Build-to-Rent (BTR) refers to the construction of large residential developments, often high-density and multi-unit, specifically designed for rental purposes rather than for sale.
The Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Act 2023 (Act) was granted royal assent on March 31, 2023, and established BTR as a recognized asset class in New Zealand. It is now exempt from interest deductibility limitations.
To qualify as a BTR development, it must consist of 20 or more dwellings that meet the requirements of residential tenancies under the Residential Tenancies Act 1986 (RTA).
If the development was completed before July 1, 2023, landlords must offer any current tenants a fixed-term tenancy of at least 10 years before July 1, 2023, and always offer future tenants the same 10 years or more fixed-term tenancy.
If the development was completed after July 1, 2023, landlords must always offer prospective tenants a fixed-term tenancy of not less than 10 years.
Additionally, the tenancy agreement must grant the tenant the right to customise the dwelling with the landlord's consent in accordance with the RTA, and the tenancy agreement must explicitly reflect this personalisation.
Furthermore, the tenant has the right to terminate the tenancy by giving 56 days' notice for "no reasons."
While the property management industry welcomes the introduction of BTR as exempt from interest deductibility, further guidance from the government on how to manage anti-social behaviour from tenants who have signed on for 10+ years is awaited.
Overall, this change could open up opportunities for investors to pool their resources and collectively invest in purpose-built developments.
This is something to consider.
