As housing affordability continues to be a challenge across New Zealand, more property owners are turning to granny flats and secondary dwellings as a way to generate additional income, accommodate extended family, or increase the value of their investment.
While these types of properties can offer excellent opportunities, they also come with legal and management responsibilities that every landlord should understand as a dwelling being legal to build does not automatically mean it is legal to rent.
What is a Granny Flat?
A granny flat, also known as a secondary dwelling, minor dwelling or self-contained unit, is a separate living space located on the same property as the main house. Depending on the design, it may include its own bedroom, bathroom, kitchen and living area.
Many homeowners choose to rent these dwellings independently, creating an additional income stream while making better use of their property.
Every granny flat or secondary dwelling must:
- Meet Healthy Homes Standards independently.
- Have working smoke alarms installed.
- Be self-contained
- Have proper cooking facilities, including:
- A stovetop or hotplates.
- An oven.
Are Granny Flats Covered by the Residential Tenancies Act?
In many cases, yes.
If the occupant has exclusive possession of the granny flat and pays rent, the arrangement will generally be covered by the Residential Tenancies Act (RTA). This means landlords must comply with all tenancy legislation, including:
Using a compliant tenancy agreement.
Lodging the tenant’s bond correctly.
Meeting Healthy Homes Standards where required.
Providing required insulation and smoke alarms.
Following the correct processes for inspections, maintenance and ending a tenancy.
Simply calling the arrangement a “boarder” or “flatmate” agreement does not change the legal status if the tenant has exclusive use of the dwelling.
Healthy Homes Requirements
Where a granny flat is rented as a separate tenancy, it will usually need to meet the Healthy Homes Standards.
This includes requirements relating to:
Heating
Insulation
Ventilation
Moisture ingress and drainage
Draught stopping
Every secondary dwelling should be assessed individually, as compliance requirements can differ depending on the building’s layout and tenancy arrangement.
Insurance Matters
One of the most overlooked aspects of renting a secondary dwelling is insurance.
Before advertising the property, landlords should speak with their insurer to ensure:
The policy covers multiple tenancies.
The secondary dwelling is disclosed.
Loss of rent cover is appropriate.
Liability cover remains adequate.
Failing to notify your insurer about a rented granny flat could affect future claims.
Council and Building Compliance
Before renting a secondary dwelling, ensure it has the necessary approvals.
Depending on when it was built and the local council requirements, this may include:
Building Consent.
Code Compliance Certificate (CCC).
Resource Consent (where applicable).
An unconsented dwelling may create legal, insurance and lending issues and can significantly increase a landlord’s risk.
Utilities and Services
Landlords should also consider how utilities are managed.
Questions to think about include:
Is electricity separately metered?
How will water charges be allocated?
Is internet shared or separate?
Who is responsible for maintaining shared driveways, gardens and outdoor areas?
These arrangements should be clearly documented within the tenancy agreement.
Privacy and Access
When both the main house and granny flat are rented, privacy becomes especially important.
Landlords should ensure:
Each tenancy has clearly defined outdoor areas.
Accessways are safe and unobstructed.
Parking arrangements are agreed upon.
Tenants understand any shared facilities before moving in.
Clear expectations help minimise disputes and improve the living experience for everyone.
The Benefits of a Homely Property Manager
Managing two dwellings on one title often involves additional complexity.
Homely can assist with:
Ensuring the tenancy is structured correctly.
Legislative compliance.
Healthy Homes assessments.
Tenant selection and screening.
Rent collection.
Routine inspections.
Maintenance coordination.
Managing communication between multiple tenants.
Having professional management reduces risk and gives landlords confidence that both properties are being managed in accordance with current legislation.
Granny flats and secondary dwellings can be an excellent investment, providing additional income while helping meet New Zealand’s growing demand for quality rental housing. However, success depends on ensuring the property is legally compliant, properly insured and professionally managed.
If you’re considering renting out a granny flat or secondary dwelling, obtaining advice before advertising the property can save significant time, money and stress later on.
A little preparation now can protect both your investment and your tenants for years to come.
