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A Summer Blog Post! 2019 changes for landlords and updates from us.

Posted 19/2/2020

We have done a couple of emails out to our email subscribers, and here is what has been happening in the rental world and for Rental Coach.

Updates, updates, updates...


There have been some important updates during this year for landlords that relate to their rental properties.

 

The first has been the "Healthy Homes" standards


From the 1st of July 2019, any new residential tenancies will need to use a new Residential Tenancy Agreement form that has a 'Healthy Homes' Statement about how the property complies with the new Healthy Homes Standards.

From the 1st of July 2021, any new tenancies must have the following (from the Tenancy Services website):

The Healthy Homes Standards (HHS) are:

  • Heating - The main living room must have one or more fixed qualifying heaters, which provide at least the required heating capacity to heat the main living room to at least 18°C and be capable of maintaining this temperature during the coldest days of winter. The new regulations clarify the requirements for heating devices – some will not meet the requirements under the heating standard as they are inefficient, unaffordable or unhealthy.
    A heating assessment tool will be provided in July 2019, which will assist with determining the heating capacity required for the main living room at rental premises, including a boarding house. When used correctly this tool will confirm if existing heating devices will meet the standard or what heating options will meet the heating standard if installed. Landlords will be encouraged to seek professional assistance when required.
  • Insulation – Rental homes must have ceiling and underfloor insulation which either meets the 2008 Building Code, or (for existing ceiling insulation) is at least 120mm thick.
  • Ventilation – Rental homes must have the right size extractor fans in kitchens and bathrooms, and opening windows in the living room, dining room, kitchen and bedrooms.
  • Moisture and drainage – Rental homes must have efficient drainage and guttering, downpipes and drains. If a rental home has an enclosed subfloor, it must have a ground moisture barrier if it’s possible to install one.
  • Draught-stopping – Rental homes must have no unnecessary gaps or holes in walls, ceilings, windows, floors, and doors that cause noticeable draughts. All unused chimneys and fireplaces must be blocked.


What is interesting is that there are specific heating sources that are going to be disallowed. These are open fireplaces, unflued gas heaters, and if more than a 2.4kw electric heater is required to heat a room (for example, using 2 x 2 Kw heaters in one room).

To be an allowed heating source, it must be a source of heating such as a fireplace (wood or flued gas), or electric heating of more than 1.5kw, which would be a heatpump or electric heater with a themostat.

To read the actual requirements in the legislation, you can read them here.



The second big change has been the update to the Residential Tenancies Act

 

On 27 August 2019, the Residential Tenancies Amendment Act took effect. This legislation covers the following amendments.

Tenant liability for careless damage in rental properties

If tenants (or their guests) damage a rental property as a result of careless behaviour, the tenant is liable for the cost of the damage up to a maximum of four weeks’ rent or the landlord’s insurance excess, whichever is lower.

Landlords also need to provide insurance information in any new tenancy agreement that is relevant to the tenant’s liability for damage to the premises. This information must include whether the property is insured and if it is, what the excess amount is.

Unlawful residential premises

Sometimes properties are rented that can’t lawfully be used for residential purposes. Examples of these are:

  • illegally converted garages
  • unconsented dwellings
  • commercial properties

This change means tenants living in these premises are now protected by the Residential Tenancies Act. The Tenancy Tribunal now has full jurisdiction over cases concerning premises that are unlawful for residential use.

Contamination of premises

Landlords can now test for methamphetamine (meth) in rental properties while tenants are living there. This amendment also allows for regulations to be developed that address how contamination of rental properties is tested and managed.


You can read more about these changes on the Tenancy Services Website.

 

The third big change has been the ring-fencing of rental loses

 

From 1st of April 2019 residential property investors will not be able to offset excess deductions against their other income (for example, salary/wages or business income).  Instead, deductions will only reduce residential property income. 

Any excess deductions (losses) will be carried forward to reduce residential property income in future years or be used to reduce the taxable income amount (if any) on the sale of the residential property.  Any remaining unused deductions will generally continue to be ring-fenced and only be able to reduce rental income in future years.

From next year there will be a new box on the IR3 which will cover excess rental deductions so that they can be carried forward to a future year. There is a good summary of the rules in this article published by BDO and a quick summary here, on Inland Revenue's website.

 

Important updates of Rental Coach


We have been busy at work checking Rental Coach and have made some important updates over the last week or so. Here are the main changes:

  • Home Office Claim - this section has been re-written as Inland Revenue have changed the way this needs to be calculated. So, we have updated the material in all the courses to reflect the new way to calculate your home office claim.
    Mostly, this affected people that had a shared space for their home office. Inland Revenue have said that the only area that you can use are the actual area that is mostly used for business. So, if you had a desk in lounge that was used for business, it is now only the area around the desk allowed (and not the whole lounge area).
    We go through this new method and the other rules needed to claim the home office claim in all 3 versions of the Rental Coach course (Lite, Standard, and Full). If you would like to read Inland Revenue's operational statement on Home Office Claims, you can read it here.
  • The Resources and Files in Rental Coach have been updated. We noticed a small bug where some files were not being updated to the most up-to-date version. We have fixed this and updated all the files (such as the Worksheet, Model Job, Model Job Answers). If you have access to the course, you can log-in and download these updated files from the "Resources" menu from within the course. Note: this change mostly affects the "Full" version of the course.

As always, any changes are included in your subscription at no extra charge.

 

What's changing in the future?


We are working busily on the next lot of changes to Rental Coach.
 

Ring-fencing of losses


The first main area is to do with ring-fencing of losses. This is a big change that will affect all rental properties from the 1st of April 2020. The biggest change will be for rental properties that make a loss during the year. Previously, if there is a loss made by a rental property, then this loss would go onto the tax return and be off-set against any other income earned (which usually results in a tax refund).

From the 1st of April onwards, when you file a tax return, this will change. If a loss has been made, the loss from the property can only be used when the rental property has made a profit in the future.

There is more to it than that (the legislation is a bit complicated). So, we will be adding this in to our April update planned.


Healthy Homes


We will be adding into the Rental Coach material all the Healthy Home requirements that will apply from 1st of July 2021. These are the requirements for heating in living areas, extractor fans in kitchens and bathrooms etc.


Tax Year updates


All the material in all versions of Rental Coach will be updated to show the new tax year we will be working on. The tax year that will have just been completed will be from the 1st of April 2019 to the 31st of March 2020. This is called the 2020 Tax year (as it ends in March 2020). If you need to file a tax return for your rental property (an IR3), then this deadline is the 7th of July 2020.


Other improvements


We are looking at making some other improvements to Rental Coach that you will see in the future. We are looking at preparing an audio version of Rental Coach. This is designed for people who just want to listen in their car and learn about how to manage their rental property. We are also looking at adding in video to the courses and some other enhancements.