Want to rent out your granny flat? First get to know the statutory requirements.

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Granny flats are often seen as valuable additions to properties, potentially making them more attractive to buyers by offering the possibility of rental income.

However, renting out a granny flat without ensuring it complies with certain statutory requirements, such as those under the Building Act 2004 and the Residential Tenancies Act 1986, can lead to significant legal risks. If the premises are found to be unlawful under the Residential Tenancies Act 1986, landlords could face serious consequences.

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Understanding the Residential Tenancies Act 1986

The Residential Tenancies Act 1986 (RTA) governs most residential tenancies in New Zealand unless specifically excluded. The RTA does not apply if the premises are primarily used by the landlord, the owner, or a family member as a place of residence during the tenancy.

If a tenant makes a claim at the Tenancy Tribunal that the granny flat is an unlawful residential premises, the key question often revolves around whether the RTA applies.

Common instances where a tenant may make a claim that the flat was unlawful residential premises include:

-        The tenant had exclusive use of the premises, separately from the main dwelling, when the premises did not have the required building consent to be used as a separate dwelling;

-        The landlord required the tenant to sign a flat-sharing agreement, instead of a tenancy agreement;

-        There were breaches of the Healthy Homes standards.

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Consequences of renting out unlawful residential premises

Should the Tribunal declare the premises to be unlawful under the RTA, the implications for landlords can be severe. Depending on the circumstances, the Tribunal might order the landlord to refund up to the full amount of rent paid by the tenant.

However, there may be special circumstances where the landlord could seek a reduction in the amount of rent to be refunded.

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Exemplary damages

Claims of unlawful premises are frequently accompanied by a claim for exemplary damages due to breaches of the Healthy Homes Standards and the tenant’s right to quiet enjoyment. This is often because the landlord may not fully have considered the tenant's rights under the RTA. Depending on the severity and intentionality of the breach, these damages can be substantial.

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Need assistance?

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Our team is here to help. Contact us, if this article raises any concerns for you.

-        If you own a property with a granny flat and want to ensure your premises comply with the law

-        Or if you are looking at purchasing a property with a granny flat

It is best to seek expert legal advice before engaging with potential tenants. Talk with Anna Fuiava or Seo Young Ghil to discuss your situation.

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