No Grounds

The principle behind a contract is straightforward. Two parties, having clear objectives negotiate an outcome that is reasonably suited to both parties and with consensus on terms and conditions, a verbal or written agreement is formed. Both parties know those terms and are generally satisfied that there is a fair deal in place.

When a dispute arises between the parties, both can rely on the terms and conditions to remedy the dispute within the terms of the agreement. On occasion, lawyers and courts are required to adjudicate an outcome if the original agreed terms are uncertain. In this situation, either party are not required to give a reason for their claims over the other party. Similarly, when a spousal relationship breaks down, the person leaving the relationship is not required to give their partner a reason – they can simply exit stage left. Likewise, when an employee wishes to leave their employer, they can simply hand in their notice and they’re done. For residential tenancies, this may no longer be the case.

For residential tenancies, property owners normally offer up their property for rent on certain terms, mostly for a fixed period of 12 months. Tenants, keen to retain some flexibility, are mainly agreeable to an initial 12-month term. Governed by the Residential Tenancies Act (RTA), a fixed term lease is just that – a term fixed for an agreed period. The government is currently considering changing a fundamental principle of contract law when it relates to residential tenancies by allowing the tenant to demand a further fixed term lease be offered once the initial term has ended.

Referred to (incorrectly) as ‘no grounds terminations’, renter advocates are keen to empower tenants to choose if they wish to stay and the property owner will have to agree other than on limited grounds such as renovating, taking possession themselves or selling the home. Currently, an owner can decide not to offer an additional lease term to the existing tenant and are not required to provide a reason why not. Surely, just like it is for marriages and employment, this is reasonable. The tenancy contract has simply ended – it is not terminated on ‘no grounds’.  A property owner that is forced to re-let their property because the tenant demands it despite the fixed term ending erodes the fundamental rights attached to property ownership.

Ironically, this issue is an answer to a question no one asked. Almost always, when a tenant seeks to renew their lease term, the owner is agreeable. Only when a tenant who fails to meet their obligations under the initial lease will an owner decline a renewal request and fair enough.

It is well known that, due to a lack of housing supply and increase demand, rents have risen sharply since the Covid-19 pandemic and whilst the pace of rental growth has slowed, renters are paying about double for a 3-bedroom home nowadays compared to this time 8 years ago. Lack of supply remains the fundamental challenge for rental affordability. The last time government considered making changes to the ending of tenancies, REIWA surveyed property investors with an alarming 68% of respondents claiming they’d consider selling their investments if they were forced to re-let their property to a tenant that demanded it.

The last thing we need is to risk damaging supply of rental homes by bringing in laws that might cater for very few situations. If a great tenant wants to renew a lease, unless the property owner has a good reason to refuse, why would they not renew?