Landlords and tenants both have things they need to consider when looking at renting a written off house, particularly as some of the responsibilities of each party under the Residential Tenancies Act 1986 and other legislation cannot be contracted out of.
As a landlord, you have certain responsibilities. You must provide and maintain the property in a reasonable state of repair, having regard to the age and character of the property. However, the period that a house is likely to remain habitable may also be taken into account when determining how well maintained the property must be.
Additionally, you must comply with all requirements relating to health and safety. This includes the provision of adequate drinking water, together with adequate toilet and shower facilities. Also, you must provide an adequate waste removal system. Many agreements for sale and purchase of written off properties will exclude the seller from having to provide these services in a sale, but you will not be able to contract out of these requirements with any tenants.
Failure to comply with these responsibilities is unlawful. A Wellington landlord was recently found to have misled tenants about the safety of the property and its earthquake risks. The landlord in that case was ordered to pay compensation to the tenants. Be honest with your tenants about the condition of the property.
If you are considering renting the property, we recommend that you first obtain a structural engineer's report to confirm that the property is safe. Additionally, any works required to make the house weathertight should be completed before it is rented.
Insurance is another issue. As the landlord, you are unlikely to be able to obtain insurance for the written off house itself, but you are probably also unlikely to be able to get the usual landlord's insurance covering loss of rents and damage to the property by the tenant. If the property is dangerous and causes damage to the tenant or their possessions, without insurance you may become personally liable for any such damage.
The lack of insurance for the house may also affect the tenant's ability to obtain contents insurance, so you should advise your tenant that the property is uninsured. As well as affecting the tenant's ability to insure their own property, you may not be able to recover any loss from your tenant's insurer where your tenant causes damage to the property, as liability for such damage would normally be covered by their contents insurance.
The Ministry of Business, Innovation and Employment (formerly the Department of Building and Housing) publishes suburb specific market rent. We recommend that you look at this information when setting the rent to ensure it is in line with the market rent. If the tenant disputes the rental within the first three months of the tenancy starting, they may apply to the Tenancy Tribunal to reduce the rent if it's considered above the market rent by a substantial amount.
Tenants are in a difficult position in Canterbury as there is high demand for rental properties, and many tenants must feel that they don't have a lot of choices if they want to stay in a particular area.
However, at a minimum, you need to check that the house is watertight, able to be heated during the winter months, and generally safe to be occupied. You also need to satisfy yourself that the damage will not affect your enjoyment of the property or cause harm to any people living in the property, or their guests. You do have rights if the property is not safe and sanitary, regardless of what any tenancy agreement might say.
If you are a tenant, make sure you can get contents insurance if the house itself is not insured. As already noted, if you don't have insurance, as well as not having cover to loss or damage to your property, you will not have cover for any damage that you or your property causes to another person or their property. This includes the uninsured house in which you are living.
Ideally you should have a clear, written agreement as to the responsibility for maintenance, provision for what happens if another earthquake significantly worsens the damage to the property, and agreement as to what you may be liable for if you cause damage to the landlord's property.
You always have basic rights under a tenancy agreement. If you are concerned that those rights are not being met, contact your lawyer for more information about your rights and how you can ensure your rights are being met.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.