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23-07-2009

NZPIF Submission to the RTA Amendments Bill Pt 2

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Clause 22 Tenant’s goods not to be seized
Recommendation

Landlords should not be required to keep a former tenant’s items after the tenancy has ended, unless suitable arrangements have been made, and should be entitled to dispose of it accordingly.

Clause 23 New section 39 substituted - Responsibility for outgoings

There has been a longstanding period of confusion over whether landlords or tenants have the responsibility for metered water and waste charges incurred. This problem is the prime reason for the complete re-write of Section 39.

Unfortunately the proposed changes to section 39 regarding outgoings have already been rendered out-of-date and will not solve the wastewater problem they were designed to address.

The wastewater problem has arisen following many local authorities separating water charges from rating charges[1],[2],[3]. It was deemed fair and ecologically prudent that water charges should be based on usage. The law was changed in 1996 so that subject to provisos; tenants could be charged for the water they used when it was charged on a metered basis, the premises have a separate water meter and the charge was included in the tenancy agreement.

It is noted that the average Auckland household spends $683 for water and wastewater services[4],[5].

Some local authorities established standalone businesses who could choose how they charged customers for water use. A notable example was Metrowater, owned by Auckland City Council, whom divided its charges into sections, including a section for wastewater charges.

The Tenancy Tribunal ruled that as the Act stated that the tenant was responsible for all water supplied “to” the premises and as wastewater came “from” the premises, then wastewater was the responsibility of the landlord.

This point was argued for many years before a District Court[6] decision overturned the Tenancy Tribunal decision and allowed all water charges, including metered wastewater, to be the responsibility of the tenant.

It was considered that the Act was not flexible enough to accommodate the various ways suppliers charge for utilities and services since they were unbundled from the general rates bill. The resulting confusion can give rise to disputes and inconsistent Tribunal decisions.

A solution to the wastewater problem has been attempted under the previous Residential Tenancies Act Amendment Bill (No 2) and the current Bill, which would apply to all outgoings. The suggestion is that the landlord is responsible for all outgoings that are incurred whether or not the premises are occupied, such as general rates, insurance, and, where applicable, body corporate levies. The landlord is also responsible for outgoings for common facilities.

The tenant is responsible for outgoings that are exclusively attributable to the tenant’s occupation of the premises or the use of the facilities. Examples of the tenant’s responsibility include charges for electricity and gas, telephone and Internet, and charges for water based on consumption.

This attempt to solve the problem has already been superseded by Manukau Water changing the way they charge for wastewater. Manukau Water has introduced a wastewater charge of $315 regardless of whether the premises are occupied or not.

Under the proposed changes to Section 39, this would make them payable by the landlord, which was clearly not intended.

With Auckland now likely to be operated as a “super city”, it has been suggested that the Manukau model be adopted for all of Auckland.

Therefore, the wastewater and outgoings problem will not be solved until water and wastewater charges are treated in the same manner as other utilities.

The Federation therefore recommends that all utilities should be treated in the same way. Any utility (telephone, gas, electricity, water, wastewater, rubbish bags etc) that are charged on a usage basis be the responsibility of the tenant. This includes all line charges, which are a pro-rata payment for utility maintenance. Currently water is the only utility treated differently from other utilities. Why should water be treated differently from other utilities?

If a utility, such as gas, is supplied at a rental property and the tenant chooses not to use it, any rental fee for the meter which still applies is the responsibly of the tenant. By mutual agreement between the tenant and the landlord, the meter may be removed, however not without the approval of the landlord. This is fair, as the utility was there when the tenancy began. If this was an issue for the tenant then they should not have taken the tenancy. If they decide not to use a utility after a tenancy has commenced then this is their personal choice and the landlord should not be adversely affected.

The very first connection fee for a utility or service provided as part of the tenancy should be the responsibility of the landlord. If the utilities are disconnected then there is usually a reconnection fee. If the disconnection occurred during a tenancy because the tenant did not pay the invoice, then the reconnection fee is the responsibility of the tenant. If the utility is disconnected in-between tenancies, then the reconnection fee is the responsibility of the landlord.

The Federation submits that in an era of user-pays which rewards those who use less water and which has powerful long-term benefits for conservation[7], it would be consistent for the Bill to clarify and base wastewater and other water charges on how much is used or created by the tenant.

Moreover, for the law to foist what is a user-pays cost to landlords would be to ignore a legal precedent and contradict the findings in that case.

Finally, it is noted that in its 2003 minority report of the Social Services Committee, the National Party and Act Party “oppose the charging of landlords for waste water”[8].

Recommendation

That section 39 (1) and (2) of the principal Act be amended as below [text in BOLD indicate amendments]:

(1) Subject to subsection (2), all outgoings (including rates, insurance premiums and service connection fees but excluding reconnection fees due to disconnection following a tenant failing to pay their account), from time to time payable in respect of the premises shall, as between the landlord and the tenant, be payable by the landlord.

(2) Subject to subsection (3), the following outgoings incurred during the tenancy shall, as between the landlord and the tenant, be payable by the tenant:

(a)     all charges for electricity or gas supplied to the premises:

(b)     all charges for water supplied to or from the premises (including the cost of charges for standard meter readings) if the charge is identifiable to the premises and the period of occupation by the tenant:

(c)     all charges in respect of any telephone or internet facility connected to the premises:

Clause 24 Tenant’s responsibilities

This clause is strongly supported. It reinforces the importance of balance and responsibility.

As drafted at 24(3A) (a) tenant’s failure, without reasonable excuse, to quit the premises on the termination of the tenancy may have exemplary damages of $1,000 applied against them.

Recommendation

Damages should be $3,000 in line with landlord breaching a works order

As drafted at 24(3A) (b) using the premises for an unlawful purpose may have exemplary damages of $1,000 applied against them.

Recommendation

Damages should be $3,000 in line with landlord breaching a works order

As drafted at 24(3A) (c) harassment of other tenants or neighbours may have exemplary damages of $2,000 applied against them.

The Federation acknowledges that the vast majority of tenants treat their home and neighbours with respect however we welcome the new unlawful act of interfering with the peace and privacy of neighbours. Neighbours expect a quality of life without the nuisance of bad tenants and landlords are expected to act. In the extreme case, unruly or undesirable tenants need to be evicted immediately as per the legal precedent now set in the “Salt case” involving Housing NZ[9].

As drafted at 24(3A) (d) exceeding the maximum number of persons who may reside in the premises may have exemplary damages of $1,000 applied against them.

The Residential Tenancies Act currently allows landlords to specify a maximum number of residents, but this is often ignored by some tenants.

And offending tenants have been liable to pay damages only if the landlord could prove that overcrowding caused actual damage to the premises.

It beggars belief that landlords have to go to the Tenancy Tribunal and offer proof of the problems of overcrowding. Plain commonsense suggests more than the specified numbers of tenants in the property is problematic.

Making over-populating of a property an illegal act is a good move. The wear and tear on a property increases as the number of tenants increases and there are serious health and social issues for tenants through overcrowding.

On “over-populating” it is worthy to note that a Waitakere City landlord was severely fined for letting a property with occupancy levels far higher than was safe or sanitary. Clearly, the proposed breach by tenants is fair!

Recommendation

Damages should be $3,000 in line with landlord breaching a works order.

New unlawful acts

The Federation proposes further changes that would also make it an unlawful act(s) that can result in exemplary damages for, thus: 

Recommendation

New sub-clauses be inserted

24(3A) (e) non-compliance with relevant and applicable body-corporate rules

24(3A) (f) gaining a tenancy through a false identity or information

24(3A) (g) wilfully damaging property

24(3A) (h) tampering with fitted smoke alarms

24(3A) (i) Tenants stopping their rent payments after they have given notice to end a tenancy

In all of the above situations there is intent shown on the part of the tenant. This is a substantial problem facing landlords – eg Often tenants interfere with the smoke alarms, which risks and counteracts the landlords initiative to protect his/her investment potentially resulting in  loss of income and costs faced by the landlord. Ultimately, this affects good tenants through higher costs and rents. A severe penalty is needed to provide a measure of disincentive. 

Recommendation

Damages to be $3000, the same as against landlords.

Clause 26 Assignment and subletting by tenant

Landlords do not unreasonably withhold consent however increasingly this is a problematic area for private sector landlords and it would be fair and proper to protect landlord interests.

As an interesting parallel and revealed from Parliamentary and other sources it is noted that even in the State housing area that subletting is rife and totally unacceptable[10] [11] [12]

Recommendation

Damages should be $3,000 in line with landlord breaching a works order

Clause 27 Landlord’s responsibilities

The Federation has no objection with sanctions for those landlords who breach building, health and safety regulations, resulting in substandard housing and suggests that current legislation by way of jurisdictions including the Building Act, health/sanitary, fire safety regulations already protect against substandard housing issues. There is no compelling case for the duplication of such measures in the Act.

When substandard premises have been proven, the Courts have ample fines and penalties at their disposal to punish the breach. In recent cases the Courts imposed a fine of $49k on a Waitakere City landlord for letting sub-standard housing in Nov 2004 and an earlier case (in June 2001) a Henderson landlord was fined $40,000 for renting out a converted garage to a family of six for 4 years.

Of significance here are the increasing cases where destructive tenants, through their own behaviour and actions as opposed to the landlord’s, render a property substandard.

We are not aware of many landlords offering possession of a property in a substandard condition, because it then sets a poor standard that the landlord has impliedly agreed to

Regulations here would be duplicative and unnecessary and does not achieve anything further than existing legislation.

There is no compelling reason to duplicate the law when provisions are available under the Building Act 1991 and the Health & Safety Act.

Recommendation

Delete 45(1A)

Clause 28 Landlord’s right of entry

At the moment if a landlord wants to enter their property it is at the discretion of the tenant, and the proposed change would give landlords right to access the property if tenants do not agree.

A typical problem confronting landlords occurs when a property is placed on the market. Some tenants can place unreasonable conditions of entry.

Recommendation

The Bill defines what constitutes “reasonable time” and we suggest that this be: times between 8am and 7pm.  Additionally, the clause should provide for the making of consent within 2 days subject to any reasonable conditions (in the event to enable application and attendance at the Tenancy Tribunal to obtain an order).

Clause 31 Termination by notice

The clause reaffirms that the owner of a property who wants to occupy the property must give 42 days notice to the tenant.

To improve the drafting it is suggested that the term “owner” should include Trustee or beneficiary[13] of a family trust and Director of a company. In the last 8 years investors have been encouraged to structure the ownership of investment properties in Loss Attributing Qualifying Company’s (LAQC’s) or Family Trusts and they would be disadvantaged by the current definition.

Recommendation

s31(2) be amended by inserting an additional sub-clause, to read:

(b) Owner of the premises includes a Trustee of a family trust and or a Director of a company 

Clause 35 Amendment to section 55; Termination on non-payment of rent, damage, or assault

The Federation is very supportive of this clause which enables decisive action to be taken to deal with assaults, or threats of assault, by tenants' guests or associates. 

Recommendation

Damages should be of the level of $2,000 in line with a landlord using force to enter a premise 

Clause 40 New sections 60A to 60C inserted
Recommendation

Section 60A should include - during the last 21days of a fixed term tenancy either party can give 21days notice if no other agreement has been entered into. [As it reads now at 20 days before the end of a fixed term the landlord has missed the deadline and now has to give 90 days notice].

That Section 60C be further clarified as currently when resigning at the end of a fixed term the rent can increase. This implies 60 days notice must be given prior to the increase.

Clause 41 Abandonment of premises

The Federation welcomes this clause which declares that a tenant commits an unlawful act if, without reasonable excuse, he or she abandons the premises when the rent is in arrears the landlord can receive exemplary damages of up to $1,000.

Rent arrears are the main reason for applications to the Tenancy Tribunal and the leading problem for the entire industry. The clause is the first acknowledgement that a tenant who vacates the property owing rent must be accountable for his or her actions. Further, the clause rightly reinforces an important personal responsibility principle.

The Federation believes that exemplary damages should reflect the seriousness and frequency of this problem plus the cost to both landlords and the legal system. 

Recommendation

Damages should be of the level of $3,000 in line with landlord breaching a works order

Clause 42 Abandoned goods

It is unreasonable that in the event of an abandoned property, the landlord is held liable for any non-perishable possessions left behind. It places an unfair onus upon the landlord to find storage for property he was not responsible for bringing and delaying further the opportunity to re-let the premises.

For consistency with Clause 25 Tenant’s Fixtures (the explanatory note to the bill states, that the tenants fixtures pass to the landlord if the tenant does not remove them at the end of the tenancy unless arrangements have been made) Clause 42 should reflect this. Further, the reference to tenant's fixtures and should also apply to the tenant's chattels.

Recommendation

Clause 42 be amended to reflect Clause 25 ie abandoned goods pass to the landlord unless arrangements have been made.

Part 2A

Boarding house tenancies

We have not yet received input on this issue from property investor members in the limited area that it applies.

On the face of it, it does appear reasonable to expect the Bill to incorporate boarding house issues.

However, we appreciate that there are practical and special issues relating to boarding houses and their clients not encountered by private residential investor landlords.

We reserve the right in this area to make further submissions on the section if information supplied by affected Federation members.

Clause 58 New sections 86 and 87 substituted

Current provision requires proceedings to be commenced in the Tenancy Tribunal office that is nearest to the premises to which the dispute relates. Under the substituted section 86, the appropriate office will be determined by the chief executive. The chief executive must determine the appropriate office by reference to areas for which each office is responsible. These determinations must be published in the Gazette and on the Internet.

Recommendation

This could potentially make it difficult where a tenant has left an area and the CE orders it to be heard at their new location. There should be some terms guiding the CE’s decision making.

Clause 66 Costsclause-66

This clause entitles an applicant who has been wholly successful in his or her application to obtain a refund from the respondent of the filing fee paid for the application. If the applicant has been only partly successful, the Tribunal has discretion to order the respondent to refund the filing fee. The amendment also permits the Tribunal to award costs for any reasonable expenses or commissions incurred in attempting to recover an overdue payment owing under an order of the Tribunal if the tenancy agreement provides for the recovery of those expenses.

Recommendation

This clause must be included in standard tenancy agreements.

Clause 69 amends section 109

This increases the amounts that the Tenancy Tribunal may award as exemplary damages for certain unlawful acts and establishes awards for new unlawful acts.

Recommendation

The jurisdiction of the Tenancy Tribunal should be extended to include an Order of Examination and an Attachment order at the time of the hearing. Also clarification required that exemplary damages go to the landlord.

Clause 79 Residential Tenancies Trust Account

This amends section 127. All unclaimed bond money held by the chief executive must be paid to the Crown if it has not been collected 6 years after the termination of the relevant tenancy or 6 years after its refund has been approved.

According to the Department of Building and Housing 34,000 bonds with a value of $5.78 million remain unclaimed. This money (and the bonds themselves – amounting to $260million[14]) is held in the Crown’s consolidated account earning interest. DBH then uses money from the investment to run its services including the Tenancy Tribunal, which addresses complaints between landlords and tenants and for its education programme.

The unclaimed bond monies should be retained by the DBH rather than appropriated by the Government’s consolidated account. Interest received on unclaimed bond money should be allocated equally to landlord and tenant education for the betterment of the entire industry.

Part of these funds could be made available for educational events undertaken by not-for-profit incorporated societies at the DBH’s discretion.

Recommendation

Unclaimed and abandoned monies amounting to over $6million[15] should be retained by the Department of building and Housing to assist and fund Tenant and Landlord education initiatives.

OTHER AMENDMENTS

Principal Act Section 17 Requiring key money prohibited

The service of finding and matching a tenant with a landlord is an important process and the Federation submits that it is unfair for only a solicitor or real estate agent property manager to charge a fee for services rendered relating to the grant or assignment of the tenancy.

As property managers also perform services relating to the grant or assignment of a tenancy this profession should also be entitled to charge a letting fee associated with the tenancy. A real estate agent or solicitor who owns a property management company should not be legally entitled to uncompetitive advantage over others with similar businesses.

Recommendation

Section 17 (4) (c) be redrafted to read as: “Any sum required to be paid by the tenant to or at the direction of the landlord in respect of any fee or other charge for services rendered by any solicitor or real estate agent or property manager relating to the grant or assignment of the tenancy”.

 

END

 

3 July 2009

 

 

 

Mr Matthew Louwrens

Social Services Select Committee Secretariat

Parliament Buildings

Wellington

 

By Fax: 04 499 0486

 

 

Dear Mr Louwrens

 

NZPIF Submission on the

RESIDENTIAL TENANCIES AMENDMENT Bill

 

Please find attached the written response of the New Zealand Property Investors’ Federation Inc to the Residential Tenancies Amendment Bill.

 

The Federation is is happy to provide the Committee with any further information it may require and wishes to be heard in person before the Social Services Committee in support of this submission.

 

Yours sincerely

 

 

 

 

 

Martin Evans

President



[1] 11 of the 73 territorial local authorities currently have metering systems that measure - and attach a price tag - to the amount of water that comes into homes and gets flushed down the drains.

Source: “Bill for water says lobby group” 5/4/09 Sunday Star Times

[2] "Which water company is ripping you off?" NBR 27/3/09

[3] "Calls to talk about metering Wellington's water" The Dominion Post Thursday, 27 November 2008. Wellington's leaders are backing debate on a user-pays water system to reduce Wellingtonians' reckless consumption of water. With Auckland now likely to be operated as one large city, the wastewater and outgoings problem will not be solved until Water and wastewater charges are treated in the same manner as other utilities.

[4] "Which water company is ripping you off?" NBR 27/3/09

[5] In Auckland City, Metrowater’s residential wastewater charges are based on 75% of the total water supplied. For example, a customer using 1,000 litres of water would be charged for 750 litres of wastewater.

[6] “Hubble” decision Foote v Au Yeung 23 September 2003 the Auckland District Court

[7] Report of The Royal Commission on Auckland Governance, see para 26.58

[8] Residential Tenancies Amendment Bill, Report of the Social Services Committee, March 2003, pg 13

[9] Housing NZ accused of bungling Salt eviction bid, 4/7/07, NZ Herald

[10] State house fraud not isolated - so how many? 18/10/06 National Party

[11] Family facing eviction from state house 'inherited' after mother dies, 19/10/06, NZ Herald

[12] Housing NZ strengthens fraud unit after paperwork gathers dust 4/10/07 NZ Herald

[13] It is common for the children of the trustees to be beneficiaries

[14] DBH Briefing for the Minister for Building and Construction, November 2008

[15] Government sitting on $5.7m in unclaimed rent bonds 9/9/08 NZ Herald

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