Published tribunal order
Tenancy Tribunal case 4476380 — Rent arrears at 381E Hukanui Road, Rototuna, Hamilton 3210
Decided 12 Dec 2023 · Published 12 Dec 2023 · Application 4476380
- Rent arrears
Order
- No application for suppression has been made in this case and no suppression orders apply around publication of this decision.
- On 16 May 2022, the weekly rent increased from $600.00 to $690.00.
- The Tribunal finds that on 10 January 2023, the market rent was $640.00 per week. Accordingly on 10 January 2023, the rent reduced from $690.00 to $640.00 per week.
- The rent of $640.00 per week is to remain in force from 10 January 2023 until 01 January 2024, after which it may increase.
Reasons
- Ms Gulliver and Ms Gerbich appeared for the landlord. Both tenants appeared.
- The tenancy commenced on 01 March 2021 and is periodic. On 16 May 2022, the rent increased from $600.00 to $690.00 per week. This was the tenancies first rent increase and was likely the result of increased mortgage commitments following interest rate rises. Initially, the tenant accepted the rent increase but from 29 August 2022, reduced the payments back to $600.00.
- On 26 October 2022, the landlord filed a claim for termination on the basis that at the material time the rent was at least 21 days in arrears. On 10 January 2023, the tenant filed a counterclaim that the rent charged exceeded the market rent by a substantial amount under section 25(1) of the Residential Tenancies Act 1986 (The “Act”).
- On 12 February 2023, the tenant increased their rent payments to $640.00 per week.
- Both applications were heard together on 17 February 2023. The Tribunal determined the market rent to be $640.00 per week effective from 16 May 2022. It is unclear what happened to the landlord’s application for termination, although it appears on the material before me that on 26 October 2022, the tenant was not at least 21 days in arrears.
- On 23 February 2023, the tenant filed an application for rehearing. This was dismissed on the papers. On 03 March 2023, the tenant appealed to the District Court. On 14 June 2023, the District Court granted the appeal, quashing both Tribunal decisions of 17 February 2023, and the decision not to grant a rehearing, and directed that the matter be reheard. The Court also directed the tenant continue to pay rent at the rate of $640.00 per week until the matter was determined. The Court further directed the Tribunal to consider the duration of any market rent order made, and “... also, to consider obtaining a report from a registered valuer.”
- On 28 August 2023, the landlord filed a fresh claim for termination for rent arrears of at least 21 days. On 05 September 2023, the tenant’s rehearing was set down for 01 November 2023. On 05 September 2023, the Registrar advised Tenancy Services of the outcome of the appeal, who then set about obtaining a valuer’s report.
- The landlord’s application filed 28 August 2023 was set down for hearing on 29 September 2023, before me. On that date it was discovered that the rehearing matters were outstanding and had been listed before me on 01 November 2023. As all the applications should be heard together, I adjourned directing that all matters be before the Tribunal on 01 November 2023.
- On 30 October 2023, the Tribunal and the parties were provided with a copy of the valuer’s report which assessed the market rent, as of 12 October 2023, to be $675.00 per week. Law
- In the case of Frisk and Associate Limited [2003] NZDC 17698, the Court confirmed when dealing with applications under section 25, the Tribunal must first determine what the market rent is, then decide if the rent charged substantially exceeds the market rent.
- Sections 25(1), (3) and (4) of the Act provide: (1) On an application made to it at any time by the tenant, the Tribunal may, in accordance with the succeeding provisions of this section, on being satisfied that the rent payable or to become payable for the tenancy exceeds the market rent by a substantial amount, make an order reducing the rent to an amount, to be specified in the order, that is in line with the market rent. (3) For the purposes of this Act, the market rent for any tenancy shall be the rent that, without regard to the personal circumstances of the landlord or the tenant, a willing landlord might reasonably expect to receive and a willing tenant might reasonably expect to pay for the tenancy, taking into consideration the general level of rents (other than income-related rents within the meaning of section 2(1) of the Public and Community Housing Management Act 1992) for comparable tenancies of comparable premises in the locality or in similar localities and such other matters as the Tribunal considers relevant. (4) An order made under this section shall take effect on and from a date to be specified in the order, which may be the date of the order or any earlier or later date but being no earlier that the date of the application for the order and no later than 30 days after the date of the order.
- Section 26 of the Act provides that where an order is made under section 25, the Tribunal must also record the duration of that order. In the case of a periodic tenancy any order made may be for a period of 6 months or such shorter period.
- The tenant must prove on the balance of probabilities, which is more likely than not the rent exceeds the market rent by a “substantial amount.”
- The test for market rent is the amount “a willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay for the tenancy.”
- The concept of the 'market' is constrained by the requirement that both parties be 'willing', and that the rent meets their 'reasonable' expectations. These terms are not defined by the Act. The Oxford English dictionary defines willing as: "having a ready will; disposed to consent or comply; ready to do (what is specified or implied) without reluctance"; and reasonable as "having sound judgement; sensible ... not asking for too much ... not extravagant or excessive; moderate".
- The factors the Tribunal may have regard to are “the general level of rents ... for comparable tenancies of comparable premises in the locality or in similar localities and such other matters as the Tribunal considers relevant.” The evidence for comparable rents is usually based on advertisements for similar premises in the locality. However, this evidence does have limitations. Although advertisements usually list the essential features of the property advertised, there is often limited qualitative information available for comparison. Also, advertisements only cover houses currently on the market and do not necessarily reflect the overall level of rents charged for existing similar tenancies in the area.
- It is therefore common for parties to also refer to the 'market rent' statistics published by Tenancy Services. These statistics cover the rents charged for tenancies where bonds have been lodged over the preceding 6 months. The statistics include median rent as well as upper and lower quartile.
- Section 25(3) of the Act states the Tribunal may also consider, “such other matters as [it] considers relevant” to market rent. In Housing New Zealand v Hobman (DC Lower Hutt, TT89/97, 27 November 1997) the Court said the other factors to be considered must be of the same kind as the preceding specified factors. It is arguable however that the term ‘other matters’ is broad enough to cover anything relevant to the ‘reasonable’ expectations of a ‘willing’ landlord or tenant.
- The Act does not provide a definition of the words “substantial amount,” and therefore, the Tribunal must interpret those words by applying their ordinary meaning. The Oxford English dictionary defines substantial as “large in amount, value or importance.” Analysis
- The result of the appeal is that the application is to be heard afresh. The Tribunal has before it all the evidence produced by the parties at the original hearing. The landlord has also produced a listing for a similar property in the suburb offered for rent on 27 October 2023 for $680.00 per week.
- The tenant submits that the valuer’s report is irrelevant, arguing that it does not assist determining the market rent at the time of the rent increase on 16 May 2022, when the application was made on 10 January 2023, or the date on which the application was initially heard on 17 February 2023. However, the Tribunal’s view is that the valuer’s assessment, while not determinative, is relevant evidence under section 25(3).
- At paragraph 1.2 the author of the report states that they have used a direct comparison approach to determine the market rent. The report does not refer to any bond data collected by Tenancy Services.
- The valuers report describes the property at paragraph 2.1: The property comprises a good quality three-bedroom plaster over harditex sheet and fibre cement weatherboard clad / corrugated colorsteel roofed dwelling of 134 m² with internal double garage of 37m² , porch 2m² and patio 22 m² . The property has good residential site development on a 405 m² section in a desirable locality of Rototuna, Hamilton approximately 6.5 kms north and east of the Hamilton City Post Shop and commercial shopping centre.
- The tenant’s property was built in 2006 and is located down a long driveway shared by eight other properties. The landlord states that the other properties were built by the same developer around the same time, and although differing in style and construction, all share the same number of bedrooms, bathrooms, and kitchen / dining and living areas, and section size.
- At paragraph 2.3 the report comments on “The Market”: The residential rental market during the past 12 months in Rototuna, Flagstaff and Hamilton has been strong in 2023. The areas of North Hamilton have a good demand due to their modern standard of construction and good access to local schools and shopping centres and being with[in] 10 minutes of the Hamilton City centre Properties which are well presented and realistically priced are renting reasonably quickly with the time taken to rent similar to previous years.
- At paragraph 3 of the report the author refers to other properties in the area they consider comparable. The tenant submits that none are in Rototuna, this is correct. All are in the neighbouring suburb of Flagstaff, which the author of the report appears to deem as equally desirable as those in Rototuna. The landlord submits that it is likely that the author of the report has used properties in Flagstaff as 3-bedroom properties in Rototuna are extremely popular and are often quickly rented, suggesting that at the time of preparing the report they were likely unavailable for comparison. The properties were built in 2000, 2010, and two in 2022. Each had been offered for rent in October 2023 for between $650.00 and $690.00 per week.
- The landlord has also produced a listing for a similar property located in Rototuna offered for rent on 27 October 2023 for $680.00 per week.
- The tenant has produced a spread sheet which shows that of the eight properties on the driveway, five are offered for rent, the other three are recorded as “private property.” The exact source of the data is unknown although appears to be from an online source. The spread sheet records that the five properties offered for rent range in estimated value between $855.000 and $895.000 and confirms that each has roughly the same floor and land area. The tenant has produced a Google map of the immediate area on which they have highlighted properties with a house value of under and over $900.000. Once again, the source of the data is unknown.
- The tenant has produced market rent statistics from the Tenancy Services website which show that between 01 July 2022 and 31 December 2022 of the 102 bonds lodged for three-bedroom properties in the suburb that the median weekly rent was $630.00, with a lower quartile of $600.00 and upper quartile of $640.00.
- The tenant’s property appears to have an estimated value of $875.000. The tenant submits that as the value of the property is below the average property value of $900.000 it therefore sits in the lower quartile. I am unsure whether placing the property in the lower quartile based on its capital value alone is accurate. The rent charged is not solely based on the capital value of the property, it may however, be a guide as to the general desirability of the property.
- The tenant states they enquired with their immediate neighbours about the rent they paid, and for two obtained a copy of their tenancy agreements. One is for a fixed term commencing 04 February 2022, with a weekly rent of $580.00, the second a periodic tenancy commencing on 10 February 2022 with a rent of $600.00. The tenant states they have been unable to obtain the agreement for the third property and have produced an advertisement from around September 2022 offering the property for rent at $580.00 per week. This evidence was provided by the tenant with their application on 10 January 2023.
- The tenant states that they initially accepted the rent increase however upon reflection and enquiry with their immediate neighbours became unhappy and felt they had been “ripped off.”
- The tenant submits, based on the material produced, that the market rent at the time of the rent increase on 16 May 2022 was around $599.00 per week, and that the rent increase to $690.00 was therefore one that substantially exceeded the market rent.
- The tenant invites the Tribunal to make an order determining the market rent at the time of the increase on 16 May 2022. However, under section 25(4) of the Act any order made by the Tribunal cannot be back dated to 16 May 2022 and must take affect from the date of the application, which in this case is 10 January 2023, or the date of the decision, or no later than 30 days after the date of the decision. The clear intention of parliament is to provide certainty to landlords, and tenants, and encourage tenants who wish to challenge the rent to do so promptly.
- Based on the evidence, I consider that on 16 May 2022, the property more likely than not had a market rent in the region of $600.00 to $625.00 per week. Had the tenant filed an application at the material time, the Tribunal would have likely found that the rent increase from $600.00 to $690.00 was one that resulted in a rent that substantially exceeded the market rent.
- Based on the evidence, including the valuers report, I find that the market rent in October 2023 was in the region of $650.00 to $675.00. Had the tenant’s application been made in October 2023, a rent of $690.00 would not have exceeded the market rent by a substantial amount.
- However, in this case the question is what the market rent on 10 January 2023 was, and, having determined the market rent, did the rent charged exceed the market rent by a substantial amount.
- Considering the likely market rent in May 2022, and market rent in October 2023, the Tribunal assesses that on 10 January 2023 the market rent for the property was $640.00 per week.
- A rent of $690.00 per week, would in my opinion have exceeded the market rent by a substantial amount.
- Accordingly, pursuant to section 25(1) of the Act, the Tribunal reduces the rent from $690.00 to $640.00 per week effective 10 January 2023.
- Pursuant to section 26 (1) of the Act the Tribunal orders that the rent of $640.00 per week is to remain at that rate until 01 January 2024, after which it may increase.
- For clarity, as stated, section 25(1) does not allow for the back dating of any rent reduction prior to the date of the application. On that basis, the rent from 16 May 2022 to 10 January 2023 was $690.00 per week. From 10 January 2023, the rent is reduced to $640.00 per week. The rent will remain at $640.00 per week until 01 January 2024, after which it may be increased.
- If after adjusting the rent summary there is any rent arrear that cannot be resolved by the parties, they should advise the Registrar, and the matter will be referred to me for direction.
- The Tribunal makes no order for reimbursement of the filing fee. Neither party seek name suppression.