Residential Tenancies Amendment Act 2020: Its place in the unit title ecosystem

On 11 August 2020, substantial reforms to the Residential Tenancies Act 1986 (the Act) became law through the passing of the Residential Tenancies Amendment Act 2020 (the Amendment Act). The changes were made to modernise tenancy laws and align them with the present-day realities of renting, while striking a balance between the rights and obligations of both landlords and tenants.

The Ministry of Housing and Urban Development provides a summary sheet of the changes brought by the Amendment Act. Although the Act relates to tenancy relationships within single dwellings, the Amendment Act brings changes that will inevitably affect neighbouring properties. This will be particularly true in unit title developments. As such, body corporate members, managers, and stakeholders alike should be aware of these changes and plan their affairs accordingly.

This article will discuss provisions that will come into force on 11 February 2021, namely the provisions for ‘minor changes’ and installation of fibre. It will then emphasise the importance of body corporate rules that are up to date, amended lawfully and fit for purpose.

Minor changes

The Act currently prevents tenants from making changes to their properties without their landlords’ consent and landlords could not object to changes ‘unreasonably’. However, it is unclear what would be unreasonable in practice so landlords effectively have the sole discretion to deny changes.

Section 42A(1) will continue to prevent landlords from unreasonably objecting to changes, but s 42B(1) will make it unreasonable for landlords to prohibit ‘minor changes’. Section 42B(2) lists the elements that will form a minor change. The Ministry’s summary sheet provides examples of minor changes such as adding fire alarms, door bells, curtains and baby-proofing. Section 42B(2)(d) will be particularly important to unit title stakeholders. It implies that a change will be ‘more than minor’ if it “compromises the structural integrity, weathertightness or character of any building”.

In unit title developments, such changes will likely affect neighbouring units and potentially the entire development. Section 42A(1) will prohibit landlords from objecting to minor changes, but it is silent on what will happen if the proposed changes are more than minor. The wording of s 42A(1) arguably gives landlords the option to allow any changes that are more than minor. For example, landlords can choose to allow works that require a building consent and make the tenant pay for the application. They can also allow changes to their properties even if they cannot be returned to the same condition once the changes are made. However, as established below, landlords must prohibit changes that will cause a breach of the Building Code.

The Building Code contains the structural and weathertightness standards that need to be achieved by all buildings. The Building Act 2004 requires unit owners to ensure all building work (e.g. renovations, alterations or additions) comply with the Building Code, whether they be to their principal units or common property (as owners through their bodies corporate). Similarly, the Unit Titles Act 2010 requires bodies corporate to repair and maintain common property, and building elements and infrastructure that relate to or serve more than one unit. Owners will be liable to their bodies corporate for repair costs incurred because of any defective works they (or their tenants) undertake. Section 42A(1) must therefore be interpreted consistently with these imposed duties and owners must continue to take steps to ensure compliance.

Installation of fibre

Section 45B(1) will require landlords to allow the installation of fibre if they do not have to pay for the installation and none of the exceptions in s 45B(2) apply. For example, ss 45B(2)(a) and (b) will allow landlords to object to fibre if it would compromise the structural integrity or weathertightness of any building. Similar to s 42A(1), the wording of s 45B(2) will arguably give landlords the option to allow fibre to be installed even if an exception applies. However, the reasoning in the previous section applies; landlords should prohibit work that would breach the Building Code.

Unlike s 42B(2)(d), s 45B(2)(a) will only allow landlords to object to fibre if it would ‘materially’ compromise the weathertightness of any building. This acknowledges that in most cases a fibre installation will require a cable to penetrate the exterior weatherproofing fabric of the building. As long as the affected wall would continue to “prevent the penetration of water that could cause undue dampness, damage to building elements, or both” (performance requirements of Clause E2 of the Building Code), a landlord will unlikely have valid grounds to object.

Body corporate rules

Bodies corporate may choose to amend their operational rules to provide certainty for their members. For example, rules could be amended to identify prohibited changes to unit property. This will avoid issues as to what a minor change is or whether tenants could install fibre, and will allow owners to withhold consent under ss 42B(2)(g) and 45B(2)(c). With the guidance of lawyers and experts, updating the rules will assist bodies corporate in identifying works that will breach the Building Code. It will also give them certainty when recovering costs from owners who consent to non-compliant works.

Conclusion

This article serves to remind stakeholders of unit title developments that the duties imposed by the Building Act and Unit Titles Act still apply despite the changes in the Act. In summary, the new provisions should be interpreted consistently with these duties and owners should only allow tenants to alter their units if the proposed works comply with the Building Code. Bodies corporate can also amend their rules to guide owners on the changes they can allow their tenants to make. 

Alphonso Sales, Solicitor
Grimshaw & Co

Covid-19 lockdown and lease disputes

On 25 March 2020 the Government declared a civil emergency and enforced a Level 4 lockdown. Aside from the unprecedented social impact, shockwaves reverberated throughout businesses operating in New Zealand.

If you owned/operated a business at a leased premise before the lockdown, then almost certainly you have acquired rights when it comes to the payment of rent during the lockdown period.

The standard form Auckland District Law Society lease document (6th edition, 2012) has special provisions relating to “No Access in Emergency”. These were incorporated as a response to the Christchurch Earthquakes and fall out from the Red Zones created following those catastrophes. Put simply, a qualifying lessee will be entitled to withhold a “fair proportion of the rent and outgoings”. Other standard form leases have similar provisions which may be engaged by the circumstances of the lockdown.

On the flipside, if you were the landlord of commercial premises during the lockdown then you will need to carefully consider your approach to the enforcement of rent payments.

Grimshaw & Co is able to provide tailored advice to your situation, after considering the applicable lease documents, and your particular lessor-lessee relationship. We are able to think outside the box to offer a strategy suited to your individual circumstances. This may simply involve an exchange of correspondence, or more formal measures such as mediation, expert determination or quick form arbitration.

Get in touch if you would like to speak to one of our experienced lawyers today.