Residential tenancies – what is the Government proposing and how might these changes affect you as a landlord?
During the Labour Government’s six years in power, numerous changes were made to property taxation and rental accommodations – many of which have been suggested as “anti-landlord”. The National Government campaigned on the promise of drastic legislative changes in these areas looking to redefine the dynamics between landlord and tenant.
The first changes have already been made, with tax settings recently been altered to:
- Enable landlords to claim back 80% of the interest they pay as a business expense for their rental properties from 1 April 2024. This increases to 100% of the interest expense from 1 April 2025.
- Restore the brightline period to the original 2-year period for residential properties that are sold/transferred under an agreement signed on or after 1 July 2024.
Anticipated changes to residential tenancies, as part of the National-Act coalition agreement, include:
- Reintroducing 90-day ‘no cause’ terminations for periodic tenancies, allowing landlords to end a periodic tenancy without requiring a specific reason. Periodic tenancies have no fixed end date in the tenancy agreement.
- Returning landlords’ notice periods for ending a periodic tenancy to 42 days where:
- they want to move themselves or a family member into the property, or
- the tenancy agreement notes the property is usually used to house employees, and they want to move an employee into the property, or
- where the property is subject to an unconditional agreement for sale requiring vacant possession.
- Returning tenants’ notice period for ending a periodic tenancy to 21 days.
- Reintroducing landlords’ ability to give notice to end a fixed-term tenancy at the end of the term without a specific reason.
- Introducing a ‘pet bond’ – to make it easier for pet owners to find rentals by paying a larger up-front bond (suggested as being an additional 2 weeks rent).
A Bill is expected to be introduced to Parliament shortly, and if passed, these anticipated changes outlined above should come into effect in early 2025. It is worth noting that the introduction and passing into law of the proposed changes is not guaranteed and will depend on Government work and legislative priorities. Until the Bill is introduced and passed, residential landlords and tenants should follow existing laws regarding notice periods, terminations, and other obligations.
Key Takeaways
Key takeaways for investment property owners are:
- Properties that don’t fall under the ‘main home’ exemption are now subject to a 2 year bright line period (previously 10 years).
- Interest paid on investment properties may be claimed back as a business expense (accounting advice is recommended).
- There are changes proposed for tenancy laws, however until these are passed into law (a Bill is yet to be introduced to the House), current tenancy laws should be followed.
If you have any questions about residential tenancies or need assistance with an investment property, get in touch with a member of our property law team.
Special thanks to Special Counsel Jo Giboney and Associate Victoria Cole for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
