Insulation – Your Obligation as a Landlord

Insulation – Your Obligation as a Landlord

The Residential Tenancies Act (“RTA”) is receiving significant attention and rework, as the Government pushes to increase the expected quality of New Zealand rental properties and to improve tenants’ tenure security. This article discusses the insulation requirements that all rental properties must have and sets out what you, as Landlords, need to know.

Residential Tenancies (Smoke Alarms and Insulation) Regulations 2016 –

These regulations came into force on 7 June 2016, which requires all rental properties to have underfloor and ceiling insulation (where reasonably practicable), along with an insulation statement attached to any tenancy agreement, by 1 July 2019. If it is determined that a rental property is not compliant, the Landlord can be fined up to $4,000.00.

This requirement is however subject to the design of the homes, as it may not be reasonable to install insulation in specific house designs. For example, properties which have a low-sub floor will not be required to have underfloor installation due to the impracticality of installation.

Healthy Homes Standards –

The Healthy Homes Guarantee Act 2017 (HHGA) further amends the Residential Tenancies Act 1986 and requires the implementation of standards for the likes of heating, insulation and ventilation of rental properties. The Healthy Homes Standards were drafted and finalised by the Ministry of Housing and Urban Development, and are now found within the Residential Tenancies (Healthy Homes Standards) Regulations 2019.

In respect of insulation, the standards require a minimum level of ceiling and underfloor insulation that must either:-

  1. Meet the 2008 Building Code, or
  2. For existing ceiling insulation, have a minimum thickness of 120mm.

By 1 July 2021, all private rental properties must comply with the Healthy Home Standards, including the further insulation requirements, within 90 days of any new tenancy.

Tax Implications –

You are entitled to claim a range of expenses, resulting from your rental property. However, whether the installation of insulation is tax deductible is another question.

The IRD advises that you can claim a deduction on costs for repairs or general maintenance of the property. However, if any works result in an improvement to the property, this is recognised as a capital expense and therefore is not eligible for a deduction.

In respect of insulation, it appears that if you are installing insulation in the rental property to make the property compliant with the legislation, you will likely not be eligible for a deduction. However, if you are replacing or “topping up” the insulation, it is likely that this will be recognised as tax deductible.

Overall, if you are a Landlord and have installed new insulation in your rental property since 2016, the insulation should already meet the 2008 Building Code and you will not have to do anything further when the Healthy Homes Standards becomes enforceable in 1 July 2021. However, if you are unsure of the type of insulation in your rental property, you will need to have this inspected to ensure that you are compliant before 1 July 2019.