Published tribunal order
Tenancy Tribunal case 9052084 — Tenancy dispute in Browns Bay, Auckland
Decided 6 Jun 2024 · Published 6 Jun 2024 · Application 9052084
Landlord favoured
- Leaks
- Mould & damp
- Unit Titles
Order
- Bozhao Zhang must pay AGA Iridescent Rising Limited $15,829.78 immediately, calculated as follows: DescriptionsApplicantRespondent Ordinary levies (November 2023 to March 2024) $3,220.12 Interest on ordinary levies$76.05 Special levies$12,033.61 Filing Fee$500.00 Total award$15,829.78 Total payable by Respondent to Applicant $15,829.78
Reasons
- Both parties attended the hearing on 5 June 2024. Mr Tsarukyan, a director of AGA Iridescent Rising Limited (AGAIRL), represented the unit owner. Background
- Mr Zhang rents the premises that are the subject of this application from AGAIRL from where he conducts the business of Traditional Chinese Medicine.
- The relationship between the parties is a commercial one and is subject to a commercial Deed of Lease dated 12 August 2019.
- The Deed of Lease records the tenant/lessee as New Hope Chinese Medicine Clinic Limited with Mr Zhang as the guarantor. For the purposes of this application, I will refer to Mr Zhang as the tenant/lessee rather than the company.
- When the lease was entered the owner of the premises was a different entity. AGAIRL purchased the premises on or about 20 October 2023. The Deed of Lease was assigned to the company as the new landlord/lessor.
- The Deed of Lease requires Mr Zhang to pay all body corporate levies charged to the unit owner. There is no dispute that the Deed of Lease requires this. Mr Zhang confirmed that he paid all his levies to the previous landlord.
- Mr Zhang has declined to pay the levies charged to him since November 2023. That is because there has been leaking through the ceiling in 2 of the rooms he uses as treatment rooms. The other 2 rooms comprising the premises are not affected by the leaking.
- The body corporate carried out some repair work. The leaking has stopped but ceiling tiles, which are clearly stained from the leaking, remain displaced and there is still some moisture apparent in the ceiling space when it rains.
- The body corporate has recently engaged to a contractor to do further repair work.
- Separate to the payment of ordinary levies, there is an issue about the payment of a special levy raised by the body corporate to paint the exterior of the premises.
- Mr Zhang believes the special levy was charged to remedy defects in the exterior cladding and should not be his responsibility.
- The unit owner says the special levy was the result of planned maintenance only as part of the body corporate’s long term maintenance plan, and quite separate from recladding work that was covered by a building guarantee.
- The other issue between the parties concerns the charging of GST on the levy invoices the unit owner gave to Mr Zhang. He says the levies do not attract GST. AGAIRL, relying on advice from Inland Revenue, says they do because AGAIRL issues an invoice for the levies to Mr Zhang, and it is registered for GST, so must add the GST amount into the invoice.
- The parties discussed mediation as a forum for a possible resolution of the dispute but decided to proceed with an adjudicated hearing instead. I will return to the issue of the resolution of disputes later. Issues
- The issues for the Tribunal to determine are these: • Is Mr Zhang liable for the ordinary levies (and interest) charged by the body corporate to the unit owner AGAIRL? • Is Mr Zhang liable for the special levy charged by the body corporate to the unit owner? • Should GST be charged on the levies when they are invoiced to Mr Zhang? Is Mr Zhang liable for the ordinary levies (and interest) charged by the body corporate to AGAIRL?
- The answer to this question is yes. Why? Because the Deed of Lease between the parties provides that the tenant/lessee (Mr Zhang as the occupier of the principal unit) must pay the levies charged to the landlord/ lessor AGAIRL.
- Mr Tsarukyan confirmed that AGAIRL has paid the body corporate levies. I have assumed that AGAIRL also paid the interest component of $76.05. If it did not, AGAIRL cannot claim interest from Mr Zhang; only the body corporate can charge interest on unpaid levies under the Unit Titles Act 2010.
- So, if no interest was charged to AGAIRL and no interest was paid, the Tribunal’s order, and Mr Zhang’s liability, will be reduced by $76.05. Is Mr Zhang liable for the special levy charged by the body corporate to
AGAIRL?
- The answer to this question is yes. Why? Because the Deed of Lease between the parties provides that the lessee (Mr Zhang as the occupier of the principal unit) must pay levies that relate to the maintenance of the premises.
- Mr Zhang raised a valid query about the painting work that resulted in the special levy. He thought it was needed following recladding work due to defective panelling.
- AGAIRL made all reasonable enquiries of the body corporate to address Mr Zhang’s concerns. The email correspondence between AGAIRL and the senior body corporate manager produced in evidence establishes that the painting work was entirely separate from the recladding work, covered by a building guarantee; was unrelated to that work; and was planned maintenance under the body corporate’s long term maintenance plan.
- The work resulted in the body corporate raising a special levy because no funds were held in the long-term maintenance fund sufficient to cover the cost of the work.
Should GST be charged on the levies when they are invoiced to Mr Zhang?
- The answer to this question is probably. AGAIRL produced evidence from Inland Revenue that any invoices rendered by the company must include GST because the company is GST registered.
- In this case, the body corporate levy demand is made to AGAIRL which pays the levies. AGAIRL then invoices the amount to Mr Zhang. Because it is issuing a tax invoice it is, according to the Inland Revenue advice it received, obliged to add GST.
- The Tribunal is not an adjudication forum for tax issues. However, it seems that this issue is moot to an extent. Mr Zhang is GST registered. Therefore, any invoiced amount for which he is charged GST for an activity associated with his business (such as costs under the Deed of Lease) is an amount for which he can claim the GST as a refund in his GST return. The net result is neutral; AGAIRL charges GST, Mr Zhang claims it back. Result
- For the reasons given, but subject to the query concerning the amount of interest claimed, Mr Zhang is liable for the ordinary levies and the special levy charged to him by AGAIRL under the terms of the (assigned) Deed of Lease.
What now?
- This is a unit owner application for the payment of levies. There is no application by Mr Zhang as the unit occupier.
- Mr Zhang might well have valid claims under the Deed of Lease for the interference with his use and enjoyment of the premises due to leaking. This decision does not address those concerns. They are distinct from the issue of liability for levies.
- I note that Clause 43 of the Deed of Lease provides for mediation and arbitration as methods of dispute resolution for disputes that arise from the lease.
- The Tenancy Tribunal can hear disputes between unit owners and unit occupiers in its Unit Titles jurisdiction. But if the dispute is based in the law of contract and arises from the Deed of Lease, the Disputes Tribunal would also have jurisdiction, depending on how the dispute is framed.
- Mr Zhang should seek advice should he wish to pursue a claim against the commercial landlord/ lessor AGAIRL for any alleged breach of the Deed of Lease. That advice will be necessary to decide which forum is the most relevant, considering the provision for dispute resolution (arbitration) set out in Clause 43 of the Deed of Lease.
- The Tribunal has retained jurisdiction for the landlord’s claims because Clause
- 4 specifically allows the landlord to take proceedings for the recovery of any rent or other monies payable under the lease. Filing fee
- As the unit owner’s application is successful I award the AGAIRL the filing fee – see section 176 Unit Titles Act 2010 and section 102(4) Residential Tenancies Act 1986.