Government legislation ministry clarifies rental landlord loss rule

The government legislation ministry said that private rental housing landlords need two consecutive loss-making years after registration to qualify for an exception allowing an early sale during the mandatory rental period.

Private rental housing landlords generally must keep leasing properties during the mandatory period, though transfers to another registered landlord are allowed. The law permits cancellation or a sale to a non-landlord for a landlord unable to continue renting because of default, bankruptcy or prescribed economic conditions. Such a sale requires local government approval.

The decision responded to an inquiry from the Ministry of Land, Infrastructure and Transport over whether losses spanning registration could count. The legislation ministry said the mandatory period is tied to registration or a later actual lease start date under the decree, so economic circumstances qualifying for an early exit must arise after registration.

It also said a person with a default in a private rental housing business during the preceding five years cannot register as a landlord, supporting the view that the default exception applies only to a post-registration default. The decree also includes two consecutive years of negative operating cash flow; cases in which at least 20% of a landlord's private rentals were unleased in the past 12 months and a particular property remained unleased throughout that period; and planned or completed demolition for redevelopment or reconstruction.

Counting losses that straddle registration would let landlords transfer homes before two years had passed after registration and could undermine protections for non-homeowning tenant households, the ministry said. The law provides landlords with state and local funding, tax relief and priority land supply while restricting transfers during the mandatory period.