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From July 1 this year all residential landlords must comply with the Residential Tenancies (Smoke Alarms and Insulation) Regulations 2016. The regulations make it compulsory for ceiling and underfloor insulation to be installed in all residential rental properties. Failure to comply with them could attract a penalty of $4000.

Insulation is measured by R-value, which is a rating as to how well it resists heat flow. A higher R-value represents better insulation. Different standards apply depending on whether ceiling and underfloor insulation was installed in the property pre-July 2016; or if there is no existing insulation; or it was installed after July 1, 2016.

Ceiling and underfloor insulation was installed in the property pre-July 2016

If the property achieved the minimum R-value when the insulation was installed and is in a ``reasonable condition'' (as described by the regulations), then there may be no requirement to upgrade the insulation.

In order to determine if insulation is in a reasonable condition, regard must be given to the extent to which the performance of the insulation is compromised by any aspect of its condition, the extent of dampness, damage, degradation or displacement, and the condition of items ancillary to the installation such as strapping or staples. If any part is not in a reasonable condition, then the insulation needs to be replaced in accordance with the standards for installation post-July 1, 2016.

The minimum R-value for a pre-July 2016 timber-framed property is R 1.9 ceiling and R 0.9 underfloor. The minimum R-value for a pre-July 2016 masonry property is R 1.5 ceiling and R 0.9 underfloor.

No existing insulation or it was installed in the property post-July 2016

The geographic location of the property plays a part in determining what standard you need to meet if there is no existing insulation or it was installed in the property post-July 2016. There are three zones in New Zealand, and zone 3 encompasses the entire South Island.

Zones 1 and 2 have a minimum R-value of R 2.9 ceiling and R 1.3 underfloor. Zone 3 has a minimum R-value of R 3.3 ceiling and R 1.3 underfloor.

Exceptions

There are limited circumstances where exceptions to the regulations will apply. However, these must be formally recorded and are not deemed to apply as of right. Exceptions include:

- Where there is no access to the installation location without carrying out substantial building work or causing damage to the property (for example, houses built on a concrete slab, leaving the installation of underfloor insulation unrealistic).

- Health and safety risks to people would be greater than the normal level while installing insulation.

- If when the insulation was originally installed there were requirements or bylaws applicable and the landlord can show a relevant certification of compliance.

- The landlord intends to demolish or substantially rebuild all or part of the property within 12 months of the start of the tenancy.

- The tenant is the immediate former owner and has rented back the property.

There is a common misconception that if an exemption applies, nothing further is required. In order to rely on an exception (for example, if the property is built on a concrete pad) you need a builder or professional insulation installer to provide written confirmation as to the exception. This is an important step. We recommend that landlord clients include a copy of the written exception and professional's confirmation in the residential tenancy agreement for the property.

If you are looking at buying a residential rental property, the state of the insulation should be checked. Some purchasers opt to include a specific condition allowing them time to check the insulation. Others address this as part of their wider due diligence or builder's investigations. In any case, it is worthwhile discussing the adequacy of such conditions with your lawyer before signing a sale and purchase agreement.

Rosie Clark is a partner in law firm Gallaway Cook Allan.