Overview of Residential Tenancies Amendment Act 2019
The Residential Tenancies Amendment
Act 2019 ("RTAA") was passed on 30 July 2019 and came into effect on 27 August
2019. The RTAA addresses key issues that have implications for both landlord
and tenant including: tenant liability for damage, insurance statements,
contamination of premises and unlawful residential premises.
Tenant liability for damage: The RTAA provides that if tenants or their guests
damage a rental property due to their careless behaviour, the tenant will have
to pay for the cost of the damage up to (whichever is the lower) a maximum of
four weeks' rent or the landlord's insurance excess.
This amendment aims to encourage tenants to look after the premises they are
renting, while ensuring they are not responsible for unreasonable repair
costs. On the other hand, it also ensures that landlords are not burdened with
the entire repair cost as a result of their tenant's damage to the premises.
Notwithstanding the above, tenants are still fully responsible for the cost of
intentional damage to the premises.
Insurance statements: Landlords must provide a copy of their insurance details
to the tenant, including whether the property is insured, and if so, what the
excess is. With an existing tenancy (pre 27 August 2019), the tenant can
request this information from the landlord. If the landlord does not provide
the information, or inform tenants of changes to insurance details, the
landlord may be fined with up to $500.
Contamination of premises: Landlords can test for meth contamination, while
the rented premises are occupied, by giving tenants at least 48 hours' notice.
Landlords must notify their tenant that they are testing for meth and the
tenant has the right to see the test results.
Recently there have been discussions regarding meth testing and what the
acceptable standard of contamination (if any) is. The RTAA allows for
regulations (yet to be introduced) for determining the process for testing,
the acceptable contamination level, and the decontamination process. Landlords
will not be able to rent premises that they know are contaminated at an
Unlawful residential premises: Under the RTAA, the definition of 'residential
premises' is amended so that even if a premises cannot be legally lived in,
such as a garage or industrial building, but is lived in or intended to be
lived in, they will still fall within the definition of a residential premises
and accordingly be captured under the RTAA and fall within the jurisdiction of
the Tenancy Tribunal. The Tenancy Tribunal can enforce the RTAA against
landlords who breach the RTAA regardless of whether the premises are suitable
for living in or not.
This change ensures that landlords are providing premises that meet all
requirements relating to buildings and health and safety.
If a landlord provides an unlawful residential premises to their tenant, the
landlord may be liable to pay all or some of the rent back to the tenant, the
tenancy may be terminated, the landlord may be liable to the tenant for
damages, or any other order the Tenancy Tribunal may provide.
Inside this edition
Overview of Residential Tenancies Amendment Act 2019
Points of interest on drug and alcohol testing in the workplace
What is a Calderbank offer, and when it should be used?
How do you enforce land covenants when a
neighbour is in breach?
Importance of insurance in a natural disaster
General consequence when bankruptcy is declared
Statutory entitlement for sick leave
Whether you are planning to become a landlord or tenant, we suggest speaking
to your lawyer to assist with preparing a tenancy agreement in accordance with
the RTAA. If you are an existing landlord or tenant, we suggest you revise the
rights and obligations under the RTAA with your lawyer to ensure your tenancy
arrangement(s) are compliant under the RTAA.
Business trusts: A business trust generally holds assets that are
separate from family and personal assets to protect you from a business
failure or major loss. It also protects your personal or family assets from
potential creditors. A common scenario is to have your business trust own
shares in your private company, which allows dividends to flow through the
business trust and to the beneficiaries. A business trust provides for
succession planning if a business partner dies or becomes incapacitated, and
also may result in tax advantages.
Charitable trusts: A charitable
trust as the name implies, is a formal arrangement set up for a charitable
purpose. This can relate to relieving poverty, advancing education, religion
or any other matter that benefits the community. The benefit of a charitable
trust is that as a donor, you can provide long-lasting contributions that
continue after your lifetime. Furthermore, registering a charitable trust with
the Charities Commission can provide tax advantages.
Whether a trust is suitable for your needs is best determined by a lawyer.
This article is simply an overview of the more general points about the common
trust structures. Each case is different as it depends on the purpose of the
trust. It is advisable to discuss your overall asset planning goals, financial
and relationship situations with your lawyer who can also liaise with your
accountant (if applicable) to determine the best course of action for you.
Drugs and alcohol
can make an employee less effective, struggle to concentrate, careless, unable
to make rational decisions, amongst other behaviour changes, but most
importantly of all a hazard to themselves and other employees.
Employers have an obligation to take reasonable measures to provide a work
environment for their employees and others, that minimizes the hazards at
What is a hazard and what is reasonable?: As defined at clause 16 of The
Health and Safety at Work Act 2015 ("HSW") a "hazard includes a person's
behaviour where that behaviour has the potential to cause death, injury, or
illness to a person (whether or not that behaviour results from physical or
mental fatigue, drugs, alcohol, traumatic shock, or another temporary
condition that affects a person's behaviour)".
In the case NZ Amalgamated Engineering Printing and Manufacturing Union
Incorporated & Ors v Air New Zealand Limited & Ors (2004) provided some
factors to take into consideration what reasonable is, such as:
* Random testing is considered reasonable if employees work in a role where
there could be a risk of serious harm from being under the influence of drugs
* The test results need to be assessed to a scientific standard and preferably
a medical trained individual interpret the results.
* The employee must give their consent to being tested, if the employee
refuses to give consent this refusal will be taken into consideration during
the investigation and trigger a disciplinary investigation.
* The company policy should handle employees' personal information with
* Education and avoidance of use or abuse of substances should be the main
goal of the policy.
* Rehabilitation should be the first remedy for an employee when a test is
The starting point for drug and alcohol testing in the workplace is for
employers and employees to be on the same page. This is achieved by the
employer having relevant documents (such as a specific policy relating to drug
and alcohol testing) in place and every employee is aware of these documents;
what is expected of them, how testing will be conducted, consequences of
testing positive, etc.
Act 1993 and Drug and Alcohol Testing: Drug testing involves the collection,
storage and use of personal information. The Privacy Act allows employers to
collect personal information but only for a lawful purpose, which relates to
their work, and the collection must be necessary for that purpose.
As touched on earlier, this is why the information gathered (e.g. a sample)
must be collected lawfully. The collection must be seen as reasonable and must
not be intrusive or biased on the employee. With that said the employer's
obligation to provide a safe and healthy work environment under the HSW will
likely amount to a lawful purpose for information gathered.
Drug and alcohol testing in the workplace remains a contentious topic,
nevertheless drug and alcohol testing will remain in the workplace for the
foreseeable future. As drug and alcohol testing is looked at on a case-to-case
bases, it is recommended that you (as the employee or as the employer) contact
your lawyer to discuss your position.
A Calderbank offer, otherwise known as a
"Without Prejudice Save as to Costs" offer, is a tactic that can be used to
settle a dispute for a lower amount and avoid going to a court trial.
This tactic is named after a case from 1975 in the English Court of Appeal,
between Mr and Mrs Calderbank.
Calderbank offer is an offer made by one party to the other side of a dispute.
It puts the other side on notice that if the dispute goes before a court, and
the outcome is less favourable to the other side than the Calderbank offer
being made to them, the party making the offer is entitled to more of their
costs of the trial process being recovered, as the court may take into account
the offer when they decide on the costs awarded.
It was decided in the 1975 Calderbank v Calderbank case that the offer, made
by Mrs Calderbank before the dispute proceeded to the courts, showed she had a
willingness to settle the dispute. If Mr Calderbank had accepted the offer
that was made to him before trial, then he would have actually been in a
better position as the judgment was less favourable to him than Mrs
Calderbank's offer, and neither party would have had to go through the court
process. It was also held by the court that Mrs Calderbank was entitled to her
costs as from the date that she made her willingness to settle known.
Either side of a dispute can make a Calderbank offer. If the defender of a
dispute offers to settle out of court but for a lower amount than is being
pursued, and the plaintiff rejects the offer, this Calderbank offer may be
taken into account by the Judge when costs are being awarded. The plaintiff
may be successful in their claim against the defendant in court, but for a
lower amount than what the defendant offered them to settle out of court in
their Calderbank offer. In this situation, the Judge can reduce the costs that
are payable by the defendant to the plaintiff, leaving the plaintiff with an
even lower amount in the end than first sought.
In the same dispute, it may be the plaintiff that makes a Calderbank offer to
the defendant to accept to settle out of court for a lesser amount than they
were originally claiming. If the defendant thinks they may get a better
outcome at trial and refuses this offer, and the plaintiff is awarded a
greater amount at trial than their Calderbank offer, the plaintiff may be able
to seek increased costs from the defendant.
It is important to weigh up carefully whether to make or to reject a
Calderbank offer. It is important to work out if you would want to make such
an offer, and when you would make it, as costs are awarded from the date a
Calderbank offer is refused. It is equally important to consider at what point
you would want to refuse an offer, and similarly when you would be prepared to
accept it and settle the matter without proceeding to court.
Land covenants place rights and
obligations on the land/property you own. It is an instrument that is
registered on a record of title for a property that runs with the land, which
creates a legal obligation to do, or not to do, something in respect of the
Such restrictions can relate to anything from the colour of your house or what
you use the property for; to where you put your rubbish or park your vehicle.
These restrictions are commonly found in new suburban subdivisions to maintain
the quality of the neighbourhood.
If you, or your neighbour, breach one of the covenants, steps can be taken to
enforce and rectify the breach.
In recent times it has become more common to put a time limit on covenants.
For example, if you are required to only use certain materials for building
your home, in 30 to 40 years those materials may be out of date and the
covenant more burdensome than beneficial. In some cases, covenants are no
longer enforceable as the current law no longer supports them.
Processes to enforce a breach will largely depend on what is written in each
individual covenant instrument.
Common practice is to give written notice to your neighbour specifying the
breach, the work to be undertaken, whether you believe contractors or workmen
need to enter the land to remedy the breach, and the consequences that will
follow should the notice not be adhered to.
Under section 310 of the Property Law Act 2007, your neighbour will have 15
working days to respond to your notice. If they do not respond in this
timeframe, then it can be treated as them agreeing with what was written.
You can then take action to rectify the breach and pass all reasonable costs
on to your neighbour. However, your neighbour is entitled to respond with a
cross-notice if they believe there has been no breach or they are not liable.
must not take action to remedy the breach before the 15 working day timeframe
has expired, nor if a dispute arises between you. Should you choose to take
action anyway, your neighbour will not be liable to contribute to the costs.
Should you be unable to resolve a dispute, an application can be made to the
court for resolution.
The court can make an order on:
* the existence/enforceability of the covenant;
* whether any work is required and if so, the nature and extent of any
* the reasonable and proper cost of any required work;
* who shall pay the cost of any required work;
* the time any required work is to be undertaken;
* the entry onto any land for the purpose of doing any required work; and/or
* any other matters arising.
Any order a court makes is binding on all parties.
If you are purchasing a property with land covenants it is important you
understand the implications of this before completing the purchase. If you own
land subject to covenants it is important you know what these are and your
avenues for enforcing any breach. In any event, you should consult your lawyer
to review any land covenants registered against your property's record of
In light of recent events like the
Christchurch earthquakes, and the Australian bushfires and flooding, it really
does hammer home the importance of having insurance in place for your
residential and commercial properties. As lawyers, we see the repercussions
for clients who face the devastating reality that they were not sufficiently
insured for such events.
many people are aware that specified insurance can be required in areas of
high risk of natural disasters. In particular, in areas such as Christchurch,
we see an increased requirement from lenders that the insurance provider has
earthquake cover specifically noted on the policy, as natural disaster cover
is not specific enough. Furthermore, provisions can be made in the sale and
purchase of homes for the potential to assign any Earth Quake Commission ("EQC")
claims or ongoing works applicable to that home. Thus, providing the benefit
of a claim to the purchaser.
If you own private insurance that includes fire cover, when a natural disaster
strikes you can also be entitled to insurance cover under an EQC claim. As of
1 July 2019, EQC has increased its coverage from $100,000 plus GST to $150,000
plus GST in accordance with the 2019 amendments to the Earthquake Commission
Act 1993 ("the Act"). As of July 2020, the Act will also seek to phase out any
EQC cover for contents damage as a result of natural disaster. The Act has
instead allowed for the increase in the total house cover, as noted above. For
those without private insurance though, this option is not available.
As part of the 2019 changes to the Act, we have also seen an extension of the
time frames for someone to make a claim, whereby as of February 2019, a claim
may be lodged within two years of any incident, as opposed to the previous
two-month period.It must also be noted that an EQC claim can be limited in its
scope, whereby a private insurer will need to pick up some of the other costs.
Most insurers include this as an excess in your insurance policy, but it can
cover damages to items such as the driveway, swimming pool and fences which an
EQC claim will not cover.
As the saying goes, "you don't know you need it, until you need it", it is
much the same for insurance. As most home owners in NZ have lending over their
property, they will already have some form of insurance coverage to protect
them as a requirement of their lenders. However, the vulnerable can be those
who own their homes outright and are not necessarily required to hold
If we can take anything from the devastating disasters like the Christchurch
earthquakes and bushfires in Australia, a natural disaster can be
unpredictable and devastating in nature. Ensuring that not only do you have
cover for the property in question, but you are also confirming that you will
be entitled to further EQC cover, is a vital move for any home owner or
business owner to minimise the impact of a disaster.
We would always suggest that insurance is a vital consideration of owning any
property or home. In particular, if you live in an area that is known to be at
risk of a natural disaster then the idea of insurance and potentially choosing
further natural disaster add-ons to your insurance policy should be a very
General consequence when bankruptcy is
It is always a difficult time when you find that you are earning 99c but
regularly spending $1.00. If you cannot turn the position around, personal
bankruptcy being declared against you looms as a real consequence.
Filing for bankruptcy itself is the most serious alternative when you are in
financial difficulties, and the whole situation is stressful, so sharing the
problem with your lawyer in the first instance can help clarify the best way
The general consequences are significant. In brief, any proceedings commenced
against you to recover debts are halted, and some are actually cancelled.
However, the personal cost is high. Certain debts will still remain payable,
and any assets you had recently transferred within a two year window may be
able to be clawed back from the recipient.
While you are able to retain essential personal items, the remainder is sold.
Your credit rating will be affected, and you cannot buy or own significant
assets for a period of three years. After this three year period you are able
to be discharged from the bankruptcy.
The office of the Official Assignee can be approached directly regarding your
bankruptcy, but there is no downside to asking your lawyer first to review the
options with you.
Statutory entitlement for sick leave
We all get sick from time to time, and New Zealand law in
the form of the Holidays Act 2003 recognises that an employee will be paid for
some of those times, and rightly so.
As a general rule, the minimum sick leave available is five days per year.
Employees receive another five days sick leave for each twelve month period
following on from that. This entitlement should be enshrined in an employee's
agreement with their employer.
A prerequisite to using sick leave is that an employee must have been in the
same job for a continuous period of six months. There are also a minimum
number of hours each week that underpin the entitlement.
Sick leave is available if an employee is sick or injured, or when a spouse or
partner who depends on the employee is sick or injured. The availability of
ACC is relevant when injuries occur.
Longer sick leave periods can be negotiated with an employer. Any unclaimed
leave can be carried over from year to year, but accumulation options are to
be clarified on a case-by-case basis.
But who wants to be sick!
If you have any questions about the newsletter items,
please contact me, I am here to help.
Scannell & Co - 122
Queen Street East, Hastings
(06) 876 6699 or (021) 439 567 Fax: (06) 876 4114 Email:
information in this newsletter is to the best of the authors' knowledge true
and accurate. No
liability is assumed by the authors, or publishers, for any losses suffered
by any person relying directly or indirectly upon this newsletter. It
is recommended that clients should consult S J Scannell & Co before
acting upon this information.
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