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Long term leases beneficial but some downsides

Long term leases beneficial but some downsides.

“We welcome the aim of the Minister for Building and Construction to ensure that the proposed long-term leases are a win-win situation for both landlords and tenants. But we can see some downsides and are keen to have these addressed for the members we represent,” said Martin Evans, President of the New Zealand Property Investors’ Federation.

Mr Evans said that many tenants are very pleased to be offered a fixed term tenancy to guarantee their tenure for a period of time. However, when this period is extended to 15-33 years, as the Minster has asked the Department of Building and Construction to investigate, clarification is required regarding how these will operate in practice. For example, what powers will a landlord have to evict a tenant if the tenant fails to pay the rent, breaches the tenancy, upsets neighbours or causes damage during a long term lease of this nature? A tenant can end any tenancy at any time by stopping rent payments and a landlord similarly needs to be able to end a tenancy if the situation becomes unacceptable.

“We will need to look at exactly how workable such leasing arrangements are in other countries, but in principle, long term leases sound like an idea well worth exploring,” said Mr Evans.

The Minister is quoted as saying in his press release on Monday that long-term leases may be tradeable. “Our members would like to know the procedure for determining the value of such leases and what happens if a tenant decides to sell their lease to another tenant,” said Mr Evans. “Another side of the question is how difficult will it be for a landlord to sell a property occupied by a long-term tenant.”

It was suggested that tenants with long-term leases may welcome the opportunity to take over the fit-out and capital developments of the interior of the space they are renting without any cost to landlords, but landlords will want to know that they have the ability to control the extent of these. Landlords will also want to know how the Government will regulate maintenance schedules for these properties.

“We have already had talks regarding long-term tenancies with the Department of Building and Housing and the Government team amending the RTA. However, we will be seeking a time to have further discussion on these matters with the Minister as soon as possible to ensure that the new model delivers the desired benefits for both tenants and landlords,” said Mr Evans. “We will certainly work cooperatively with the Minister in looking at and investigating these issues.”


Note for Editors

The New Zealand Property Investors’ Federation was established in 1983 and is the national body representing 4,700 property investors. There are 20 Property Investors’ Associations throughout the country affiliated to the NZPIF. These Associations have regular meetings with guest speakers on a variety of subjects related to property investment and run educational seminars for their members.


ENDS

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