Article: Law & Finance

Better Safe Than Sorry with Thomas BissBetter Safe Than Sorry with Thomas Biss

New laws are coming into effect on 1 July 2016 affecting minimum standards for rental properties.  In particular properties are required to have minimum standards of insulation and smoke alarms.  The requirements relating to smoke alarms apply from 1 July 2016.  The requirements regarding insulation are phased in and apply initially to subsidised rental housing.  In due course all rental housing will be required to comply by 2019.

To a degree these changes will have no effect on house sales.  It will not be an offence to sell a house without insulation or smoke alarms and the sale can simply proceed.  However, sensible purchasers will be wise to ensure that any house purchased for the purpose of renting meets these requirements. 

While it is correct to say there is no technical effect on a house purchase the regulations will have a significant impact and they cannot be ignored.  Leaving aside the simple truth that an insulated house with working smoke alarms is a better, more desirable and safer house.  It will be an offence to rent out a house without these in place.  Tenants will have remedies under the Residential Tenancies Act, fines can be imposed and a smart tenant can use breaches to avoid their obligations. 

What this means is that a failure to have a working smoke alarm may well invalidate an insurance policy.  If a landowner makes a claim for fire damage an insurance company will rightly ask if smoke alarms were installed.  If they weren’t then claims might be denied.  More generally if there aren’t smoke alarms installed then an insurance company might simply refuse to insure a property or will restrict the cover available.  If the house can’t be insured then banks won’t lend. 

So a prudent purchaser buying a property to rent will need to check for themselves and their bank that the property complies with the rules.  To do this a specific clause could be inserted in the agreement for sale and purchase requiring compliance, or the purchaser could rely on their own investigation and checking, or on a building inspection clause. 

Thomas Biss is a director of Henderson Reeves Connell Rishworth and he oversees Smart Move, the property section of Henderson Reeves Connell Rishworth, as well as leading Henderson Reeves Connell Rishworth’s business law team.


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