Understanding Residential Tenancies in New Zealand
There are two types of residential tenancies in New Zealand – fixed term tenancies and periodic tenancies. Each comes with its own set of rules which are important to understand. Currently, at Aspire, 87% of our tenancies begin with a 12 month fixed term, and then approx 50% roll onto periodic tenancies, and 50% of landlords and tenants decide to re-fix for another 12 month period. Important changes to the Residential Tenancies Act came into effect on 21 Feb 2021, so if your agreement was signed before this date, a different set of rules will apply.
Fixed-Term Tenancy Agreements
A fixed-term tenancy agreement is a tenancy that is set for a specific period of time. This arrangement offers both the tenant and the landlord the assurance of stability and security for the duration of the agreed-upon term. The significant feature of a fixed-term tenancy is the inclusion of a set end date. For instance, the tenancy could be for six months, one year, or any other agreed-upon period.
If the fixed term is longer than 90 days, then the tenancy automatically becomes a periodic tenancy at the end of the fixed period. A tenancy shorter than 90 days is considered a short-term tenancy, and different rules apply.
Generally, tenants and landlords cannot end fixed term tenancies – so a fixed term tenancy offers both tenants and landlords security and peace of mind.
Key Points:
- If a tenant wants the tenancy to end on the date the fixed-term ends, they must provide 28 days written notice, prior to the end of the term.
- Tenancies signed after 21.02.2021 will automatically become periodic tenancies after the fixed term ends.
- A landlord can only end a tenancy at the end of the fixed term for a few reasons; they or their family are moving into the property, the house has been sold with “vacant possession” as a term of an unconditional sale and purchase agreement, extensive repairs or renovations are needs for which the property is uninhabitable, the property is to be converted into a commercial property, or the property is to be demolished.
- If the above reasons do not apply, then the tenancy will become periodic.
- If one of the above reasons apply and the landlord wants to end the tenancy, then they must provide 63 or 90 days written notice to the tenant, depending on the reason.
- A fixed term tenancy can be ended before the end date if both the tenant and the landlord agree. This agreement must be documented in writing, and the landlord may charge the tenant their reasonable and docemented costs for ending the tenancy early. These costs are often advertising, viewings, and the time taken to carry out these activities.
- If a tenant wishes to end the agreement early, they can reassign the tenancy to another suitable tenant, and the landlord cannot reasonably decline this. However, the landlord can require certain reasonable criteria to be met by the new tenants.
- For more information on Fixed Term agreements, see the Tenancies Services site.
Periodic Tenancy Agreements
A periodic tenancy agreement does not have a fixed end date. Instead, it continues until notice is given to end it. A periodic tenancy usually follows on from a fixed-term agreement, but sometimes both parties decide to start with a periodic tenancy from the beginning. A periodic tenancy agreement offers good flexibility for tenants, who can terminate the tenancy without reason, with 28 days’ notice.
Key Points:
- A periodic tenancy continues indefinitely until one party gives notice to terminate it.
- Generally, a landlord cannot terminate a periodic tenancy, but there are a few set circumstances where they can. It is unlawful for a landlord to end a periodic tenancy, unless the specific circumstances apply.
- The notice period required for termination is 28 days if the tenant is ending the tenancy (this used to be 21 days). Usually, the notice period for a landlord giving notice is 90 days, but for some reasons it’s 63 days. See the Tenancy Services site for more information.
- Written notice is necessary to end a periodic tenancy, and it must be served by either the landlord or the tenant.
- Written notice must include the tenancy address, the date the tenancy will end, reasons for ending the tenancy (if the notice is being given by the landlord), the signature of the party giving the notice.
- Unlike the fixed-term tenancy, there is no need for both parties to agree on ending the tenancy.
Pros And Cons of Each Type of Tenancy
Pros of Fixed Terms
Stability and Security: Fixed-term tenancies offer both landlords and tenants a sense of stability and security. Tenants can plan their living arrangements without worrying about sudden termination, while landlords can ensure a steady rental income for the agreed-upon term.
Predictable Tenancy Period: With a set end date, fixed-term tenancies provide clear timelines for both parties, making it easier to manage future plans and commitments.
Cons of Fixed Terms
Lack of Flexibility: Fixed-term tenancies offer less flexibility compared to periodic tenancies. Tenants may face difficulties in terminating the tenancy early without the landlord’s agreement.
Responsibility to Find New Tenants: If the tenant decides not to renew the tenancy at the end of the fixed term, the landlord must find new tenants, which can be time-consuming and may lead to periods of vacancy.
Pros of Periodic Terms
Flexibility: Periodic tenancies offer greater flexibility for tenants. The tenancy continues until notice is given to end it, allowing tenants to terminate the agreement with a 28-day notice, and landlords to issue termination notices with 90 days’ notice (only under certain circumstances). Landlords often opt for periodic tenancies when they aren’t sure if they are selling their property in the near future or not.
No Fixed End Date: For tenants who are uncertain about their long-term plans, periodic tenancies can provide a sense of freedom, as there is no commitment to a fixed term.
Easier for Tenants to End Tenancy: Unlike fixed-term tenancies, tenants in periodic tenancies can terminate the tenancy with a 28-day written notice, giving them greater flexibility to move out when needed.
Cons of Periodic Terms
Uncertain Tenancy Period: Periodic tenancies lack the predictability of fixed-term agreements, making long-term planning more challenging for both parties.
The choice between a fixed-term tenancy and a periodic tenancy in New Zealand depends on the specific needs and preferences of both landlords and tenants. Fixed-term tenancies offer stability and predictability but may lack the flexibility that periodic tenancies provide. On the other hand, periodic tenancies offer greater freedom to terminate the tenancy with shorter notice periods. Ultimately, understanding the advantages and disadvantages of each type of tenancy can help landlords and tenants make informed decisions that align with their individual circumstances.
At Aspire we will guide you through the process of choosing a tenancy type that works best for you. Contact us now.
