Let’s imagine you’re looking for tenants for your new investment property. You discover that your neighbour’s cousins are looking for a place to live.

You’ve met them and they seem decent people. Is a handshake enough to seal the deal? Actually, it’s not. If you want a positive landlord-tenant relationship, you need to set the standard from the start. That means formalising expectations and obligations on both sides with a tenancy agreement.

What Does A Tenancy Agreement Do?

A tenancy agreement is a legal contract between a tenant and a landlord. It’s required for all tenancies in New Zealand and you may be fined if you don’t have one in place when you rent out a property. The best landlord/tenant relationships are built on transparency and good communication. Discussing the terms and conditions of a tenancy agreement gives you the perfect opportunity to establish a positive and professional relationship.

What Type Of Agreement Should We Choose?

There are two different types of tenancy agreements: fixed term (where the tenancy is for a set period, such as six to 12 months) or periodic (where it can be any length of time, with a defined notice period). A fixed term tenancy can only end early by mutual agreement. It gives both landlord and tenant security for the duration of the lease.

Currently, we find that tenants prefer this type. With a fixed term tenancy, you must notify the tenant in writing at least 21 days (but not longer than 90 days) before the end date that the tenancy will be finishing. If you don’t, the tenancy becomes periodic.

Under a periodic tenancy agreement, the tenant must give you 21 days’ notice in writing if they wish to move out. Landlords can give tenants 42 days’ notice if you require the property for yourself, an immediate relative or an employee, or if the property has sold.

In all other cases, landlords must give 90 days’ notice. If you’re not sure of your circumstances - if you’re considering selling the property, moving back in or renovating it, for example - then a periodic tenancy may be a better option. Your property manager can advise you here.

What To Include In Your Agreement

Landlords must provide statements about the property’s insulation, insurance and healthy homes status to prove that it complies with government standards for New Zealand rental properties. You can choose to add many other clauses, such as septic tank management, swimming pool maintenance, parking or body corporate rules, depending on the property.

These are all good things to discuss before the tenancy begins. Be aware that any clauses you add are only enforceable if they are covered by the Residential

Tenancies Act (RTA). For example, you can’t add in a clause that the carpets must be professionally cleaned at the end of the tenancy, because this isn’t specified by the law.

We recommend listing the approved occupants for the property and stating the maximum number of people “who ordinarily live there, in case there are any issues later on with subletting tenants.

Know Your Obligations

We often hear tales of DIY landlords who fail to do their due diligence before a tenancy begins, or who neglect repairs and maintenance. Even worse, some make empty promises to prospective tenants about upgrading the property and fail to follow through.

Remember that regular inspections protect you, your property and the tenant. If you’re checking a property on a regular three month basis, you’re more likely to be covered by insurance if there is a problem like a leak or structural issue.

Responsible landlords know what’s expected of them and make sure that their properties comply with the tenancy agreement and the RTA.

Operating in a decent and professional manner will go a long way to ensuring a good experience for everyone involved. ■