Alongside the changes to employment law, the National-ACT-NZ First coalition is bringing in major changes to the property sector.
Among the most significant and those likely to affect many of our clients are:
- Tenancy and rental market adjustments
- The Bright-line test changes
TENANCY AND RENTAL MARKET ADJUSTMENTS
DEDUCTIBILITY OF MORTGAGE INTEREST FOR LANDLORDS
From 1 April 2024, landlords may claim back 80% of the interest they pay as a business expense for their rental properties. The government also announced that next year from 1 April 2025, this deductibility will increase to 100%.
NOTICE PERIODS
At present, month-to-month and periodic tenancy laws provide for tenants to give at least 28 days’ notice to vacate, and for the most common situations, landlords must give tenants at least 63 days’ notice if the landlord or a family member will be moving into the property to live there (within 90 days after the termination date); and at least 90 days if they intend;
- to carry out major renovations; or
- to develop the property ; or
- to sell the property
The changes will mean these notice periods will change to 21 days for tenants and 42 days for landlords.
PET BONDS
New laws in relation to bonds for having pets on the property are being promulgated. Property owners will be able to request more bond money than the usual 4 weeks to cover potential damage from pets. Details of the new scheme and how it will be administered are yet to be made available.
REINSTATING 90-DAY NO-CAUSE EVICTIONS:
In 2020 Labour introduced changes requiring landlords to give tenants a reason when they were told to leave a rented property. The new government is restoring “no-cause eviction” and landlords will no longer have to provide their tenants with an explanation as to why they have been evicted, if they give tenants 90 days’ notice to vacate.
As at the publication of this newsletter we are waiting for details as to when the above changes are going to be introduced.
BRIGHT-LINE TEST
Currently, the bright-line rules, which determine if tax is owed on property sales within a specified period, apply to properties bought after March 27, 2021, and sold within five years for
new builds or within 10 years for other properties. This period starts from the transfer date until you enter a binding sale agreement, except for off-plan purchases.
There are exceptions to the bright-line rules which are:
- If the property was your main residence; or
- If other tax rules govern the property sale; or
- If the property is farmland or business premises.
Effective July 1, 2024, the bright-line period reduces to two years for properties sold after this date. However, some details are still pending confirmation, such as:
- Whether trust transfers trigger the bright-line rules; and
- The calculation start date of the bright-line period; and
- The exemption for the ‘main home’.
CONCLUSION
These changes will have a significant impact on tenancy and tax laws and property investment in New Zealand. Please get in touch with us if you need advice on any of these topics.
