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Renting out your property creates a business relationship between you and your tenant. As with all business relationships, there must be an agreement in place documenting each party's obligations towards each other. A tenancy agreement is a contract for your tenant to rent your property and must be entered into before the tenant moves in.
Form of Agreement
Although tenancy agreements are required by s13 of the Act to be in writing, s13C suggests that oral tenancy agreements will also be enforceable. "In a very subtle way," says Scotney Williams, Principal of Tenancy Practice Service, "Parliament is saying that everyone should have a written tenancy agreement for evidential purposes but even if the agreement was made orally, it would also be binding on the parties." The policy reason behind s13C seems to be that parties who make oral promises to each other should not be allowed to renege from their words.
Simon Allen, Director of Allen Realty Ltd, believes that it is best to have a written agreement in any event. "Over the years I have seen tenancy agreements on the back of food packaging and tenancies negotiated verbally with no written agreement initially in place. The Residential Tenancies Act will still govern the tenancy... however there are great risks for landlords with no agreement in place as tenants can claim that as there is no agreement." If you currently do not have a written agreement with your tenant, Simon suggests that you meet with your tenant to sign a written tenancy agreement.
At the end of the day, a written tenancy agreement clearly spells out both party's obligations. If you are serious about being a landlord and protecting your property, why wouldn't you have a written agreement?
Substance of Agreement
The Act requires that there be an agreement, preferably in writing, before the start of the tenancy. While it does not prescribe a particular template over another, it does set out the minimum requirements of an agreement.
Under s13A of the Act, a tenancy agreement, at the very least, should contain:
• your full name and contact address;
• your tenant's full name and contact address;
• the address of your rental property;
• the date of the agreement;
• the date of the start of the tenancy;
• your address for service;
• your tenant's address for service;
• whether the tenant is under 18 years old;
• the amount of any bond;
• the rent amount and the frequency of which they are payable;
• the place or bank account number where the rent is to be paid;
• the statement (if applicable) that the tenant shall pay any fee/charges for services rendered by any solicitor/letting agent relating to the grant/assignment of the tenancy;
• a list of chattels provided by you; and
• (for fixed-term tenancies) the date on which the tenancy will terminate.
The Department of Building and Housing has a basic agreement template available for downloading. While this template is accessible to all, there has been some concerns within the industry that the agreement affords landlords little protection for potential (and not uncommon) tenancy issues. In response to these concerns, Tenancy Practice Service has designed its own agreement template which contains a range of relevant landlord protective clauses that are not usually found in other tenancy agreements. To purchase a copy of the TPS Tenancy Agreement email firstname.lastname@example.org.
If you choose to write your own tenancy agreement, be mindful that any clauses that are inconsistent with the Act have no effect. As a landlord, you cannot enforce what is outside the law and under s11(3), your tenant cannot waive any of his rights under the Act.
There are also some other points to be aware of:
• Minors - "Minors are treated differently under the Minor Contracts Act which is imported into the Residential Tenancies Act," says Scotney, "In order to make a tenancy agreement with a minor completely binding, you have to apply to the Tribunal for an order to ratify the agreement. This provides the Tribunal the mechanism to supervise the agreement so that the youth is not being taken advantage of."
• Variations and renewals - Any variation and renewal or tenancy should also be in writing and signed by both parties.
• Change of name or address - If you and your tenant are to change your name, address or address for service during the tenancy then you must inform the other party of the changes within 10 working days. Traditionally these notifications are in writing.
• Successor to landlord or tenant - If someone is to succeed you as the landlord of the property then he must notify your tenant of his name, address and address for service within 10 working days.
• Appointment of agent - If you are overseas for over 21 days, you must appoint a New Zealand based agent to act on your behalf. You must also inform your tenant of the appointment.
• Body corporate rules (for apartment tenancies) - Existing body corporate operational rules that affect the tenant of the premises are considered part of the tenancy agreement.
Your tenancy agreement forms the fabric of the relationship between you and your tenant. A carefully worded tenancy agreement not only protects your property, it will also protect your interests as a landlord down the track.