Fixed term tenancies notice must be given to end.

Posted on Tuesday, September 27 2011

FIXED TERM TENANCIES – NOTICE MUST BE GIVEN TO END

Prior to the 2010 Residential Tenancies Act amendments, at the end of a fixed term, the tenants were expected to move out. If they didn’t, there would be a limbo period of 90 days where either party could enforce the end of the fixed term. i.e. the landlord could demand the tenant moved without notice (or obtain a possession order) and the tenant could up and leave without notice. If neither party acted past the 90 day point, the tenancy would roll into a periodic tenancy whereby landlords would be required to give 90 days notice as standard or 42 days notice if the owner was moving into the property or purchasers were moving into the property.

The amended Residential tenancies Act has significantly changed this aspect of the act to requiring one party to give written notice anytime from the 90th day prior to the end of the fixed term tenancy to the 21st day prior to the end of the fixed term tenancy.

The parties can agree to extend the tenancy or enter into a new tenancy agreement, however if agreement is not reached and written notice is not provided, the tenancy automatically rolls onto a periodic tenancy. Therefore tenants would be required to give 21 days or landlords must give 90 days notice as standard or 42 days notice if the owner is moving into the property or purchasers were moving into the property.

Then throw into the mix the requirement to give 60 days notice to increase rent. Although yet to be tested in the tribunal, you would expect that there will be some issues around rent increases when moving from one fixed term to another or simply extending a fixed term tenancy, especially when a specific date of rent increase is provided for in the original tenancy agreement (Provision C of Schedule 1 in the act).

How should you tackle renewing a fixed term tenancy? If an extended tenancy were to have the same terms and conditions as the previous tenancy and therefore only the end date changes you would expect that the rent could not be increased again at the time of extension if the original tenancy set out the actual date the rent would increase.

To avoid any issues here, it would be more prudent to enter into a new tenancy rather than extend the original tenancy. Note this would not be an issue if the rent increase clause chosen stated that rent could be increased with 60 days notice or on a set day each year with prior notice (Provision A or B of Schedule 1 in the act).

Speak to the tenants to find out if they looking to renew allowing plenty of time prior to 60 days before the end of the tenancy.
If tenants would like to renew then providing the paperwork is completed prior to the 60 days before the end of the tenancy, you would expect that an increase in rent will not cause any technical issues.
If tenants are unsure then explain the requirement to provide notice of rent increases as well as notice to end fixed term tenancies.
Issue the notice to end the fixed term tenancy.
Any discussions with the tenants should now relate to a new tenancy, however to cover all your bases you could state in your notice to end the fixed term that the property will be available to relet, what the new rent will be and that they would be welcome to re-apply.

Allowing indecisive tenants to drag out time could result in you not providing adequate notice the rent is going to increase or the tenancy is going to end.

Tania and Kyle Elmer
Directors
Mana Property Management Ltd

www.ManaProperty.co.nz

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Expert's Bio

Tania & Kyle Elmer

Tania & Kyle Elmer are active investors with a large portfolio of properties in Dunedin and Central Otago and mentor investors in the techniques used to grow wealth through property investing. Kyle and Tania are Co-directors of the Leading Property Mangers of New Zealand (LPMNZ). Kyle is a past president of the Otago Property Investors Association (OPIA). They founded Mana Property Management Ltd to provide specialist management services to Discerning Landlords dealing in the quality end of the market. www.ManaProperty.co.nz | Find Kyle on Google+

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