Published tribunal order
Tenancy Tribunal case 4634610 — Rent arrears at 3 Triangle Road, Massey, Auckland 0614
Decided 23 Jan 2024 · Published 23 Jan 2024 · Application 4634610
Landlord favoured
- Rent arrears
- State of repair
Order
- Obelisk Industrial Limited and Kara and Steven Culham must pay Kinson Wang $135.49 immediately, from the bond, as calculated below:
- The Bond Centre is to pay the bond of $3,680.00 (3317158-004) immediately apportioned as follows: • Kinson Wang: • $135.49 • Obelisk Industrial Limited and Kara and Steven Culham: • $3,544.51
- The tenant’s application for a reduction of the term of the fixed term tenancy is dismissed.
- The tenant’s application for exemplary damages is dismissed.
- The landlord’s application for compensation for the repair of damage is dismissed.
Reasons
- Both parties attended the hearing I held on 18 January 2024. Mr and Ms Culham directors of Obelisk Industrial Limited (OIL) represented the tenant. Ms Byrne, the property manager and employee of OIL also attended as a witness. Background
- The tenant is an approved employer with Immigration New Zealand for migrant workers. It provides temporary accommodation for the migrant workers it places into employment in New Zealand.
- However, OIL does not enter tenancy agreements with the individual migrant workers; it merely assists them to get settled and they each then move on separately or in groups to take up their own residential tenancies once places are found. Nor does OIL enter service tenancies with the migrant workers.
- The tenancy between OIL and the landlord started on 10 February 2023. There were some initial issues concerning the cleanliness of the premises. The parties entered an agreement to try and resolve that and the tenancy got under way.
- The tenant vacated the tenancy on 24 July 2023. It alleges that the premises were unlawful residential premises and that the landlord failed to maintain and repair them.
- The tenant seeks to be released from the fixed term tenancy (due to end on 9 February 2024) on the date it vacated the tenancy.
- The tenant also seeks exemplary damages because it alleges that the premises did not comply with the Healthy Homes Standards (HHS) and compensation for the landlord’s failure to maintain and repair the premises and provide them in a reasonably clean condition.
- The landlord has applied for rent arrears, water rates, and for compensation for damage he alleges the tenant (that is, the tenant’s migrant works at the premises with the tenant’s consent) caused.
- I first began hearing the application on 18 October 2023. I adjourned the hearing part heard to allow the landlord the opportunity to provide evidence in reply to the tenant’s allegation that the premises were unlawful residential premises.
- The Tribunal received further evidence from the parties and heard their respective submissions at the hearing on 18 January 2024. Issues
- The issues the Tribunal must determine are these: •Should the fixed term tenancy be reduced in term and end when the tenant vacated on 24 July 2023? •Were the premises compliant with the HHS? If not, should the Tribunal award the tenant exemplary damages? Did the landlord maintain and repair the premises and provide them in a reasonably clean condition? •Were the premises (in part) unlawful residential premises? If so, what should happen as a result? •Should the Tribunal terminate the tenancy on the landlord’s application? •What amount of rent arrears should be awarded? •Has the landlord proved a claim for water rates? •Has the landlord proved claims for compensation for damage caused by the tenant (the migrant workers who resided at the premises)? Legal considerations Compensation
- The Tribunal may award compensation to a landlord for losses arising from a proven breach or breaches by the tenant of their statutory responsibilities.
- A tenant is liable for damage that occurs during a tenancy that is not fair wear and tear.
- Once damage is proved to have occurred during a tenancy, it is for the tenant to prove that it was fair, wear and tear to avoid liability.
- The Tribunal must also take account of depreciation. A landlord should not be better off because of compensation awarded, but returned to the position they were in before the damage occurred.
- The tribunal may also award compensation to a tenant for proven breaches by a landlord of their statutory responsibilities. The tribunal must consider the nature of the breach, the duration of the breach, and the effect on the tenant – see Birch v Otautahi Community Housing Trust [2020] NZDC 17667. Exemplary damages
- Exemplary damages are different. They are designed to punish and to deter. They are like a fine. In Auckland City Council v Blundell [1986] NZLR 732 the Court of Appeal (Cooke P) said: Exemplary and punitive [damages] are different words for the same thing. The damages are exemplary because they are meant to teach an example to the guilty officer and others. They are punitive because they are meant to punish. They are like a fine, though they go to the citizen who has been the victim of conduct.
- Exemplary damages are awarded at the Tribunal’s discretion when one party has proved that the other party has committed a defined unlawful act. If that is proven, and before the Tribunal may award exemplary damages, it must take account of the factors set out in section 109 of the Residential Tenancies Act 1986 (RTA).
- In Birch (referred to above) the Court said this: In considering whether an order of exemplary damages should be made, the Tribunal must first look at the intention of the person against whom the order is sought. As the Tribunal in Chief Executive, ex parte Edmondson v Walls TT548/92 said: Before an award of exemplary damages can be made the threshold question for the Tribunal to answer is whether the unlawful act has been committed ‘intentionally’. In my view negligence does not equate to intention, and for the Tribunal to be satisfied that a party has ‘intentionally’ committed an unlawful act evidence must exist which would justify the Tribunal in coming to the conclusion that the party committing the unlawful act has in fact turned his or her mind to the act and deliberately set about to commit it. If the Tribunal considers that the person against whom the order is sought has committed the unlawful act intentionally, the Tribunal must then consider whether it would be just to require that person to pay exemplary damages, taking into account: (a) The intention of the person; (b) The effect of the unlawful act; (c) The interests of the party against whom the unlawful act was committed; and (d) The public interest.
- Section 66 RTA address the reduction of a fixed term tenancy. For a tenant to succeed on an application to reduce the term of a fixed term tenancy, they must provide that due to an unforeseen change in their circumstances, the unforeseen hardship they would face if the term of the tenancy were not reduced would be greater than the hardship the landlord would face if the term of the tenancy were reduced.
- So, the test is a test of high threshold. Tenancy agreements are contracts, and the Tribunal does not lightly interfere with them.
- Even when the Tribunal does reduce the term of a fixed term tenancy it will usually compensate the landlord for the loss of the contract by awarding compensation, often the amount of the bond.
- Section 78A RTA deals with unlawful residential premises. It defines what unlawful residential premises means. It allows the Tribunal to award all of some of the rent paid for the period the premises were unlawful premises. Should the fixed term tenancy be reduced in term and end when the tenant vacated on 24 July 2023?
- The tenant has not established that there was an unforeseen change in their circumstances such that the term of the tenancy should be reduced to the date they vacated – 24 July 2023.
- However, by a different route, the tenancy will end on 18 August 2023. That is when the landlord applied to the Tribunal to terminate the tenancy.
- Had the Tribunal reduced the term of the fixed term tenancy, it would have awarded the landlord compensation of roughly the amount equivalent to the rent between 24 July and 18 August 2023.
- So, the result for the tenant is roughly the same as it would have been had they succeeded in their application to reduce the term of the tenancy. Were the premises compliant with the HHS? If not, should the Tribunal award the tenant exemplary damages? Did the landlord maintain and repair the premises and provide them in a reasonably clean condition?
- The landlord produced in evidence a HHS compliance report following an inspection of the premises by the contractor he engaged.
- The tenant’s representatives said they did not consider that the report was produced by a genuine contractor because they could not locate the company the report was provided by on the companies register.
- The tenant’s representatives said that the report was at odds with their observations of the premises.
- In the absence of evidence such as a competing HHS assessment produced by the tenant the Tribunal will accept the report produced by the landlord as evidence that the premises were HHS compliant.
- That said, I am satisfied that the landlord did not provide the premises in a reasonable state of repair and cleanliness. The tenant’s photos produced in evidence show that the premises were dirty, poorly maintained, and mouldy. It was the continuing state of disrepair that led the tenant to vacate the tenancy.
- While the parties reached some agreements around cleaning, the landlord objectively failed to maintain and repair the interior of the premises.
- I find that the tenant should receive compensation for this breach by the landlord. It caused the tenant significant disruption as they could not continue to use the premises for their migrant workers, mindful as they were of their obligations as an accredited employer with Immigration New Zealand.
- For this breach by the landlord, I award the tenant compensation of $2,000.00. Were the premises (in part) unlawful residential premises? If so, what should happen as a result?
- The tenant alleges that the premises are not consented for work done to instal a kitchen and bedrooms on the ground floor of the premises. The tenant alleges that a permit was issued for a rumpus room and a bathroom, but not for a kitchen, dining room and for 3 bedrooms.
- The tenant said that the downstairs range hood ventilated into the ceiling so could not have been permitted.
- The tenant contacted the MBIE Tenancy Compliance Unit which believed that the premises were not consented. Due to a back log of cases it could not investigate further.
- Both parties produced email correspondence from the Auckland Council. I adjourned the first hearing to enable the landlord to produce evidence to address this issue raised by the tenants.
- The email correspondence the landlord produced does not really advance matters.
- The evidence the tenant produced suggests that there might be a compliance issue.
- However, the evidence overall is not sufficient for the Tribunal to conclude that the premises are non-compliant for use as residential tenancy premises.
- Even if there are compliance issues, the Tribunal has a discretion as to how it addresses that.
- I find it is very possible (but by a small margin not proven to be probable) that the premises were/are not compliant in terms of the conversion work to include a kitchen and bedrooms downstairs.
- The standard of proof is on the balance of probabilities. The tenant’s case is largely based on (possibly well-founded) suspicion and on email correspondence from the Council and the MBIE compliance team. But it does not establish that the premises were unlawful residential premises on the balance of probabilities.
- I therefore make no finding that the premises were unlawful residential premises. Should the Tribunal terminate the tenancy on the landlord’s application?
- The landlord opposed the tenant’s application for a reduction of the term of the tenancy. He sought continuing rent.
- However, the landlord sought termination of the tenancy in his application made on 18 August 2023. He said the rent then was at least 21 days in arrears.
- The rent summary the landlord produced shows that the rent was not 21 days in arrears as of 18 August 2023. However, if the Tribunal had heard the application then, it would have made an order terminating the tenancy by consent since that is what both parties (for different reasons) wanted.
- The Tribunal need not make termination and possession orders now. Following the hearing on 18 October 2023, the Tribunal assured the landlord he could take possession of the premises as the tenant had vacated the tenancy and he had applied to end it.
- The Tribunal simply records that the tenancy ended on 18 August 2023, the date when the landlord applied to terminate the tenancy by which time the tenant had vacated the tenancy.
What amount of rent arrears should be awarded?
- The tenant accepted the landlord’s rent record as a correct record of payments made and not made. I have calculated rent to 18 August 2023 based on the rent record produced in evidence. The tenant must pay rent arrears of $1,971.42 to 18 August 2023.
Has the landlord proved a claim for water rates?
- The landlord proved, and the tenant accepted, water rates owing of $164.07. I award the landlord that amount by consent. Has the landlord proved claims for compensation for damage caused by the tenant (the migrant workers who resided at the premises)?
- The landlord sought costs for a missing key and a broken lock on a sliding door. Neither the key nor the lock has been replaced/repaired. There are no invoices to prove the claimed loss. I dismiss these claims for lack of proof.
- The landlord alleges that the tenant’s migrant workers flooded the upstairs laundry area where a washing machine was situated, and the flooding then damaged the ceiling of the room below the flooded laundry.
- The landlord claims $6,030.78 for the repair of this damage based on a quotation. He is not insured for this damage. The work has not been done.
- The tenant strongly denied that their migrant workers caused this damage. The tenant’s representatives said that the workers never used a washing machine upstairs; they never installed the machine that the landlord provided. They did their washing at a laundromat.
- The tenant said there was another area downstairs away from the affected ceiling area that was similarly damaged. They said all the damage was due either to leaking pipes in the areas between the downstairs ceiling and the upstairs floor or flooding from the hot water cupboard which Ms Byrne had pointed out to the landlord, as she had the dirty state of the premises following which they reached an agreement about cleaning.
- The landlord said that the other damage referred to by the tenant (photos produced) was just dirt because the workers cooked and used the rangehood a lot.
- The tenant’s representatives produced previous Tribunal orders where the landlord was a party. The orders have little direct relevance because they were made on the landlord’s applications against tenants who did not attend the hearings. So, the orders were made on a formal proof basis. One order that relates to these premises, includes damage to floor and ceiling areas caused by flooding. But I cannot draw conclusions from that.
- What is missing here is evidence about the cause of the flooding. The quote for the repair work the landlord provided does not address that at all.
- The laundry area generally appears to be in a poor state of repair. I cannot speculate about the cause of the water damage. And the evidence such as it is does not establish one cause (the use of a washing machine by the migrant workers) as more probable than the other possible cause (leaking pipes or leaking from the hot water cupboard).
- The tenant produced photos taken before the tenancy started. They show evidence of leaking, mould and wet carpet.
- Without a proven probable cause of the leaking that affected the floor of the bathroom and the ceiling below (with the ceiling affected in another area as well) I do not find that the landlord has established a claim against the tenant. The tenant has proved that its migrant workers probably did not cause this damage. This claim is dismissed. Result
- The tenancy ended on 18 August 2023 the date when the landlord applied to terminate it. By then the tenant had vacated the tenancy.
- The tenant’s application to reduce the term of the tenancy to 24 July 2023 when they vacated is dismissed.
- The tenant’s application for exemplary damages for a breach of the HHS is dismissed.
- I award the tenant compensation of $2,000.00 for the landlord’s failure to maintain and repair the premises and to provide them in a reasonably clean condition.
- The tenant’s application for compensation based on the premises being unlawful residential premises is dismissed.
- The landlord’s application for rent arrears is allowed to 18 August 2023 - $1,971.42 and is his claim for water rates - $164.07.
- The landlord’s application for compensation for damage is dismissed.
- No award is made of either filing fee. Neither application has been fully or mostly successful.
- The bond will be split between the parties - $3,544.51 to the tenant and $135.49 to the landlord. This is close to the settlement the tenant first proposed to the landlord (a full refund of the bond) which in hindsight he should have accepted. Comment
- Despite my finding that the premises are not unlawful residential premises, the Tribunal encourages the landlord to ensure that all building work done at the premises is compliant.
- Without that confirmation, the Tribunal might reach a different conclusion should the same tenancy premises be the subject of a later application alleging the premises are not properly consented. The monetary penalty the landlord might face could be considerable. Name suppression
- Both parties applied for orders suppressing their names. I make no name suppression orders. Neither party has been wholly or mostly successful. There are no other factors that would justify suppression orders – see section 95A RTA.