of up to $6500.

Where landlords want to convert a tenanted rental property into a commercial holiday home or for similar commercial short-term accommodation, they may be able to use the ‘commercial premises’ termination ground. This termination ground requires that the premises be used as commercial premises for at least 90 days.

Coromandel MP Scott Simpson said he suspected any tourist destination would likely be feeling the same impacts of the law change.

“Where there are high numbers of holiday homes, it is an issue.

“What this change does is it means an already tight rental market is reduced further and it has a knock-on effect to contractors and business owners.

“There’s an enormous lack of rental properties in the whole Coromandel, not just Whangamata, and this law change makes it less desirable for a landlord to want to let their property, so they won’t,” he said.

“We’ve got this kind of weird market where there’s no shortage of dwellings, many that are unoccupied most of the year, but the owners of those aren’t going to want to make them available even for shorter rental agreements because they will be worried about not being able to exit the tenant in the future.”

Rental agent Kylie said it was hard for tenants being asked to vacate a holiday home.

“Lots of people may want to rent their [holiday] home out for a couple of years but they can’t come back unless they need it and it becomes their place of residence for a minimum 90 days.”

It had become riskier and more costly for landlords to rent out their property – particularly if they were baches and the owner was overseas.

These owners, by law, had to have a company manage the rental for them.

She agreed that some law changes were positive if it meant nobody had to live in mouldy homes, but said none of the rentals on the company’s books were unhealthy as the properties were managed with quarterly inspection reports sent to landlords.

Property managers around the country had different problems, such as in Dunedin which reported an oversupply, compared to Whangamata and other Coromandel towns being impacted by the new law applying to baches.

They were very limited by law on what they could divulge about potential tenants to landlords, under privacy laws.

“In Whangamata, they have either sold up, moved back in or decided with the law changes they want their holiday home back.”

Simpson had spoken to hospitality businesses in Whangamata that asked prospective staff first and foremost if they had permanent accommodation in town.

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