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Rent holiday, Reduction of rent or Alterntative payment schedule?

Photo by Tierra Mallorca on Unsplash

Many landlords are asking us to assist with addressing rent changes discussed and agreed with their tenants in the form of putting rent holidays in place, temporary rent reductions or payment plans.

To help out, we wanted to outline the difference between 3 options and explain what needs to be done without accidentally breaching the Act.

To be upfront, we in no way encourage uptaking any these rent adjustment options. But we know that under the right circumstances these options could end up in a win-win result for both landlords and tenants. It's up to you to determine if any of these options are suitable for your specific tenancy.

No matter which option applies to you, we recommend that you put it in writing. Under the Residential Tenancies Act, by granting a tenancy agreement, you have given your tenants the right to occupy the premises in exchange for them paying the agreed rent until the tenancy comes to an end. So by altering rent, you're creating a variation to the tenancy agreement. We recommend having it signed by both parties outlining the specific terms of the arrangement.

Rent holiday

In certain circumstances, landlords can choose to suspend the rent payments entirely for a period of time. You would normally offer a rent-free period for a fixed amount of time, then decide later if a longer rent-free period is appropriate and necessary.

Temporary reduction of rent

A rent reduction would work in much the same way as a rent holiday. You would need to identify a new rent, and then agree on how long that will be in effect. With this arrangement, you essentially forgive part of the rent.

There is no average discount. This is determined on a case-by-case basis and will depend on the circumstances of the tenant and the landlord - the length of the tenancy, the quality of the relationship, the reason for rent adjustment in the first place and personal cash-flow challenges.

This adjustment needs to follow the terms of s24A of the Act, which requires the variation to be in writing, signed by both parties and delivered to the tenants before the reduction takes effect. Doing it this makes sure that you the reinstatement back to the original amount doesn't count as a rent increase (which would otherwise affect your ability to increase rent at a later date).

Alternative payment schedule

An alternative payment schedule would mean the landlord allowing extra time for the tenant to pay rent. This arrangement does not remove the tenant's liability. It's more of a deferral program that delays rental payments, meaning the tenant will have to catch up later.

When putting together a payment plan in writing, make sure you're clear that should the tenancy come to an end before the final payback date, then all the outstanding payments are to be made in full.

When weighing up your options of rent holiday, reduction of rent and payment schedule, it is important to remember that no one size fits all. Some tenants will need no reduction at all – others will be unable to pay anything temporarily. So make sure the proposal you put forward actually works for both you and your tenants, doesn't push them too hard and is something you can agree on. But a good tenant who maintains your investment property is often worth holding on to and in the long run, will be worth some temporary sacrifices.

The information contained in this article is exclusively for promotional purposes. It does not in any way constitute legal advice and should not be relied upon as the basis for any legal action or contractual dealings. The information is not, and does not attempt to be, a comprehensive account of the relevant law in New Zealand. If you require legal advice you should seek independent legal counsel. does not accept any liability that may arise from the use of this information.

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