Right of renewal options
Question from Anna updated on 15th February 2015:
I currently have a fixed-term lease. I gave a right of renewal on the original 12 month agreement. I would like to either raise the rent or to not renew and sell the property. Am I able to do either?
Our expert Alan Bruce responded:
The Residential Tenancies Act 1986 (the Act) requires a landlord who does not wish to continue with a fixed term tenancy past the agreed end date to give written notice to the tenant(s) of their intention not to continue with the tenancy. This notice must be served not more than 90 days, and not less than 21 days before the tenancy expires. If the landlord has offered a right of renewal, a tenant who wishes to exercise that right must give the landlord written notice not later than 21 calendar days before the date on which the tenancy would otherwise expire. By giving the tenant the right of renewal, a landlord has effectively waived their right to end the agreement should the tenant exercise that right. Similarly, the Act only allows for the rent to be raised during the term of a fixed term tenancy, and in this situation, during the renewed or extended tenancy, if the terms and conditions of the tenancy agreement contain a provision allowing a rent increase. If the agreement contains such a clause, the Act sets out the requirements whereby the rent may be lawfully increased. Lastly, the Act also states that if the premises are sold, then the new owner of the premises would inherit the current tenancy agreement and be bound to the same terms and conditions contained in the fixed-term agreement you signed with your current tenants. This would include any right of renewal. To discuss your situation further you can visit the Ministry of Business, Innovation and Employment website (www.tenancy.govt.nz), or call 0800 TENANCY (0800 836 262).
The Ministry of Business, Innovation and Employment provides information and guidance on building law and compliance, services including weathertight homes, and advice for tenants and landlords.