Holiday homes - How the RTA Act 1986 could affect the good old kiwi bach/crib owner

While most of the changes to the Residential Tenancies Act 1986 that came into effect on 11 February 2021 are being navigated by property professionals, and case law will no doubt add further insight; one of the changes to the RTA has the industry and owners of holiday homes just a little perplexed.

The fact that fixed term tenancies of greater than 90 days automatically roll onto periodic tenancies and landlords can only end them for reasons listed in the RTA (while tenants can end them for any reason), means that owners of holiday homes who have typically rented out their homes during seasonal peaks of tourism (either winter, summer or both) or to seasonal horticultural workers, will need to be fully briefed by their property managers about this risk.

The risk highlights that an owner of a holiday home might not be able to use their bach/crib as it was before the changes to the RTA took effect earlier this year. That is, owners wish to rent out their property for a fixed period of time and know that it will definitely end on the date agreed by both parties at the outset. Under the new RTA changes, the tenant may now choose to stay on longer and the owner give notice to the tenant to end the tenancy, unless one of the legislated reasons applied.

Reasons include: the owner or a member of their family returning to the property to reside as their principal place of residence for at least 90 days; the property being placed on the market or has been sold; or the owner has extensive renovations planned to take place. Outside of the risk of a fixed term tenancy rolling onto a periodic tenancy, there is also the risk of a tenant staying on longer and then wanting to exercise their right of assigning the property.

While the new RTA changes do pose a risk, the good news is that most people who enter into fixed term agreement in these situations do so for a reason, being that their work is also for a fixed period of time and they do not wish to stay longer and rent the property. Tenant selection by property managers has always been critical in any tenancy and now, perhaps a little more so with holiday homes given this quirk of the legislation.

It is important for property managers to brief the owners about the ‘small’ risk of a tenancy continuing on and how that could have an impact on their plans. It is best to have the discussion and record that it has been had in case something in the tenant’s circumstances change and the tenancy continues past the date originally agreed.

Vesna Wells is director and a solicitor for over 20 years who specialises in property management law at Resolve – resolve.org.nz.

Vesna Wells

Director and Solicitor, Resolve