Significant Anderson v FM Custodians decision could signal change of tide

– Report by Chris Matthews

A Tenancy Tribunal Adjudicator in Christchurch has delivered an order that could signal the days of full rent refunds for tenants are numbered.

The Anderson v FM Custodians High Court judgement from 2013 has caused havoc in the residential rental industry over the past 12 months.

Following that decision, many tenancies have been rendered unlawful because of non-consented work.

Consequently, a growing number of tenants have been awarded full refunds of rent, sometimes totalling tens of thousands of dollars.

But Adjudicator Armstrong has gone against the tide, saying in a Tenancy Tribunal order that the tenants weren’t entitled to a full refund of rent.

“This order comes as a welcome relief for landlords who have been reeling from the tide of the decision adopting the Anderson approach,” tenancy consultant Scotney Williams said.

“This decision swims against that tide and casts doubt on the rationale in the Anderson case.”

Adjudicator Armstrong acknowledged that the tenants, Bethani Edwards and Brett Townsend, rented a dwelling off Wongeoon Vast Limited that had neither a building consent nor a resource consent.

But unlike other Adjudicators, Armstrong argued Section 137 of the Residential Tenancies Act 1986, has been misinterpreted.

“I would find it very difficult to accept that Parliament intended that the Tribunal must order a landlord to repay to a tenant all rent paid by the tenant in every case where, for whatever reason, the premises could not be lawfully occupied by the tenant,” Armstrong wrote in this order.

Section 137

Section 137 alludes to the fact that you cannot enter into a contract that contravenes the provisions of the Act, and that any money paid under the contract is recoverable to the tenant.

Armstrong argues that Section 137, subsection 4, refers to money paid provided by the tenant “for the tenancy”.

“The conclusion that I have come to is that the expression “for the tenancy” is intended to refer to payments such as premiums for a tenancy or other payments not in the nature of rent.”

“Rent is generally regarded as payment for the use and occupation of the premises rather than for the “tenancy” as such.

“Payment “for the tenancy” is more apt to refer to payment for the granting of the tenancy rather than payment in the nature of rent.”

As a result, Armstrong ordered the bond of $1,180 to be paid to the tenants.

“Only a further appeal from either side will clarify the uncertainty which now exists”, Williams, from the Tenancy Practice Service, said.

Multiple tenants have been awarded full rent refunds over the 12-18 months.

The most infamous case involved Dunedin landlord Vic Inglis, being ordered to pay back his former tenant Natalie Parry nearly $11,000

Inglis has appealed the decision to the District Court, in a judgement that will be eagerly anticipated by the tenancy industry.

 

New landlord rules

Landlords: What to put in tenancy agreements

A recent law change means tenancy agreements must be in writing. Here’s what you can and can’t include — plus details of the new rules for insulation and fire alarms in rental properties.

Put it in writing

A written tenancy agreement is a great foundation for a stable tenancy — and it’s now a legal requirement. It sets out the rights and responsibilities of both landlord and tenant, reduces the risk of future misunderstandings, and keeps you on the right side of the law.

All new tenancies must have a written agreement —signed by both landlord and tenants — setting out important details, including:

  • full names and contact addresses
  • address of the rental property
  • date tenancy begins — and ends, if it’s for a fixed term
  • bond to be paid, if any
  • rent amount and frequency of payments
  • any chattels, eg furniture or appliances, provided by the landlord
  • information about insulation in the ceilings, floors, or walls

Even if you don’t put your agreement in writing, the Residential Tenancies Act applies. This means you and your tenants must still do what’s required by law.

If you add any clauses or conditions, make sure these are in line with tenancy law. It’s fine to say “no pets” or to write down the maximum number of people who can live at the property. But you can’t insist the tenant has the carpets commercially cleaned when they move out.

Of course if you use our services, we’ll take care of everything for you.

TIP: Give a copy of the signed agreement to your tenant before they move in.

Other new rules

Changes to the Residential Tenancies Act (RTA) also mean landlords must fit the following in their residential rental properties:

  • working smoke alarms
  • insulation in the ceilings and under floors by July 2019

If your property doesn’t have insulation — or if the current insulation doesn’t meet the new standards — talk to your tenant about the right time to get it installed or upgraded.

If you are a landlord you need to make sure you are complying with your legal obligations.

There can be a lot to remember if you are in the business of being a landlord. Making sure that you meet your obligations under tenancy law can help in avoiding any problems during the tenancy.

Again, using a competent Property Manager like Investment Rentals will ensure your property is compliant.

Call us on (09) 527 3980 or (021) 357 109 for a no obligation chat today.

Foxton landlord appeals new tenancy rules and wins


The Foxton house was so badly soiled that the carpets had to be replaced.

A Manawatu landlord has won what could be a precedent-setting case against his tenant who was let off a big bill for damaging his property.

David Russ of Tekoa Trust took his case to court after the Tenancy Tribunal ruled last year that his tenant, Amanda Stewart, was not liable for damage caused by her dogs urinating throughout the Foxton house she rented.

The tribunal based its decision on the landmark “Osaki” court case, in which tenants who accidentally set fire to their rental house did not have to pay for the damage.

However, the Palmerston North District Court has overturned the tribunal’s decision and ordered Stewart to pay about $3790 in carpet replacement costs, court costs and lost rent.

Judge David Smith said he was “of the view” that the tribunal adjudicator was wrong for concluding the damage was unintentional.

Not only had the tenant breached a no-dog clause in her tenancy agreement, but she had continued to let them in after perhaps a couple of accidents.

Fairfax Media was unable to contact Stewart, who did not attend the case.

Russ said he was “pretty happy with the outcome”.

“Common sense has prevailed.”

He said there was a big difference between damage based on a pot fire and damage which was allowed to happen.

“People have to be responsible for their actions.”

Tenancy expert Scotney Williams of tenancy.co.nz said the appeal case would help both landlords and tenants by clarifying the meaning of unintentional damage.

“The decision being a district court decision creates binding precedent at the Tenancy Tribunal for similar cases”, he said.

He said the District Court used a passage from the Brookers Summary Offence, a legal text book, to support its decision.

“Conduct will be intentional when it is deliberate, and not accidental, and [resulting damage] will be intentional if the defendant meant to cause it or (probably) knew it was going to result,” the court order said regarding the reference.

​Building and Construction Minister Nick Smith has proposed to change the current law so a tenant would be liable for damage of up to four weeks of rent or, if it was more, the landlord’s insurance excess.

The law change is currently going through consultation.​

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Special Children’s Christmas Party

“For the last 10 years we have been supporting this worthwhile children’s charity.  Each year we contribute in bringing this Christmas event to over 2,000 special children from over 500 different children’s groups, who nominate children (including the likes of Kidney kids, Child Cancer, Autism NZ, Down Syndrome Association to name a few).”

Average Auckland house price inches back to $1.1m

Average Auckland house price inches back to $1.1m; National average rises to $628k; Uncertainty remains over whether LVR restrictions and looming interest rate rises will keep slowing house price growth.

Lending restrictions and looming interest rate rises are subduing rampant house price growth, but question marks remain over whether the slow-down is here to stay.

Quotable Value’s (QV) December House Price Index shows residential property prices throughout the country rose by 1.3% over the three months to December, and 12.5% over the year, with the national average hitting $627,905.

While the average is at a record high, the annual growth rate has nudged down from 14.2% in December 2015.

Looking at Auckland, home values increased by 1.5% in the three months to December and 12.2% over the year, reaching $1.047 million.

However the year-on-year price growth was the slowest since January 2015, with prices actually inching back 0.4%, or $4200, from November to December.

Barfoot and Thompson data released on Monday showed a similar trend in the Super City, with sales volumes in December falling to their lowest level since 2011.

QV national spokesperson, Andrea Rush, says: “December saw a continuation of the trend of a slowing rate of value growth, activity and demand.

“This trend has been seen in many of the main centres since the introduction of the loan to value ratios (LVRs), which require a minimum 40% deposit for investment properties.

“This coupled with the annual Christmas holiday period slow-down has led to a decrease in values in some parts of Auckland, Hamilton, and Christchurch since November.”

Will the LVR-led slow-down stick?

However Rush is unsure whether national house price growth will continue to ease throughout the year.

“A similar trend of plateauing/decreasing values was seen in the Auckland market over the summer period last year following the introduction of the (30%) LVRs for the Super City region only,” she says.

“In 2016, the Auckland market then picked up in March, which is usually the busiest month of the year, and it’s possible we may see this happen again.

“However, if interest rates to continue to rise during 2017 this may further reduce demand from investors and lead to a longer period of lower value growth.”

QV’s Auckland general manager, Jan O’Donoghue, says it already “appears some investors are choosing not to buy more property as they have lower expectations of potential capital gains during 2017”.

“But any slow-down will be balanced by the fact the market is still being driven by strong net migration, relatively low interest rates and a lack of supply compared to the demand, particularly in Auckland,” Rush says.

Auckland

O’Donoghue adds Auckland properties with sub-division potential (under the new Unitary Plan) are still selling well and achieving record prices.

“This includes properties in areas that are close to up and coming town centres and have good transport links, in suburbs such as Mt Wellington and New Lynn,” she says.

Hamilton

QV general manager, Richard Allen, says the Hamilton market has become one of two tiers.

Poperties over $550,000 are attracting buyers, but those under $550,000 are proving less popular, as LVR restrictions are deterring investors. This has however provided an opening for first home buyers.

“We have also noticed an increase in the number of movers who are up-selling homes under $550,000, and buying more upmarket properties of up to around $700,000 with the capital gain they have made,” he says.

Tauranga

QV valuer, David Hume, says the announcement and immediate implementation of the new nationwide LVR restrictions in July saw a cooling off in the Tauranga market, although things have picked up in recent months.

“Rents have continued to increase throughout 2016, with an average three bedroom house now renting for $100 more than it did two years ago,” he says.

“The prestige market has shown good growth over the last six months with a number of sales in excess of $1.5 million, on the back of a strong stable economy and cashed up Auckland buyers looking for a lifestyle change.”

Wellington

In Wellington, values are continuing to rise faster than in Auckland, but at a slightly slower rate than prior to the LVRs being introduced.

QV valuer, David Cornford, says first home buyers are active and seem to be taking advantage of the fact there are fewer investors in the market.

He also notes the effect of the earthquake appears to have largely disappeared in the housing market.

Christchurch

QV valuer, Damian Kennedy, says the market is quiet in Christchurch, with December listings down around 20% from December 2015.

“Well-presented homes in the $500,000 price bracket remain popular as do entry level homes,” he says.

“Some first home buyers who are buying properties with parental support are finding they are being affected by the LVR changes also, as the support they are receiving from parents is at times being classed as an investment.

“A lot of people in Christchurch are under-insured and need to increase their level of insurance. However, there appears to have been little effect in terms of people addressing this even in light of recent earthquakes.”

Dunedin

LVRs haven’t affected the Dunedin market, as house prices and sales activity have remained strong throughout the Christmas period.

“This is likely to be due to the fact the Dunedin housing market offers a much lower entry level and price point than the other main centres. Thus it’s easier for investors to find a 40% deposit to purchase there and investors have remained active there,” Rush says.

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Landlords struggle to claim on tenants’ accidental damage

People drunkenly falling through skylights and dogs wrecking carpets after being locked inside are incidents landlords are now having to pay to fix in the fallout from a Court of Appeal decision earlier this year.

A case where a tenant did not have to pay for damage after leaving a pot of oil on the stove and causing a fire has left it nearly impossible for landlords to claim costs for accidental damage, NZ Property Investors Federation executive officer Andrew King said.

Andrew King says “every single case” of accidental damage he knows of since the Osaki decision has lead to landlords forking out their money.

The whole thing is just wrong on so many levels. We’re really hoping that the government will be looking to address this really soon.

Andrew King

But a coordinator for the Tenants Protection Association (Auckland) said it was “just another instance of the Property Investors Association going on about the same old, same old”, and said it was difficult for tenants to afford insurance when rents were so high.

In the oil fire case, Holler and Rouse v Osaki, the Court of Appeal ruled the tenant did not have to pay for the damage as it was unintentional, and the landlord’s insurance covered the cost.

King said “every single case” of accidental damage that had come to his attention since the decision has ended with the tenant not being made to pay.

“It’s ludicrous that tenants are no longer responsible for any damage that they cause to rental properties,” he said.

“It just goes beyond, I think, anyone’s thought of what’s reasonable.”

There is an appeal underway after a recent Tribunal ruling over a Foxton rental property, where the tenants broke the rental agreement by having dogs on the property and left the dogs locked inside, causing them to soil the carpet to an uncleanable state.

The Tribunal ruled the tenant did not cause the damage intentionally, so did not have to pay, as in the Osaki case.

King said the Federation was now “trying to solve the problems that the Osaki case has caused”.

Another case that came to his attention was when a tenant had their relative to visit.

The relative got drunk and “thought it would be fun to go up on the roof”. They ended up falling through a skylight, causing a large amount of damage.

“The landlord had to pay for that,” King said.

He said tenants could now cause damage, then give landlords a 14 day notice to fix it, otherwise they could be taken to the Tribunal.

“The whole thing is just wrong on so many levels. We’re really hoping that the government will be looking to address this really soon.”

They’ve had it good for years and years . . . if they want to bring the rents down maybe that is an issue that could be looked at.

Angela Maynard

Consequences included insurance premiums being expected to rise, landlords having to be “more invasive” and hold more inspections, and families, people with pets, or young people finding it harder to be accepted to a rental property.

But a recent decision where the Tribunal ruled a tenant must pay after keeping her five cats shut in a room, where they damaged the curtains and carpets, was a positive sign, King said.

He said it meant “the Tribunal is enacting the Osaki case in a reasonable way”.

Angela Maynard, Tenants Protection Association (Auckland) coordinator, said she has only had one experience of a landlord being denied his claim for damage, “and it’s actually a landlord who was trying to claim unnecessary expenses from the tenant”.

Maynard felt the Osaki precedent “stops those kind of grievous sort of excessive claims from landlords who are just trying to [have] their house renovated at the expense of the tenant”.

“What you have to look at is the huge amount of rents that people are paying for a start – how are they going to be able to insure themselves?”

Maynard said landlords, who are charging rents “way outside” what was reasonable “really have no right to complain about it”.

“They’ve had it good for years and years . . . if they want to bring the rents down maybe that is an issue that could be looked at.”

She said the case of the person falling through the skylight could have been brought up as wilful damage.

She said the NZ Property Investors Federation were “always whining” that the Residential Tenancies Act was biased towards tenants when it was not.

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Landlords concerned about Tenancy Tribunal precedent

  The damage to a ruined carpet was a direct result of a breach of the tenancy agreement. So why won't the tenant have to foot the bill?

The damage to a ruined carpet was a direct result of a breach of the tenancy agreement. So why won’t the tenant have to foot the bill?

A tenant who let her dogs urinate throughout a house – despite a no-pets policy – doesn’t have to pay to replace the ruined carpets.

Landlords are pointing to the contentious Tenancy Tribunal ruling against a Horowhenua property owner as a concrete example of their concerns about a change in rules.

The Foxton house at the centre of the dispute stank of animal urine and the contamination was such that the carpets had to be replaced, according to a cleaning business.

A property management company agreed there was a strong, “unbearable” smell of urine.

READ MORE:
Landlords angry over rental damage ruling
* Bad tenants let off the hook for damage after court ruling

Although the tribunal accepted the tenant, Amanda Stewart, breached the tenancy agreement, it had not been established she intended to damage the carpet.

But Tekoa Trust property manager David Russ said the damage was a direct result of Stewart breaking the agreement.

“We believe the tenant had dogs confined in the house that had defecated and urinated on the carpets. The damage was gross and putrid and was impossible to be remedied and the carpet had to be replaced.”

In April, the Court of Appeal ruled in favour of a couple who were pursued by the landlord’s insurer for the cost of a house fire, caused by an untended pot on the stove.

The court sided with the renters, Kenji and Tieko Osaki, and last month the tribunal put out a practice note to help clarify how the ruling would be applied.

Scotney Williams, a director of tenancy services firm Tenancy.co.nz, said the previous understanding was that tenants had to pay for damage they caused, even if it was accidental.

The Osaki practice note stated that if tenants showed on the balance of probabilities the damage was unintentional and the landlord was insured, the tenant would not have to pay up.

Russ said Tekoa Trust’s insurance company informed him each identifiable instance of damage caused by the dogs’ waste would count as a separate claim, as would each room.

There was a $500 excess, and with at least 10 noticeable spots in each room, the total excess would have worked out to $25,000, making a claim pointless, he said.

“This whole thing is unworkable. Our insurance premiums are going to lift if we have to keep making [unrecoverable] claims on these kinds of damages.”

Fitzherbert Rowe associate Liam Hehir said landlords should carefully review their insurance policies.

Landlords angry over rental damage ruling

 When rentals go bad - landlord's insurance must cover careless damage.

Three months on from a landmark court case, landlords are angry that they cannot even claim the excess on their insurance claim when tenants damage their property accidentally.

In April the Court of Appeal ruled in favour of a couple who were pursued by the landlord’s insurer for the cost of a house fire, caused by an untended pot on the stove.

The court sided with the couple, Kenji and Tieko Osaki, and now the Tenancy Tribunal has put out a note to help clarify the ruling for landlords and tenants.

It confirms that tenants cannot be held liable for unintentional damage if the landlord is insured.

However, principal tenancy adjudicator Melissa Poole’s note says tenants or their guests can be held liable if the landlord has no insurance, or the damage is found to be deliberate.

Landlords are also not allowed to seek the excess on their insurance policies, or use 14-day notices to get tenants to repair damage. Instead they must go through the tribunal.

Insurance Council chief executive Tim Grafton said many people would be “offended by the idea that those who have negligently caused damage don’t have to face the consequences of their actions”.

However, he noted that those who acted deliberately would remain liable.

Scotney Williams, a director of tenancy services firm Tenancy.co.nz, said it would be interesting to see how the new rules played out, as the tenant had to prove the damage was unintentional and that meant showing up at court.

‘If this is the case, most disputes would be awarded to the landlord because the majority of tenants fail to turn up to their hearings.”

Williams said the Osaki decision had been a radical change from the previous understanding, which was that tenants had to pay for even careless damage.

“This is a get-out of jail free card for tenants.”

The Auckland Property Investors Association described the new law as “an alarming development,” further tipping the balance of tenancy laws in the favour of tenants.

APIA president Andrew Bruce said it set a terrible example.

“To give tenants exclusive possession (and therefore full control of how the properties are being used) but not financially disincentivise them when they fail to be responsible, is tantamount to arming a child with a livewire and a lighter and shrugging your shoulders when the bomb goes off.’

David Faulkner of Wellington property management firm Real IQ said that landlords were angry.

“One property manager based in the Taranaki has informed us that there is extra security at Tenancy Tribunal due to uneducated landlords losing their temper as they find out the impact of this decision.”

He predicted more landlords would sell their properties because of the increasing risk and costs.

“This, along with the real prospect that testing for meth may become compulsory between tenancies, will only see costs increase further.

“Mass selling of rental properties is a very realistic prospect.”

By CATHERINE HARRIS – 4 August 2016

Tenants from hell – an Auckland landlord’s story

You think it’s easy being a landlord? All we do is sit around and randomly put up rents when our Jags need servicing. Capitalist pigs, feeding from the trough of tenants’ misery. Apparently we bunch people’s undies too.

People who think being a landlord is simply a matter of buying a property, finding a tenant, squeezing the life out of the tenant, finding a new tenant and repeating the cycle, should take a harder look at the rental accommodation business in this city. Yes, it’s a business. Not a charity. The reason we buy properties is to earn a living, not just to provide a service to those who can’t or don’t want to buy their own property. But we’re subject to conditions no other business ever has to endure.

The rental legislation in New Zealand is biased completely in the tenants’ favour but even more so when a long-suffering landlord tries to get some justice out of the Tenancy Tribunal.

Take yesterday, for example. I had a telephone mediation finally scheduled after my application was filed with Tenancy Services on June 2 for a tenant who had been behind with his rent for over seven months, and was four weeks behind when I finally applied to the Tenancy Tribunal. After waiting for over six weeks, the scheduled mediator never showed up for work.

Another mediator who was meant to fill in forgot about it. And so it goes on and on while I have to pay the mortgage, the rates, the insurance and everything else while my tenant lives there with his kids, rent-free. If landlords could give 21 days’ notice, the same as for tenants, he would have been long gone by now.

Last week, my hired rental inspector and I went to my worst tenants’ house. The whole place was a trashed pigsty. Broken windows, the kitchen vinyl torn to bits beyond recognition, the lounge carpet covered in big black stains and torn, rubbish piled up around the place, torn and missing curtains, the deck gate smashed, the main steel driveway gate bent beyond repair.

These are tenants who wrecked an outside tap and then left it running, and who throw much of their rubbish out the windows, over the deck and out the doors into the yards and landscaped gardens.

They shout and scream and swear at each other all day, never stop smoking and drinking booze, and when I approach the house I am ordered to f*** off.

The worst bit is we did preliminary meth tests and the whole house is contaminated over the 0.50 limit; how bad I won’t know until detailed laboratory testing is carried out. The previous long-term tenants were exemplary citizens with a baby. No way they ever did cigarettes, booze, marijuana or P. Purely by chance, less than an hour after we left, eight police raided the house.

Anyone want this lot living in their house?

It doesn’t surprise me that so many houses in Auckland are simply kept vacant. If my above described tenants were let loose in a flash home, there would be more than $50,000 damage in the first two weeks and over $250,000 in three or four months.

And if the Government bothered to talk to those at the coal face instead of just relying on news media and its bureaucrats, it would soon have a totally different perspective on the Auckland housing market. It might even be persuaded to reform the tenancy laws less in the tenants’ favour.

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Zoning fix for housing crisis too simplistic

The Government has settled on a simplistic solution to the Auckland housing shortage. It will simply order the Auckland Council to expand its residential zoning until prices are stabilised. The order will take the form of a national policy statement that is expected to be issued very soon, possibly today. It would more accurately be called a national policy directive since it will have the force of law. If councils do not comply with it, the Prime Minister says, developers will be able to take the council to court, “and they will win”.

It appears the directive will set a desired average house price as a proportion of the average income and require councils to zone more land for housing where the average price is above that trigger point. Finance Minister Bill English has suggested the trigger could be 10 times the median income, which Auckland’s average house will soon reach. If the price of houses was simply a result of a shortage of zoned land, this alone could be a solution.

The limits of urban expansion are not just lines on a map, a council could draw the lines further out, or even abolish them altogether, and urban development would still be constrained by the infrastructure the council can afford to provide. Unless the Government is about to also order the council to extend its roads, sewers, water supply and the like, to every development that may be proposed on its periphery, it is hard to see its national policy statement having much effect. And if it does contain an infrastructure spending directive, the councils’ ratepayers will be alarmed.

John Key expects the debate will soon turn to the question of who should pay for the additional infrastructure. The Labour Party has a very good answer. Councils could be permitted to raise the money by issuing bonds secured against the rates to be collected from the new area served. This idea has several attractions, not least spreading the rewards of residential property investment. Rather than investing in ever more houses, people with savings could buy bonds that would give them a return on an investment in services to the houses. There is an unsatisfied demand for bonds and as an alternative to property investment they could reduce the rate house prices are rising.

The practical question remains, though, who decides where infrastructure will be extended for residential development to occur? The land-use planning profession will be reluctant to surrender that decision to developers, though they might have to under the Government’s proposed directive. If developers are able to go to court to force a council to change their land zoning, as Mr Key implies, the developers will be leading the direction of the city’s expansion.

They will lead it to areas where people most want to live and the returns on development will be best, not the areas designated on council’s Auckland Plan. That 30-year plan is spawning a more detailed Unitary Plan for the next 10 years. The Government’s imminent directive could ensure the Unitary Plan allows much more accommodation in and around the city, if nothing else.

NZ Herald