The recent granny flat building consent exemption has created exciting opportunities for property owners looking to add rental income, accommodate family members, or increase their property's value.
However, while the changes make it easier to build certain small standalone dwellings, landlords should understand that "consent-exempt" does not automatically mean "ready to rent".
What is the Granny Flat building consent exemption?
From January 2026, some new standalone dwellings can be built without a building consent, provided they meet strict exemption criteria.
To qualify, the dwelling must:
- Be a new standalone building of up to 70m²
- Have a simple design that complies with the Building Code
- Be built or supervised by licensed building professionals
- Notify the local council before construction starts and after completion.
These consent-exempt dwellings are commonly referred to as "granny flats", although the official terminology is a non-consented small standalone dwelling.
Importantly, this exemption only applies to qualifying new builds. It does not apply to:
- Existing secondary dwellings built before January 2026
- Sleepouts
- Converted garages
- Minor residential units
- Other secondary dwellings that don't meet the exemption requirements.
Easier to build doesn't mean easier to rent
One of the biggest misconceptions surrounding the exemption is that if a dwelling can be built legally without consent, it can automatically be rented out. That's not necessarily the case.
A property may be lawful to build under the Building Act but still fail to meet the legal requirements needed for residential tenancy. Before renting out a granny flat, landlords must ensure it complies with all other relevant legislation, including:
- The Residential Tenancies Act (RTA)
- Healthy Homes Standards
- Smoke alarm requirements
- Local planning and resource consent rules
- Occupancy and use requirements
Failing to do so can create significant financial and legal risks.
Why compliance matters
The Tenancy Tribunal has the power to determine that a rental property is unlawful residential premises if it cannot legally be occupied as a residential dwelling.
In situations where unlawful premises are rented:
- Tenants may be entitled to rent refunds
- Compensation may be awarded
- Exemplary damages may apply
- Landlords can face enforcement action.
For landlords, the cost of getting it wrong can far outweigh the savings achieved during construction.
What Landlords should check before renting out a Granny Flat
1. Is it truly self-contained?
A qualifying granny flat should be capable of independent living and include:
- Its own kitchen
- A bathroom
- Living space
- Sleeping area
The more independent the dwelling, the more likely it is to be treated as a separate tenancy under the Residential Tenancies Act.Property managers and landlords should also consider:
- Whether the dwelling is detached or attached to the main home
- Whether it has a separate entrance
- Whether the occupant exclusively uses facilities
- Whether the tenant has exclusive possession
Simply calling an arrangement a licence to occupy or flatmate agreement will not override tenancy law if the occupant effectively has exclusive possession of the dwelling.
2. Fire safety requirements
Fire separation is particularly important where a dwelling:
- Is attached to the main house
- Has been converted from a garage
- Is located above or below another residence
- Was created by dividing an existing home
Evidence of appropriate fire safety measures may include:
- Fire-rated walls
- Fire-rated ceilings and floors
- Fire-rated doors
- Fire stopping systems
- Compliant escape routes
These are critical safety considerations that can affect whether a dwelling can be legally occupied.
3. Has there been a change of use?
Some properties may require council approval where a building's use changes. For example, a home originally approved as a single-household dwelling may require additional approval if it is later occupied by multiple separate households.
Landlords should seek confirmation that any required change-of-use requirements have been satisfied before advertising the property for rent.
Don't assume utilities prove compliance
It's common for landlords to assume a dwelling is legitimate because it has:
- Its own letterbox
- Separate rubbish bins
- Independent power accounts
- A separate address
While these features can make the tenancy more practical, they do not prove that the dwelling can legally be occupied as residential accommodation.They should never be relied upon as evidence of compliance.
Insurance Considerations
If a property contains both a main dwelling and a separately occupied granny flat, landlords should ensure their insurer is aware of this.It's important to confirm:
- The policy covers the granny flat
- The insurer knows the property contains multiple tenancies
- Insurance details disclosed in tenancy agreements remain accurate
Failing to disclose additional occupancy arrangements could affect future insurance claims.
Insurance Healthy Homes and smoke alarms still apply
Every rental dwelling must meet the Healthy Homes Standards, regardless of whether it is a granny flat or a traditional home. This means compliance must be assessed separately for each rented dwelling.
Working smoke alarms are also mandatory in all rental properties. Landlords should ensure compliance is documented before tenants move in.
Don't forget cooking facilities
A lawful rental property must provide proper cooking facilities. This means tenants must have access to:
- A cooktop or hot plates for boiling and frying
- An oven for baking
A microwave alone is not sufficient.
Final thoughts
The granny flat building consent exemption is designed to make small standalone homes easier and more affordable to build. For landlords, it presents an exciting opportunity to unlock additional income from existing land.
However, the exemption is not a shortcut around tenancy, health and safety, or occupancy requirements.
The safest approach is to treat a new granny flat like any other investment property: verify compliance, obtain the right documentation, and seek professional advice where uncertainty exists.
Because when it comes to rental properties, being lawful to build and being lawful to rent are not always the same thing.
The Ministry of Business, Innovation and Employment (MBIE), has published guidance and templates on its website to assist homeowners, councils and building professionals. Click here to read more.
