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Covid-19 and Service Tenancies

30 March 2020

On 25 March 2020, the COVID-19 Response (Urgent Management Measures) Legislation Act 2020 was passed and received royal assent.  This included some major changes to the Residential Tenancies Act 1986 (RTA) with temporary effect (three months at the moment but to be reconsidered).

Traditionally, 1 June marks the largest number of staff movements for farms.  However, the number of movements intended in March this year has been striking, at least in our practice.  Coupled with general staff issues, farmers are facing a tough time removing tenants from properties and managing their farms now.

Often, staff on farms are provided with accommodation called a service tenancy.  These fall under the RTA and the provisions of the RTA need to be adhered to strictly.  Many farmers use good precedents like the Federated Farmers individual employment agreements to cover off their legal requirements.

Service tenancies can be terminated quicker than normal tenancies.  Generally, 14 days’ written notice is given to vacate the property at the end of employment.  The new employee then takes the accommodation of the old.  The Government’s changes to the RTA have cut across all of that.  Right now, if a farmer has a service tenancy in place and a staff member’s employment comes to an end then they will be entitled to remain in the property.  This will cause major headaches for farmers and the answers often appear to be fact specific.

The Government’s temporary changes were aimed at protecting the tenant during the COVID-19 lockdown.  They include:

If the landlord has served a notice to terminate a tenancy before 26 March 2020 then that notice has no effect;

(a) Termination orders already obtained have no effect;

(b)Tenancies cannot be terminated for failing to pay rent unless rent is 60 days overdue (rather than the usual 21 days overdue);

(c) If the tenant has given notice to end the tenancy (or agreed to end the tenancy) on or after 26 March 2020 then they can simply give a further notice to the landlord to continue living there;

(d) Rent cannot be increased for an initial period of six months.

 

Right now is the worst time for a service tenancy to come to an end.  The landlord farmer will probably need a replacement staff member and both the landlord and tenant will be stressed by the effects of the COVID-19 lockdown on themselves and their loved ones.  For those who unfortunately lash out, anti-social behaviour, assault and harassment are good grounds to have a tenancy terminated.  An application can be made to the Tenancy Tribunal for that.  The Tenancy Tribunal is an essential service and is still operating.

For those farmers unfortunately now stuck with extended service tenancies for the lockdown, stick to the lockdown rules.  Don’t encourage or require a breach or any non-essential travel.  This is only temporary.  Tenants, keep paying rent as best you can.

There are exceptions or circumstances that could change the legal advice given to a particular circumstance.  This article should not be relied on without seeking legal advice specific to your circumstances.  Please get in contact with one of our team if we can assist.

 

Tim Burtenshaw is an Associate in the Commercial Disputes and Employment Team at Norris Ward McKinnon. You can contact Tim at tim.burtenshaw@nwm.co.nz