Living in a flat with other flatmates is a popular choice in New Zealand. However, tenants are often unaware of the risks of co-signing a tenancy agreement. Many first-time tenants and those unfamiliar with the Residential Tenancy Act 1986 do not fully understand the legal ramifications when more than one person signs a Tenancy Agreement. It is important to understand that whoever signs the Tenancy Agreement becomes jointly and severally liable for all matters relating to that tenancy. Additionally, they are taking total responsibility for the whole tenancy not just a portion of it.
A common example of this is when one person on the Tenancy Agreement stops paying their rent and the rent falls into arrears. Due to a lack of communication, the other tenant/s on the agreement are unaware of the situation. In the end the tenancy is terminated with a substantial amount of rent arrears. The landlord can pursue both or any of the tenants on the Tenancy Agreement for rent owed, not necessarily the individual who hasn’t paid.
Quick tips for co-signing tenants:
- Carefully consider who you sign a Tenancy Agreement with and whether they will act in good faith.
- Keep records of who pays what portion of the rent/water/power etc.
Bindi Norwell, Chief Executive at REINZ says: “When tenants sign a tenancy agreement together, this means they are jointly and severally liable. Therefore, if one tenant wants to vacate the property it can become a problem if the other party doesn’t want to leave. Tenants need to understand this well before they sign a legally binding contract. (The Tenancy Agreement)
“Our advice to tenants is to advise their landlord and/or property manager of any change in their situation. In some instances, the landlord may agree to release one party from the agreement and agree to the other party staying so long as there have not been any problems. However, this is not guaranteed nor is it required.
“This can also be a problem when a group sign an agreement and one of them does not pay the rent or wilfully damages the property, but the others are held liable.
“We appreciate that difficult and stressful circumstances such as relationship breakups can and do happen, however, it’s important to note that signing a rental agreement is enforceable by law, which is why it’s imperative tenants understand what signing an agreement with another person means.”
Flatmates are not covered under the Residential Tenancies Act and they cannot be held liable for anything to do with the Tenancy.
At the start of a tenancy when everything is going along well, it is a good idea to prepare a flat sharing agreement for those not on the formal tenancy. This will outline the details of that party and who pays what. While a flatmate agreement cannot be enforced under the Residential Tenancies Act 1986, it may be something that can be used at the Disputes Tribunal if it ever comes to it.
Here is a link to the Tenancy Services flat sharing agreement.
Information supplied by REINZ
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