With the increasingly warm temperature of our local housing market, you might be considering getting into property as an investment. At the other end of the spectrum, if you or someone you know is a hopeful first home buyer, you will be planning how to get up onto the ladder in the first place.
Here are few legal updates that could be helpful.
Let’s start with the investor.
In response to concerns about the unhealthy state of rental housing stock, the Government recently introduced new requirements around insulation and smoke alarms for landlords. The changes in the legislation mean as a private landlord, you need to:
a/ ensure you have a working, long-life smoke alarm installed within 3 metres from each bedroom door. If there is not already a smoke alarm fitted, you must install a long-life photo-electric smoke alarm. When old alarms are replaced they must be replaced with this type of smoke alarm.
b/ declare in the tenancy agreement the current state of insulation in the property for floors, walls and ceilings.
c/ ensure the insulation complies with the new Tenancy law requirements before 1 July 2019.
It’s estimated that there are over 180,000 rental properties nationwide that aren’t insulated. These will now need to fit ceiling insulation that is at least 70mm thick, underfloor insulation for timber floors (a concrete floor is already counted as its own insulation) except where the floor is on an upper level of a building, above a habitable living space. There are a few other exceptions where retrofitting isn’t possible but most houses will have to comply.
Unfortunately for most landlords, the cost of installing the required insulation will probably not be tax deductible as an expense if it is new insulation as IRD consider it to be a capital cost – it can only be claimed as an expense if it’s replacing old insulation.
If you or a family member or friend is considering buying a first home and are looking for ways to help pay the mortgage, you might want to consider getting a boarder either in a room in your house or in a sleep-out. You will still need to abide by the Residential Tenancies Act but from a tax point of view, IRD says you don’t have to declare the income as long as each renter (up to a maximum of five renters) each pays rent of less than $257 per week. Of course it also means you can’t claim any expenses their tenancy either, but it’s a good potential income source to help get started on the property ladder.
Whether you’re an investor or a buyer you will be looking to ensure you meet your legal obligations and maximise your income. For both reasons, it pays to talk to a lawyer before you sign any sale and purchase agreement.
For more information please contact
Anissa Bain, Partner
Phone: 03 545 7894