On the 23rd of March 2020 it was announced by the Prime Minister of New Zealand that there would be a freeze on residential rent increases for six months.

The rent freeze that was announced is by definition a freeze on rent increases. It does not mean that tenants will stop paying rent, or have to pay less rent.

The previous Government policy was that rent can be increased once every six months. Landlords who had already notified tenants of a rent increase are no longer able to enact that increase.

Why is there a rent freeze?

The global pandemic has seen many new regulations come in to place in the past two weeks. These are aimed at protecting the health and wellbeing of New Zealanders. The reason that a rent freeze has been put in place is to make sure that tenancies continue. The idea is for people to be at less at risk of being homeless. If rents stay the same it will mean that tenants don’t face additional hardship from rent.

Rent freezes are a great place to start, but some tenancy situations will require a lot more than that. Some landlords are helping out their tenants who might be struggling financially at this time by giving rent relief. Before you decide on adjusting rent payments, it is important to understand the differences between each type of rent relief.

Temporary rent reduction

A temporary reduction in rent means that the landlord and tenant have agreed on a reduced amount of rent, for a certain period of time.

The amount of rent reduction will be decided on a case by case basis, as everyones situation is different. As an example; the landlord might be offering to decrease rent by $60 per week for six weeks.

Any change in the amount of rent paid needs to be done in writing, and signed by both parties. Including the dates that the reduced rent amount will be paid, and for how long is a must. It also needs to specify the date that normal rent will resume.

For tenants a temporary rent reduction means they can reduce one area of their expenses during a time of uncertainty. With this method, landlords can budget ahead to reduce rent by what they can afford within a certain time frame. This option can offer both parties certainty in the short term.

Giving tenants a rent holiday

The best kind of holiday you’ll be able to take for a while! And you don’t even need to pack a suitcase. A rent holiday means that the landlord has offered to stop rent payments for a certain period of time. With this type of rent reduction, rent does not have to be paid back at a later date.

Giving tenants a rent holiday means immediate financial relief for them, with no worry about getting further in to debt. Not every landlord will be able to afford to do this. A recent survey by NZPIF found that due to COVID-19, 59% of landlords had a drop in income. 54% of those had lost all of their income.

If you are giving your tenants a rent holiday, it will be a change to your original tenancy agreement. Therefore, putting all changes in writing, and having both parties sign everything is extremely important.

Alternative rent repayment schedule

An alternative repayment schedule is something commonly used when a tenant falls in to rent arrears. It basically means giving extra time for rent to be paid in full.

With this option, rent payments are deferred in part or in full until a later date. This means that tenants will still be responsible for paying the full amount of rent outlined in their original tenancy agreement.

Speak with your tenants to see what their situation is, and work out if one of these options is suitable for you. You can do combinations of the above as both yours and your tenants situation changes, just make sure you have everything well documented. Before making a decision, we recommend that you seek independent advice.

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