Family Make the Best Tenants!

Renting to family members usually sounds like a great idea at the time, but are you protected if you do rent to a family member?

The answer is, maybe not. This is because Section 5 of the Residential Tenancies Act 1986 (RTA) states that the Act is excluded in certain cases, including that it excludes members of the landlord’s family.

Section 5(1) This Act shall not apply in the following case:
(n) where the premises, not being a boarding house, continue to be used, during the tenancy, principally as a place of residence by the landlord or the owner of the premises or by any member of the landlord’s or owner’s family.

However, landlords can (and some would argue should) opt into the RTA to protect themselves if ‘little Jimmy’ wants to rent their investment property. To do this, everyone involved must agree that the RTA will apply to their living arrangement. This is known as ‘contracting in’ to the Act (RTA).

If all parties decide to ‘contract in’ to the Act they will need to decide whether the whole Act or just certain sections will apply. The agreement must be in writing and clearly describe how everyone is to ‘contract in’ (e.g. what sections apply). The written agreement should be signed and dated by all parties involved, and each party should retain a copy of the agreement.

If by agreement, the tenancy is to be treated as any other residential tenancy under the RTA, with the same protections for both landlords and tenants, then it is recommended to use a standard tenancy agreement for this purpose.

The RTA interpretation of a family member includes any person related to the landlord by blood; or by marriage, civil union, or a defacto relationship; or by adoption. It includes any other person who is a member of the landlord’s whanau or other culturally recognised family group; or any child that is cared for by the landlord, their spouse, civil union partner or de facto partner.

At Harcourts, we recognise that family members do often make great tenants, however with over 26,000 properties under management nationwide, we also acknowledge that there are exceptions to this. If you need advice or would like an independent third party involved in the business of renting your property to a family member, get in touch with your local Harcourts property manager. Sometimes it pays to put some distance, and a professional to manage the tenancy, to avoid any problems with the relationship if things don’t go as planned.